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026 – Henry Ford did that?

Posted by  Shawn Callahan —July 18, 2018
Filed in Anecdotes, Business storytelling, Podcast

What do you do when you have high turnover? Henry Ford’s solution made his shareholders angry.

In this example, we see how Henry Ford ignored what everyone around him thought and went ahead with a decision that would more than double his profit.

We discuss how this is a great example of how a company can make a big change with a great result, and how other companies will make incremental changes without much of a result at all. If you’re trying to implement a big change, this story will come in handy for you.

Henry Ford podcast

For your storybank

Henry Ford was a great industrialist and invented the model T Ford. The first one rolled out of the factories in 1908. People don’t think of him as a people person. He revolutionised factory lines and was efficient at producing Model T Fords.

The work became very boring – repetitive, high volume menial tasks. Lots of turnover. They were spending lots of money training people. They put in bonuses and benefits to keep them, all to no avail.

The industry accepted that this was a byproduct of the assembly line system.

They passed on the cost of doing this to the price of their cars. It didn’t make sense to Ford.

Workers were working 9 hours a day and earning $2.38. He said this isn’t right and more than doubled the wage by making it $5 a day for an 8 hour working day.

Shareholders were not happy, the industry thought he was mad.

The union petered out. He was hailed as the hero on the assembly line.

He believed that he would save in costs because turnover would decrease. Between 1914 and 1916, profit doubled despite flat market share, increased competition and falling prices.

Ford later said “without a doubt, the best decision I ever made was the $5 working day”.

Podcast transcript

Shawn:

Welcome to Anecdotally Speaking- a podcast to help you build your business story repertoire. Hi, I’m Shawn Callahan.

Mark:

And I’m Mark Schenk.

Shawn:

Mark, I hear you’re off to do a bit of diving?

Mark:

Next week I’m going up to the North of Australia, into the Great Barrier Reef, out in the Coral Sea—really looking forward to it.

Shawn:

You’re on a boat for the whole week, aren’t you?

Mark:

Yeah, a little boat so probably four dives a day so a total immersion and no internet.

Shawn:

I’ve been meaning to ask because the soccer team in the cave and all the divers going in and out, big rescue mission. Thankfully, they got all the boys and the coach out. What was your thought on that? Obviously, it was so much more difficult than they imagined. It took them ages to get those boys out. What was holding them back? I just couldn’t understand it.

Mark:

I’ve been diving for 30 years and I would be completely hopeless in those circumstances. Diving in caves is incredibly specialised. It’s very dangerous; squeezing through tight places, navigation, low visibility, constant threat of panic. It’s not the diving that’s going to kill you it’s the panic or making an error in direction or timing or calculation.

A friend asked me whether they would get all the boys out and I didn’t think they would, not because of the difficulty of the diving, not even the difficulty of taking their gear off to get through the very tight squeeze (something like 38cms).

Shawn:

I couldn’t do it. I think my trousers are at least that size.

Mark:

My response was I didn’t think they would get everyone out because of panic; claustrophobia, low visibility, doing something that’s very new—they’re not trained.

Shawn:

They didn’t dive to get there did they? They more or less walked or climbed through.

Mark:

They climbed through, the water levels rose and they were trapped. The solution they came up with was remarkable; they strapped the boys to stretchers so they couldn’t thrash about, the stretchers were very low profile, and tanks were mounted to the sidebars of the stretchers so they were but wide not tall so they could fit them through the very tight squeeze.

The divers man-handled the stretchers at all times so the boys were never having to do it under their own steam. And they also sedated the boys mildly so they were less likely to panic. The big killer would have been panic.

Shawn:

Freaking out.

Mark:

I probably would too because it’s a very scary thing to do. The people who do cave diving are unique, really highly trained and disciplined people. It is a science. The solution was amazing. And when I saw the footage of them doing it I went that’s it—great idea.

Shawn:

From a story perspective (this is a little sidebar) what was it about that, that got so many people around the world excited and locked into whether those boys were going to get out of the cave? What were some of the story lessons we could learn from that?

Mark:

Kids.

Shawn:

Safety of children.

Mark:

Terror; lost in dark spaces.

Shawn:

Exactly, it’s one of those deep-seated fears we have.

Mark:

Someone said this morning that at the same time the world was watching these boys in a cave in Thailand, 100s of people died in floods somewhere else and no one is paying any attention to that. The fact that it was about kids was a very big one.

Shawn:

I think too the fact that it was drip-fed over a week’s period. It was almost like getting instalments; you’re watching Netflix and you want the next series.

Mark:

That’s right; you don’t know what’s going to happen so from a story perspective that’s a great story because people are going so what happened? It’s compelling.

