Henry Ford, Father of Lean
What Advice Would Henry Ford Have for Toyota Today?
"Henry Ford was directly responsible for making the US the wealthiest and most powerful country on earth." (Levinson, Henry Ford's Lean Vision, 2002) Henry Ford accomplished his common sense philosophy of business over 100 years ago with rational, levelheaded principles - principles of human relationships and management of physical resources. In his book, "My Life and Work," Ford (1922) even presents the application of his principles and fundamentals to today's economic, social, and governmental issues.
I consider Henry Ford to be the "father of Lean thinking" - - not Taiichi Ohno, who later created the Toyota Production System (TPS.) Lean manufacturing is an American creation. It is a philosophy of doing business which focuses on eliminating waste to reduce cost. At best, Toyota took Henry Ford's principles and writings and, after WWII, modified them to be able to produce many different models in small quantities. (Taiichi Ohno, TPS: Beyond Large-Scale Production, 1988) But it was definitely Henry Ford who taught the Japanese (Toyota and Honda) how to make low cost, high-quality cars that eventually captured more market share in recent years than Ford and GM combined. Henry Ford, whom many consider to be a visionary, also recorded ideas which later were said to have been originated by Steven Covey, Deming, Eli Goldratt, and Tom Peters. Henry Ford is an American icon!
The corporate culture of the early Ford Motor Company was lost after Henry Ford's death. Did Toyota really grasp Ford's teachings and principles? Was there something lost in the translation? In light of what is happening in Toyota's business today, is now the perfect opportunity for Ford to revitalize Detroit and set an example of an old, but new, business model for all American manufacturers?
Bio of Henry Ford
Henry Ford was the son of a farmer, and was born in Greenfield, Michigan on July 30, 1863. One of six children, his parents came to the US from Ireland in 1847. His mother died when he was just 12 years of age. At 15 years of age, he built his first steam engine. In 1891, he became an apprentice and engineer at the Edison Illuminating Company. Interestingly, Edison encouraged Ford to give up his idea of a gasoline motor, and concentrate on an electric motor as Edison believed that electricity was the wave of the future. Ford's first car was completed in 1896. He resigned from the Edison Company in 1899, and organized the Detroit Auto Company, which went bankrupt one and a half years later.
On June 16, 1903, Henry Ford organized the Ford Motor Company. He sold his first car, the Model A, on July 15, 1903. In 1908 he built the first Model T car, and in 1913 he built the first moving assembly line. In 1914 he announced his plans to share Ford Motor Company profits with workers. Interestingly enough, in 1918 he lost his bid for the US Senate, campaigning on smaller government run by business people and not politicians. "Substituting the engineer for the politician is a very natural step forward...The engineer creates and harmonizes, while the politician can at best only rearrange what he has in hand." (Ford, Moving Forward, 1930) By 1921 Ford dominated 55% of the total auto market share. He went on to successfully practice and to apply his principles in education, healthcare, and transportation. He died on April 7, 1947, at age 83.
Henry Ford Defined Lean Manufacturing as We Know It Today
The story of the development of Henry Ford's "common sense" philosophy of business is an interesting one. He had an "idea" to provide a "service" for people with a new product he called a "car." He designed and built this car in the basement of his home. Just in case this car would be successful and people would want more of these cars, he wrote down in a book every "step" in the making of this car. When the car was successful and everyone wanted one, he had two choices. He could hire one person, teach that person all 500 steps in the manufacture of this car, and they could then make two cars each year! Or, he could hire 500 people, training one person on each "step" in his book, and he could then make many cars each year. Thus Ford became the father of the "atomization of work." As he could not fit 500 workers in the basement of his home, he bought a large facility and set up the first moving assembly line in the first manufacturing plant. Of course, it only made sense to Ford to set-up this assembly line "in the order in which the operations occurred." This is what we Lean practitioners today call "flow."
Henry Ford on History
"There has not been a single example throughout recorded history of a great nation or empire that has not fallen... Businesses follow the same cycle of growth and decline." (Lawrence Miller, Barbarians to Bureaucrats, 1989) "Henry Ford bequeathed us the tools. We only need to use them...to turn back the tides of history." (Levinson, 2002) Henry Ford's thinking..."lean thinking"...is common sense. He wrote of the ability to identify improvement opportunities, and to see waste and inefficiency. Toyota today, in light of its many problems, should examine itself and ask, "What would Henry Ford do?"
