Ford – driving innovation

1. In 1913 an American industrialist named Henry Ford employed an innovative system in his factory that changed the nature of American industry forever – the production line. Instead of a group of workers constructing a complete product, Ford’s production-line techniques relied on machine parts being moved around the factory on a conveyor belt, passing each employee who had a single task to perform before the component moved down the line. This saved time in that employees were not required to move around, collect materials or change tools; they simply stood in one place and repeated the same procedure over and over again until the end of their shift. In this way, Ford was able to mass produce the now famous Model-T car for only 10% of traditional labour costs.
2. Working on a production line was monotonous work, undoubtedly, but it was not in the production line alone that Ford was something of a pioneer. In 1913 the average hourly rate for unskilled labour was under $2.50 and for such low wages and repetitive work, the labour turnover in Ford’s factory was high, with many employees lasting less than a month. In order to combat this problem, he took a step that was condemned by other industrialists of the time, fearful that they would lose their own workforce – he raised wages to $5 an hour. The benefits were twofold. Not only did Ford now have a stable and eager workforce, he also had potential customers. It was his intention ‘to build a motorcar for the great multitude’, and the Model-T car was one of the cheapest cars on the market at the time. At $5 an hour, many of his employees now found themselves in a position to feasibly afford a car of their own. Ford’s production practices meant that production time was reduced from 14 hours to a mere 93 minutes. In 1914 company profits were $30 million, yet just two years later this figure had doubled. Until 1927 when the last Model-T rolled off the production line, the company produced and sold about 15 million cars.
3. Although Ford was without doubt successful, times changed and the company began losing its edge. One problem came from the labour force. Ford was a demanding employer who insisted that the majority of his staff remained on their feet during their shift. One error meant that the whole production line was often kept waiting, and Ford felt that workers were more attentive standing than sitting. Yet the 1930s saw some radical changes in the relationships between employer and employee, as an increasing number of industries were forming Labour Unions. Ford flatly refused to get involved, employing spies in the workplace to sabotage any plans for a union within his factories. Eventually a strike in the early 1940s forced Ford to deal with unions. Another example of Ford being unable to adapt came from his unwillingness to branch out. Ford’s competitors began operating the same systems and practices, but also introduced the variety Ford was lacking. The Model-T had remained essentially the same, even down to the colour, and by the time he realised his error, he had already lost his pre-eminence in the industry. Subsequent involvement in aeroplane manufacturing, politics and publishing was a failure. Leaving the company to his grandson in 1945, he died two years later leaving an inheritance estimated at $700 million.
4. Yet the legacy of Fordism lives on. The development of mass production transformed the organisation of work in a number of important ways. Tasks were minutely subdivided and performed by unskilled workers, or at least semiskilled workers, since much of the skill was built into the machine. Second, manufacturing concerns grew to such a size that a large hierarchy of supervisors and managers became necessary. Third, the increasing complexity of operations required employment of a large management staff of accountants, engineers, chemists, and, later, social psychologists, in addition to a large distribution and sales force. Mass production also heightened the trend towards an international division of labour. The huge new factories often needed raw materials from abroad, while saturation of national markets led to a search for customers overseas. Thus, some countries became exporters of raw materials and importers of finished goods, while others did the reverse.
5. In the 1970s and ’80s some countries, particularly in Asia and South America, that had hitherto been largely agricultural and that had imported manufactured goods, began industrialising. The skills needed by workers on assembly-line tasks required little training, and standards of living in these developing countries were so low that wages could be kept below those of the already industrialised nations. Many large manufacturers in the United States and elsewhere therefore began ‘outsourcing’ – that is, having parts made or whole products assembled in developing nations. Consequently, those countries are rapidly becoming integrated into the world economic community