Leadership Lessons from Henry Ford
October 27, 2014
This month marks the 106th anniversary of one of the most innovative and life-changing products in history, the Ford Model T. Of course, the Model T wouldn’t have been the success that it was without the leadership and business acumen of its creator, Henry Ford.
Before 1908, cars were a luxury that only the affluent could afford. Not only did they have a huge price tag, but they were also expensive to maintain and repair. Ford saw huge potential in the future of the automobile and was determined to build a vehicle that fit the budget of the middle-class.
When Ford introduced the Model T, it started at $825, a price that was much cheaper than anything else on the market. It was also simple to drive and easy to repair, making it an instant success.
Throughout the next several years, Ford did something surprising. He dropped, and continued to drop, the already low price of the Model T. In fact, by 1916, the Model T was less than half of the original price at $345.
That wasn’t the only surprising decision Ford made. In 1914, he decided to offer $5 a day to employees that met certain criteria, which was double the average wage at the time (Just imagine Walmart deciding to pay its employees $18 an hour!). When a company is considering ways to lower the price of its products, doubling employee salaries certainly isn’t the first thing that comes to mind.
So why did Ford decide to lower the price of his product while increasing the salary of his employees when common sense says otherwise? Because one of the skills that made him such an innovative leader was his ability to see the big picture.
Ford knew that if he were able to lower the price of the Model T, then more people would be able to afford it and sales would increase. As you well know, his strategy worked. Sales sky rocketed so that by the 1920, he was producing over 1 million cars per year.
And before Ford raised the wage of his workers, he was having serious employee retention problems. Getting new employees up to speed is time-consuming and costly. By raising wages, Ford was actually saving money as he attracted top talent and retained that talent longer.
Ford was responsible for one of the most influential products of our time, in large part, because he wasn’t afraid to take risks. But what’s more, he had the business acumen to take the right risks, or as we like to say, strategic bets. And that is something that is lacking in most managers and leaders today.
Mark Zuckerberg got it right when he said, “The biggest risk is not taking any risk… In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”
So happy anniversary to the Model T, and let’s all make it a goal to take more (smart) risks!