A view from Dave Trott: Double your money
A view from Dave Trott

Double your money

In 1913, Henry Ford’s business was successful, but not as successful as he wanted.

If he could make his cars more efficiently, he could sell them cheaper.

The problem was the turnover of workers.

Ford had to hire around 52,000 workers to keep 14,000 jobs filled.

That’s a churn rate of 370%.

The job was so hard and repetitive, men couldn’t stick it.

In 1913 alone, there were 200 severed fingers and 75,000 burns, cuts and other injuries. 

Men often just downed tools and walked off the job.

And that usually meant the whole assembly line had to stop.

The cost in wasted production was enormous.

Plus new workers had to be hired and trained as fast as possible, which cost enormous amounts of time and money.

Conditions were the same at all the Detroit car plants.

Everywhere, men worked nine hours a day for $2.25 an hour.

That’s when Henry Ford realised the main way to keep costs down wasn’t by investing in machinery, it was by investing in people. 

And in 1913, he doubled wages.

Workers would get an unheard of $5 an hour for an eight-hour day.

Double what everyone else was paying.

All the people running American industry thought it was suicide.

They thought Henry Ford had gone mad.

But the day after he announced it, he had a queue of 10,000 men outside the factory applying for jobs.

The trouble was there were no jobs, because no-one wanted to leave.

Instead of having to hire and train 52,000 men a year, it dropped to just 6,500 men a year.

That’s a drop from nearly a 400% churn rate to under 50%.

Cost of training and stoppages plummeted.

Which meant Henry Ford was able to sell his cars cheaper than anyone else.

And by 1915, Ford was able to cut the time to build a car from 12-and-a-half hours to an hour-and-a-half, which made them cheaper still.

In 1914, Ford was making 250,000 cars a year.

By 1916, Ford was making 472,000 cars a year.

By 1918, half of all the cars on American roads were Ford.

That’s why Henry Ford said: "Doubling wages was the best cost-cutting measure we ever undertook."

Simply because he understood something no-one else did.

Something very few in senior management understand even today.

It’s not about technology, it’s about people.

Because, without people, technology doesn’t work.

People have to programme the technology, work the technology, interpret and oversee the technology.

Without people at the beginning and end of the process, technology is nothing.

Because technology is just a tool.

Of course, better tools will give you an advantage.

But Henry Ford understood that real business advantage comes from the people who operate the tools.

Dave Trott is the author of Creative Mischief, Predatory Thinking and One Plus One Equals Three.