I was remiss in letting January go by without marking the 100th anniversary of Henry Ford’s famous $5/day pay plan for his workers in the Highland Park Model T plant. The reason is that ASE, or the Employers Association of Detroit (EAD) as it was known at the time, played an important role in the administration of that program. It’s a good story; let me give you a compressed version of it:
The EAD had been formed in 1902 by a group of Detroit industrialists that included Henry Leland and Henry Ford. One of EAD’s roles was to recruit and screen candidates for skilled-trades positions in Detroit’s burgeoning manufacturing industry. When Henry announced the new pay plan on January 5, 1914, the company’s Highland Park plant was immediately overwhelmed with job applicants. Ford brought the challenge of managing the throngs of applicants to EAD, which took over the responsibility of screening and processing the hiring of all the workers Ford needed. The number of workers the EAD processed at that point is not known, but historian Thomas Klug of Marygrove College estimated that between 1902 and 1927 the EAD had sent 750,000 workers to prospective employers around Detroit. It was an important role in Detroit’s becoming a manufacturing powerhouse, and we are proud that ASE played it.
Historians agree that Henry’s primary motivation in setting up the plan was to reduce employee absenteeism and turnover at the Highland Park plant. The move, which approximately doubled his workers’ pay, succeeded beyond Henry’s fondest hopes. Daily absenteeism had been running at 10%, and the new pay plan took it down to 1%. In 1913 Ford had had to hire 53,000 replacement workers; by 1915, with the new plan in place, replacement hiring was 2,000. Henry later referred to the $5/day plan as “the greatest cost-cutting move I ever made.”
Five dollars a day was a classic example of outside-the-box management thinking and, of course, risk-taking. Ford’s peers and business rivals thought he had gone out of his mind. But, as has been well documented, they eventually had to follow suit in order to stay competitive. And, many historians agree, the American middle class was born.
I’ve been thinking about the problem Henry Ford faced in 1914 and asking myself what the equivalent problem in today’s knowledge-based workplace would be. The answer, I think, is employee disengagement. It’s really not that much of a stretch to say that it was a form of disengagement that was driving so many manufacturing workers out of the plants before 1914. At the time the causes were physical—crude, dangerous manufacturing methods, and repetitive work performed over long hours to the punishing beat of the assembly line. Today for knowledge workers the issues are more mental, social, and psychological; but in many companies they take a major toll on employees’ willingness to fully commit themselves to their work and their employer. In a workplace where creativity and passion are often the reasons one company succeeds while another one fails, the problem is every bit as serious as the one Henry Ford faced 100 years ago.
And so the question is, what would Henry do if he were alive, and in his entrepreneurial and creative prime, today? Exactly what he would do I don’t know. But I suspect it would not be to double his employee’s pay. My guess is that doubling their pay would have the effect of keeping them from leaving. But it would not make their work more interesting, their relationships with peers and supervisors more positive, or their buy-in to the employer’s mission and practices any stronger. He would be stuck with employees he would be better off without, which would be a disaster. Ford was a visionary; as such he would have seen the actual issues for what they are: a lack of passion and creativity. And he would set out to remake their work environment into one that would unleash the passion and creativity of his workers. Easier said than done, of course, but I for one would not bet against him pulling it off.
What do you think?