Henry Ford's Principles and Values
As a former math teacher, I often lectured to students that there is no "recipe" for problem solving. Likewise, Henry Ford warned against taking his writings as gospel, and stated that one cannot run an organization "from a cookbook." Henry Ford's two basic principles / values were... and still are:
- Natural law is the foundation of successful human relationships (management-labor, customer-supplier, etc.)
- Elimination of all forms of waste is the foundation of operational excellence.
He believed that service to the customer comes before profit. On quality, Ford said, "Quality means doing it right when no one is looking." (Ford, My Life & Work, 1922) Ford's car had to have certain attributes: quality, simplicity, power, absolute reliability, lightness, and control. (Ford, 1922) Henry Ford went on to say, "Ford production has not reflected good times or bad times; it has kept right on regardless of conditions excepting from 1917-1919 when the factory was turned over to war work... There is no particular secret in it...It is the inevitable result of the application of a principle which can be applied to any business." (Ford, 1922) Henry Ford went on to buy a railroad, and run it successfully... "according to our own principles of management." He also successfully ran a school and a hospital according to his own principles of management. He would have liked to have had the opportunity to apply his principles to the federal government.
Henry Ford was a Visionary
Ford was encouraged early in his life by Thomas Edison. Some of his friends, with whom he may have spent Saturday nights and a few beers, were the Wright Brothers, the Harley brothers, and Ben Franklin, as well as Tom Edison. Furthermore, Henry Ford's writings on natural law are eerily similar to those of Steven Covey's "Principle-Centered Leadership." Ford probably was influenced in industrial efficiency by Frederick Taylor. Many years later, Deming advised us to get rid of departmental barriers. Did not Henry Ford do this when he set up his first factory and assembly line, placing machines in the order in which operations occurred? In recent years, Tom Peter's professed "managing by wandering around." However, this was also first introduced by Ford. Ford was never in his office. He watched production lines rather than waiting to read a report. Ford was hands-on management. He knew every worker by first name. Eli Goldratt, in his book "The Goal" in 1984, advised us to run our plants at 100% capacity by suppressing variation. Henry Ford said this in the early 1900's. Ford also said that service, not profit, was the purpose of any business. (Ford, 1922)
Henry Ford's Lean Vision
Henry Ford talked, in the 1920's and 1930's, of design for manufacturing, error proofing, motion efficiency, and elimination of job classifications. These were all preludes to what we today call "Lean manufacturing" or "Lean thinking" (Jim Womack, LEI.) Henry Ford relied heavily on "common sense." One of his basic principles sees workers, not as commodities to be bought and sold, but as business partners. Ford quadrupled his workers' wages in 20 years - - a growth rate of 7.2% per year (Levinson, 2002.) He believed in mutual trust between Labor and Management. People have often asked me what made The Wiremold Company, a textbook case in Lean and Lean Accounting, so successful in Lean. The answer is that management knew the first name of every employee, knew the employee's family, and shared with the employee the success and the profits of the business.
Ford believed in adding Value. He stated that middlemen (i.e., dealerships) do not add Value. "We produce cars to sell - not to store." (Ford, 1922) He also stated that advertising is a waste. Thus Ford also was the father of Target Costing long before it was officially introduced in the 1950's. He believed that, if you target or plan your costs, and ask the customer what he is willing to pay, you do not need to advertise.
Henry Ford on Complacency, and Leaders in Denial
Henry Ford was unwilling to accept the idea that his Model T was over, and he could not imagine a successor to himself. After his stroke in 1930, the Ford Company discovered that there was no succession planning. Henry Ford rode his success into the ground. Why? The Model T, introduced in 1908, sold 15 million cars. By 1927, sales were poor, and business was declining. But Henry Ford dismissed his Model T's declining market share, and had a myopic view of competition. After WWII, customers wanted many options and colors other than black, but Ford dismissed this, and Toyota took over the 'leaning' of the auto industry.
The More Recent 1990's Decline of Ford's Corporate Culture
Some believe today that pension problems and/or unionized labor brought about Ford's more recent demise. However, the real reason for Ford's failure was poor management. At the time, the Japanese were focused on excellence, while Ford was focused on financials. The Japanese focused on planning (both costs and revenues) and the customer, while Ford focused on cost-cutting (laying off workers and closing plants) and the 'bottom line.' Even after WWII, Ford's young management created "a culture based on a financial paradigm where every business decision was a function of profitability." (Levinson, 2002) Ford collapsed because it failed to adhere to Henry Ford's basic principles.
