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<p>That’s not true. The HR change was part and parcel to the marketing and image change. Before the change, Ford Motor Company was an infamously stressful place to work, as Henry Ford would mercilessly push for more output from its workers, such that the company developed a reputation as undesirable employer relative to its competitors and as a company plagued by high employee turnover rates. Many workers ended up at Ford only because they couldn’t get a job at another auto company. </p>
<p>Henry Ford solved these problems by doubling wages, and, unsurprisingly, employee turnover dropped to such a miniscule level that the company even stopped bothering to measure it, and soon, the very best auto workers in the country were soon flocking to work at Ford. This resulted in soaring productivity such that the cost-per-vehicle actually drastically declined, which allowed Ford to underprice its competition repeatedly and drive numerous other auto companies out of business on its way to becoming the dominant auto firm in the US, with over 50% market share. Other firms simply got crushed because they had poorly paid and hence unproductive workers. </p>
<p>The point is, HR strategy is an integral part of your overall operational strategy. Higher pay attracts better workers which then in turn allows you to vastly improve your operations. I think every engineer will tell you that, at any firm, the vast majority of the work is actually produced by only a minority of the people, and many employees are not very productive at all. Hence, wouldn’t it be better to hire more of the productive people (by offering better pay) and fewer of the less productive people (by maintaining high hiring standards)? That’s what Henry Ford did. </p>
<p>{Now, to be fair, Henry Ford was no saint. As ruthlessly merciless as he was to his competitors, he was just as ruthless towards labor unions, repeatedly attempting to crush them. Hence, I am not saying that Henry Ford was perfect. What I am saying is that he did happen to discover a highly successful HR strategy.} </p>
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<p>Of course. But we’re talking about what individual firms can do, for they do represent the demand for engineering labor. Think of it this way. If there are lots and lots of engineering firms that offer excellent salaries and career advancement, why would anybody who has any skills want to work for one of the low-cost firms? Ultimately, it will mean that those firms won’t be able to find anybody decent who wants to work for them because they’d rather work elsewhere. Again, it’s just like how Ford was basically able to “steal” all of the best workers from his competitors by offering such high pay. Hence, with one stroke, Ford both vastly improved its own productivity and gravely damaged its competitors’ productivity.</p>