Shawn:

If you can get your audience thinking what’s going to happen next you’ve got a good story on your hands, right?

Mark:

The whole world was wondering what was going to happen to those boys.

Shawn:

Right, we’d better get into the story that we have which is another one to add to your repertoire. It’s another one to have in your back pocket; you can walk into a meeting and tell this story. Mark, it’s your story today isn’t it? Let’s hear it.

Mark:

The story this week is about a guy everyone knows; Henry Ford the guy who invented the model T Ford. 1908 was when the first Model T rolled out of the factory and Ford was well-known for his revolutionising of production and assembly lines and being very efficient at producing Model T Fords.

Shawn:

The great industrialist.

Mark:

And kind of not known as a people person. You don’t think of Henry Ford as a people person because he took meaningful work and packaged it up in pint-sized bits and it became quite tedious and boring.

This created a huge problem because assembly work became quite piecemeal; doing very small, often menial tasks in a repetitive way with high volume and it was very hard work. And there was a lot of dissatisfaction in the factories.

So, massive turnover and Ford realised they were spending an enormous amount of money training workers as a result of the turnover, putting in place bonuses and benefits that would keep them but all to no avail.

Shawn:

Really? Wow.

Mark:

The industry just accepted that this high turnover was simply a by-product of the assembly line system so they just accepted it. They just passed on the cost of doing this in the prices of their cars. That makes a lot of sense but not to Henry Ford. He looked at this and said this is completely unacceptable.

In 1914 he made a decision that certainly his shareholders were dead against and the rest of the industry looked at him as if he were mad. At the time all the workers in the motor industry were working 9-hour days and being paid $2.38 for the day. You can understand why there was a lot of turnover.

He looked at and he said this is not right and so he more than doubled the wage-$5 a day for an 8-hour working day. And everyone thought he was completely reckless, particularly the shareholders. But Ford’s view was when you pay a man well you can talk to them.

One of the by-products of this was that there was this budding unionisation in the Ford factories and that just petered out and Ford was hailed as this hero of the assembly line, kind of contrary to what we might think.

Shawn:

It’s not our common understanding, right?

Mark:

But Ford’s view was that by retaining employees he would actually reduce costs and that’s exactly what happened. Between 1914 when he made the decision and 1916 (two years) the profit doubled from $30 million to $60 million despite a flat market share, increased competition, and falling prices.

Shawn:

That’s remarkable.

Mark:

And when Ford was asked late in life about his best decisions he said, ‘without a doubt my best decision was the $5 a day working day. It was the best cost-cutting move I ever made.’

Shawn:

What a great story. I love that story.

Mark:

I’d like to acknowledge this story was shared by Rod Rothwell, our partner in Korea and it really surprised me.

Shawn:

It’s just one of those ones that go against the grain of what we think we know. Let’s talk about why this story works, why we like this story. For me, it’s great to have stories about really well-known people because you don’t have to fill all that in.

And sometimes that’s the thing that allows you to give the unexpected because you have this picture of one person and then all of a sudden in the story you flip it a little bit. I think this has a certain element of that.

Mark:

Definitely. One of the things I like about it is you can tell it reasonably quickly.

Shawn:

I could imagine sitting in a meeting and someone saying, ‘I think we need to look at reducing salaries across the board by 2% as the big cost-cutting device’. And you throw in that story; maybe you can increase profits in a counter-intuitive way.

Mark:

A think differently thought. It’s probably worth mentioning that when we did the first version of that story it was much, much longer.

Shawn:

Yes. It had too many elements in it, didn’t it?

Mark:

And one of the reasons was I wasn’t clear on the point I was using the story for so I didn’t know what details to include or exclude and so it became a much longer story. And it was only though our conversation that we were able to focus on the point and dramatically shorten the story.

Shawn:

So, when you heard Rod tell it…

Mark:

Rod shared a written version of it.

Shawn:

You saw the written version of it – did it have the same point, was it focused on the same area?

Mark:

Yes, it was. And then when I went and researched it I found out all this really interesting stuff; that Ford grew up on a farm, in 1891 he did his first design of the internal combustion engine. And it’s a great story and I got immersed in that. And when I told it I included all of that back story.

Shawn:

Yes, didn’t need it.

Mark:

Completely unnecessary.

Shawn:

I think too it’s a relatable story. It’s about a business person who is looking for new ways to improve their business but I love the fact it’s counter-intuitive and I love the fact it’s counter-intuitive for what you expect from that person. Good, anything else that jumps out for us?

Mark:

I find it interesting that something Ford did back in 1914 is still incredibly relatable in the modern 2018 business environment because there are so many companies out there who are doing things that have never been done before. This is a great example of the thinking you need to have to succeed in a new environment.