Henry Ford on Recessions and Depression
Henry Ford stated in his early writings, "...every depression is a challenge to every manufacturer to put more brains into his business - to overcome by management what other people try to overcome by wage reduction.... Get the costs down by better management. Get the prices down to the buying power." (Ford, 1922) Ford firmly believed that the worker himself was the company's best customer. As Ford's business grew, he went on to say that "...with growth, every imperfection latent in the system comes out." Ford also told us that "The principles of service cannot fail to cure bad business." (Ford, 1922)
Henry Ford on Management Accounting / Lean Accounting
Management Accounting came on strong in the early twentieth century as the pioneers of the Industrial Revolution challenged "financial" accounting. Corporations, such as Henry Ford's company, wanted and needed budgeting, capital investment analysis, performance measurements, and metrics and cost analyses. Ford stated that we should not let Cost Accounting run the business! (Levinson, 2002) Cost Accounting involves transactions, cost standards, and 'command and control' by the accounting group. Cost Accounting is a data dump! Cost Management, on the other hand, involves target costing, planning our costs, and "soft" skills such as organizational and change management behavior. Cost Management is "information."
Ford said that financial information signals us that something is wrong, but tells us not what is wrong. He stated that Cost Accounting has two, and only two, purposes: tax accounting and financial statements. He even went on to say that accounting book values "...are meaningless as the machines are worth only what we can do with them." (Ford, Today & Tomorrow, 1926)
One of my favorite quotes from Henry Ford is the following:
"We have never considered any costs as fixed. Therefore we first reduce the price to a point where we believe more sales will result. Then we go ahead and try to make the price. We do not bother about the costs. The new price forces the cost down." (Ford, 1922)
This is Lean Accounting and Target Costing! Lean Accounting makes as many costs direct costs through the set-up of "product families" and value streams, where people are held accountable for "planned" costs. The goal of Lean Accounting, both for Henry Ford and today's businesses, is to simplify financial statements, placing them in a format and language that operations people can understand, and thus giving all people outside of the financial function insight into the business.
FORD on Rediscovering its Heritage
"Failure is simply the opportunity to begin again, this time more intelligently." (Ford, 1922) For the past ten years, since 1999, Ford has been working on getting back to Henry Ford's basic principles of business. In 1999, Ford set TQM aside, and began a Six Sigma quality program which would work in conjunction with its Lean philosophy of speed-to-market. This Six Sigma program was for problem solving, and its projects delivered solutions to what Ford calls "Things Gone Wrong." Most important was that top leadership was involved in this Lean Six Sigma initiative, and Ford further removed skepticism of employees by involving all employees. In the past ten years, with its Lean Sigma program, Ford has improved quality, eliminated tons of waste, improved focus on customer satisfaction, and improved ties with suppliers.
FORD Today Can Revitalize Detroit!
Henry Ford warned businesses not to become complacent. He warned leaders of businesses not to be in denial. (Levinson, 2002) Henry Ford told us, "We suffer frequent periods of so-called bad luck only because we manage so badly." (Ford, 1922) How we in America deviated from Ford's teaching is a mystery. (Levinson, 2002) But the fact is that, today, the Ford Motor Company seems to have it all together again. "If everyone is moving forward together, then success takes care of itself." (Henry Ford, 1930)
Ford also stated that "...rushing into manufacturing without being certain of the product is the unrecognized cause of many business failures." (Ford, 1922) Japanese manufacturers knew they were getting a proven method for success when they read Henry Ford's books on both the hard and soft philosophy of business management. And Taiichi Ohno, Toyota's creator, credits Henry Ford's books as Toyota's major influence. (Ohno, 1988) However, for whatever reason....complacency, denial of current problems, and/or lack of understanding in the translation of Henry Ford's principles... Toyota is having a very difficult time today.
Just as the Saints were able, after many decades, to begin to revitalize New Orleans, so FORD today has the opportunity to begin to revitalize Detroit. As Henry Ford once said, "Coming together is a beginning, staying together is progress, and working together is success." (Ford, 1926) Toyota... WHO DAT?
To learn more about Henry Ford, the Lean philosophy of business along with Six Sigma, and Lean Accounting, please do register today for a Lean Beans seminar / workshop in your area! We also still have some seats available in our 2-day winter events at Florida resorts in Miami Beach and Orlando. Check our Seminar Schedule for dates! |
