135
workers dissatisfied, and pushed
labor turnover to higher than 370
percent—the average employee
stayed for only three months before
quitting. To counter this, Ford
announced that wages at the
company’s factories would be more
than doubled, to $5 a day. His
actions made headlines around
the world, and in the factory, labor
turnover fell to 16 percent annually,
helping the output per worker (a
measure of overall productivity)
to rise by around 40 percent.
By 1914, it took a Ford worker
just three months to save enough
money to purchase a Model T. By
1924, the price of a Model T fell
again to $260, making it possible
to buy a brand new car with a
month’s pay. By 1924, the Ford
Motor Company sold more than
50 percent of the world’s cars.
Learning from employees
Although Henry Ford generated
excellent publicity by making his
policy of paying high wages sound
like altruism, his practical need to
lower the labor turnover helped him
stumble upon an important fact:
when your workers earn enough
to afford to be your customers,
there can be huge benefits for the
business. Along with increases
in staff pride and commitment,
managers are likely to be given
valuable insights into the company’s
products and processes.
In Toyota City, Japan, more than
half the work force owns a Toyota
vehicle. This is a significant factorin helping to generate the 400,000
work force suggestions per year
on how the company might improve
production efficiency and quality.Emerging markets
In 1924, the US government
published a report titled Cost of
Living in the USA. It showed that
the average family spent 38 percent
of its $1,430 annual expenditure on
food. This is interesting because,
in the past five years, India’s family
spending pattern has slipped below
this level, to 36 percent, indicating
that the average wealth of Indian
families is increasing. When China’s
proportion of spending on food fell
toward 30 percent of income,
households could afford to increase
their wider spending on nonfood
items, such as consumer goods.
In the US today, just 7 percent of
household income is spent on ❯❯See also: Changing the game 92–99 ■ Organizational culture 104–09 ■ Understanding the market 234–41 ■ Focus on the
future market 244–49 ■ Make your customers love you 264–67 ■ Maximize customer benefits 288–89
MAKING MONEY WORK
Farm wages in India increased by
17.5 percent annually from 2007 to 2012.
Since farm labor is at the bottom of the
economic pyramid in India, this signifies
a very fast overall rise in wages.Household spending
data from 2011 shows
that US spending on
luxury goods (such as
chocolate) outstripped
spending on essentials
(like toilet paper). The
data from China shows
that as an economy
develops, spending
on essential items
rises the most.6050403020100
Toilet paper Chocolate Fragrances$ (US) PER CAPITA, 2011 USA
China
India