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Five Dollar Salary That Changed Corporate History

Posted June. 17, 2005 03:25,   


In 1914, Henry Ford, chairman of Ford Motor Company, made a critical decision.

The decision was whether to give five dollars per day to workers, which triggered serious resistance from other companies that had given only two dollars per day to workers. However, Henry Ford didn’t yield to this objection because he believed that high wages guarantee good labor quality, which eventually paved the way for the era of the mass production of autos.

Ford made another critical decision 60 years later not to recall the Pinto, a compact car manufactured by the company, even though a defect in it was confirmed. This decision was grounded in that the recall cost would surpass the damage costs when accidents took place due to this defect.

However, this decision was wrong because it seriously tarnished the image of Ford Motor Company, which put the company under persistent scrutiny from consumer organizations as a result.

When making decisions, managers always go through a very hard time, as shown in Napoleon’s words: “Anything can’t be more difficult and important than making decisions.”

Fortune, a biweekly business magazine published on Jun 20, announced the 20 critical corporate decisions that changed the history of the U.S. in a recent issue.

The magazine indicated that to make a successful decision, managers should first ask very basic questions to themselves.

This means that if they ignore such basic questions as “How about the future of our business?”; “who are our customers?”; and “is business going well now?” their decisions are destined to be wrong.

In 1980, Reg Jones, chairman of General Electric (GE), appointed Jack Welch as his successor. This was a surprise to many people because contrary to GE’s corporate atmosphere that was seeking stability, Welch’s attitude was very aggressive, which raised concerns over his possible conflicts with other senior mangers.

In an interview, Welch pointed out the problems of the GE one by one in front of Chairman Jones. Even though he was angry about it, Jones appointed Welch as his successor because while other candidates suggested strategies which only dealt with the current situation, Welch’s strategy targeted a predicted business environment in the future.

Mi-Kyung Jung mickey@donga.com