Henry Ford's Human Capital Case Study

However you may choose to refer to Henry Ford, unscrupulous robber baron, captain or industry, or visionary industrialist; his investment in Ford Motor Company’s human capital was revolutionary. Henry Ford knew if he could reduce labor time and costs in manufacturing, he could lower the price of the Model T; so he introduced the production assembly line, which reduced the time to build a Model T from twelve in a half hours to under six hours ("Henry Ford Changes the World, 1908," n.d.). To stable his workforce, and keep them happy while performing repetitious work, Ford increased the salary of his employees. Did this investment in human capital pay off for Ford Motor Company? Can this mindset carry forward into today’s society?
In 1914,
…show more content…
That kind of pay raise is practically unheard of; and a monumental investment in human capital for any company to make. $5.00 a day in 1914 is the equivalent of roughly $120.00 a day in today’s society (Cwiek, 2014). The question behind such generosity is was this generosity at all? Did Ford have a strategy behind his pay raise? There are many theories behind Ford’s legendary investment in his human capital. Some claim it was to stabilize his workforce, enable his employees to purchase the vehicles they built, or to keep them happy while performing arduous, repetitious tasks for nine hours daily. Let’s discuss the theory that Ford increased the daily pay to stabilize his workforce. The cost of hiring and training new employees is not only costly process, but a very time consuming process as well. “In 1913, Ford hired more than 52,000 men to keep a workforce of only 14,000. New workers required a costly break-in period, making matters worse for the company. Also, some men simply walked away from the line to quit and look for a job elsewhere. Then the line stopped and production of cars halted. The increased cost and delayed production kept Ford from selling his cars …show more content…
One’s own employees ought to be one’s own best customers” (Ford & Crowther, 1988). From selling 308,000 Model T’s in 1914, to over a million in 1920, Ford’s investment in its human capital (workforce) paid off in immensely (Nilsson, 2014). In today’s society, would this type of investment pay off the same as it did for Henry Ford? Henry Blodget of Business Insider believes so. Blodget wrote in an article “Because we are facing a very similar economic problem as the country did in the early 20th century. A glut of labor was allowing companies to pay a pittance for a day 's work, leaving most of their dedicated employees destitute. Business owners and executives (the equivalent of today 's 1%) did fine, but most rank-and-file workers did not. And this lack of spending power in the middle class crimped overall economic growth. Because we are facing a very similar economic problem as the country did in the early 20th century. A glut of labor was allowing companies to pay a pittance for a day 's work, leaving most of their dedicated employees destitute. Business owners and executives (the equivalent of today 's 1%) did fine, but most rank-and-file workers did not. And this lack of spending power in the middle class crimped

Related Documents