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India cannot afford to admire Henry Ford

Attending a talk of great leaders, an America-phile (lover of America) was narrating to us natives the power of American leadership and why we should replicate it. The speaker said several useful things and some I did not agree with particularly when alluding to Henry Ford's management and leadership style. Here is why we should not admire Henry Ford's leadership and management style.

Henry Ford is considered to be a legend of sorts. He was instrumental in the introduction of a revolution called mass production. Initially hailed as the most efficient way to manufacture goods, mass production churned out millions of near identical products at significantly lower costs from a process called craft production. While craft production employed highly skilled workmen with a few apprentices was highly rewarding both financially and emotionally, the products were terribly expensive. On the  other hand mass production employed large numbers of unskilled workmen in a manner that  completely de-humanised workers at very low costs. Mass production however had the great advantage of creating employment for the masses.

Ford built and managed the entire Ford Motor Company multibillion dollar empire almost singlehandedly, only to bring it to near ruin within two and a half decades. Ford achieved a meteoric rise only to plummet from the zenith to the nadir within 15 years .  Just before the start of World War II, everyone agreed that Edsel Ford the son of Henry Ford was the only hope for the Ford Motor Company. Edsel had demonstrated potential that he possessed those qualities that would turn the company around.

Edsel’s sudden death during world war II set off panic within American industry, financial sector and the government.  The seriousness with which it was viewed can be gauged  that the US government floated a proposal to lend money to Studebaker the fourth largest car maker at that time and one sixth the size of Ford to buy out Ford. This was seen as the only way to save Ford and to protect America’s war effort.

Henry Ford was obsessed with being the only shareholder and manager of his company.  Ford carefully analysed the work and its flow and broke up the tasks into the smallest possible elements so that tasks could be performed without application of mind or spirit repeatedly by faceless and nameless workers. Henry Ford designed his operations so that workers were completely dispensable and easily replaceable by any other able bodied worker.

In early 1920’s Ford motor company’s automobile share had grown to 75% and by the time world war II started in 1939 its market share had dropped to 20%.  The company was losing at that time US$ 10 Million per month and was eventually revived only by the professional approach of Henry Ford II who was Henry Ford’s grandson.

What caused this rapid decline?

Henry Ford employed a private secret police headed by the notorious Mr. Harry Bennett which was brutal and had a two point agenda; to ensure that no Ford executive made any decisions and that no worker should express an opinion.  Ford would regularly demote first line supervisors so that they did not become ‘too uppity’. Technicians he needed and paid them handsomely but Ford remained the only manager in the organisation.

Though focus of this article is on Henry Ford,  these practices were fairly common in the industrial world of that era. Nearly all of those organisations that followed this type of management took off like rockets only to plunge into the dust in a short while.  Henry Ford had his admirers too, Lenin the Russian Bolshevik leader was an ardent follower of Ford and adopted ‘Fordism’, for it appeared to offer the key to rapid industrialisation without having the need for skilled labour nor management. History shows what happened to the economies of the communist nations.

India has entered into the Industrial era much later than Europe, America and Japan.  Sadly interaction with many Indian companies show that they continue to run their companies much like Henry Ford ran his company , just like it is their personal property.  Without focus on management, many of these companies have faced and are continue to face serious difficulties.

Management is the most precious asset of any organisation and one that needs a long time to develop and build up and a very short time of bad leadership to destroy.

The rapid growth in demand without corresponding increase in supply has provided Indian organisations a false but comfortable good feeling. Suppliers have not been supplying but rationing  products and service to their customers.  

Recently significant hiccup in world politics and economics which has and continues to lead to drop in demand is now threatening  a virtual collapse of many companies. This is inevitable unless owners change their approach.

What are the changes in approach that is needed by owners? They must recognise;

1.   Management is different from ownership. Rarely do owners make good managers. Majority of the problems are because of owners in day to day management.

2.   Call it by any name but management is essential to all organisations. 

3.   A manager need not be a highly qualified person but must surely possess the right skills, knowledge and attitude to deliver results.

4.   Owners cannot manage everything and must employ managers to manage as appropriate.

5.   Organisations have to be led and managed and not driven by fear or brute force.

6.   Mangers can perform well when there is an understanding of the goals, the processes, the people and a positive spirit within organisations.

7.   The need to develop a value system for their organisation that, excites people to deliver superior performance both as individuals and as teams.

8.   Governments should get out of doing and only facilitate, after all the government by its very nature inefficient.

Changes are normally initiated under some form of pressure. Unfortunately until now there has been little or no pressure from either external sources (competition) or from internal sources (the passion to excel) on many Indian companies.. This represents a grave danger to many organisations in the medium to long run.

It appears that much resources and pain will be inflicted by a majority of owners not only on their stakeholders but also on themselves, now that there is a slowdown and as competition heats up.

p.s. Equally disturbing is the trend to blindly copy Henry Ford’s idea of making workmen completely dispensable and interchangeable by using untrained, unskilled and illiterate workmen on daily contract basis. The consequences of such an approach particularly where some application of mind or knowledge is essential will be severe if not fatal for many organisations.


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