Shawn:

That’s a good point because we can easily get tied up taking advice from people who are just holding us back.

Mark:

It’s advice that is very well served if your objective is the status quo but if your objective is not to remain in the status quo then maybe you need to talk to people who aren’t part of the current system.

Shawn:

That’s right; it does make a good case for broadening your networks.

Mark:

Yeah, and also being careful who you listen to. We’ve taken advice from very respectable people that have turned out to be 100% wrong.

Shawn:

True, absolutely.

Mark:

And these were people who kind of worked in a traditional way and we don’t.

Shawn:

Yeah, that’s right; you sort of have to make your own way in some ways. Certainly, that is what Ford was doing. Where are the places that you could tell this? What are the situations where we could imagine this is a good story to have in your back pocket?

Mark:

There are so many companies out there right now that are facing the potential Ford disruption. Lots of industries are under threat and there are lots of people in those organisations who are arguing for incremental change.

Shawn:

Right.

Mark:

So, I could imagine the shareholders of Ford back in 1914 going ‘let’s give them a 5% pay rise’.

Shawn:

Yes

Mark:

And ‘ Ford goes no, we’re going to more than double it and we’re going to reduce the working hours oh and by the way we’re going to throw in a profit share system’.

Shawn:

You’ve got to be doing something very different. I’ve literally seen a couple of big organisations that know the dark clouds are swirling around them yet they are not making any big choices to change, the inertia is so strong it is hard to move out of.

Mark:

Let’s tweak some of this.

Shawn:

Yes, tweak this tweak that. I think the other one too is you have people saying you’ve got to think outside the box. This would be a good story about how at least one business tycoon was thinking outside the box a long time ago.

And again, you don’t have to have the most amazing invention or way of doing things, it could just be the magnitude of the things you do in some ways so I think that’s part of it.

What else, are there any other places that we could use this story or give people new ways of operating?

Mark:

Well I could certainly see myself using that story as part of a conference presentation where you want people to think differently.

The applications I was talking about earlier, I was picturing leaders in meetings, but also being on stage and presenting to a big crowd where you want people to embrace significant change and innovation and thinking outside the box and all that stuff.

Shawn:

Yeah, it’s a creativity or innovation sort of thing. The great thing about this story is there would be no shortage of imagery that you could use in your presentations right?

Mark:

I was thinking our partners in Canada; Doug Keely from Mark of a Leader could really use that as part of their enormous video productions. This is one you could find a huge amount of material to support.

Shawn:

Doug could make a great story out of this. So, let’s give it a rating. Since you told it I’ll start off. When I heard the second telling–you know I wasn’t too excited about it the first time.

Mark:

I was anticipating a 4.

Shawn:

Well you’ll be pleased to know the second telling is a 7. And it’s because I just see it as a very useful story. I could definitely see it as something in my story bank that I would tell in those types of situations and it’s an easy one to tell.

And the great thing about it is there are a whole bunch of things that you could miss out. All you have to really say is the guy doubled the wages and he got good profits. That’s essentially the story. To tell it well you have to add those other bits but it’s a pretty basic story.

Mark:

I do think for the effectiveness of the story you do need to nail the $2.38 to $5—it just adds credibility in the telling of the story.

Shawn:

I think you’re absolutely right.

Mark:

If you’ve got those two pieces of information; $2.38 to $5, 9 hours to 8 hours that’s probably it because it’s a beautiful contrast. I would give it a 7 as well. I can see it as a potentially useful story that I could use in those circumstances you mentioned but I would expect that a lot of the people listening to the podcast will have really different thoughts on how they could use it.

I give it a 7 because I do think it’s got potential application way beyond what we’ve identified in this podcast.

Shawn:

Fantastic, that was a great story, another one for the story bank. There are probably more than 20 stories now that you have access to so we’re just going to keep building this up and by the end of the year we’ll have 50 odd stories for you to play around with.

Mark:

And we’ve had some really interesting feedback from people who have taken the stories we’ve shared and applied them in their day to day work and had great results. If you’ve had one of those experiences we’d love to hear about it.

Shawn:

Absolutely, well let’s wrap things up. But thanks again for listening to Anecdotally Speaking and of course tune in next week where we’ll have yet another episode for us to play around with that shows just how to put stories to work.

About  Shawn Callahan

Shawn, author of Putting Stories to Work, is one the world's leading business storytelling consultants. He helps executive teams find and tell the story of their strategy. When he is not working on strategy communication, Shawn is helping leaders find and tell business stories to engage, to influence and to inspire. Shawn works with Global 1000 companies including Shell, IBM, SAP, Bayer, Microsoft & Danone. Connect with Shawn on:

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