Problema específico

The Ford Motor Company quickly realized that its production line was efficient but made workers unhappy. By giving them a large pay rise, Ford created a market of staff-customers.

IN CONTEXT

FOCUS

Market expansion

KEY DATES

1914 Henry Ford doubles his

employees’ wages to $5 a day.

1947 US psychologist Alfred J.

Marrow finds that productivity increases when employees are involved in decision making, and introduces the concept of participative management.

1957 Douglas McGregor

publishes The Human Side

of Enterprise, claiming that

organizations thrive best by trusting staff to apply their creativity and ingenuity to the enterprise in which they work.

1993 Ricardo Semler of Brazil’s

Semco writes Maverick!.

2011 Google is revealed

to have the highest job satisfaction in the US high- tech sector; young “Googlers” are both employees and customers of the company.

Companies should focus on providing consumers with

good products and services at low prices.

They can then provide management with

valuable insights

and ideas, as well as

boosting sales.

They should also reward their employees with the

highest wages possible.

This enables employees to buy the company’s products or services.

If your workers become your customers, your

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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 factor

in 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. 60 50 40 30 20 10 0

Toilet paper Chocolate Fragrances

$ (US) PER CAPIT

A, 2011

USA China India

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food, leaving the average family with a huge surplus with which to buy nonessential items that quickly become “necessities,” such as cosmetics and gym membership. India is perhaps about to embark on this stage of economic development. If so, this will have an impact on the sales of a huge range of everyday items.

The significance of this trend lies in the numbers of people involved. If India, over the next

five years, boosts its spending on toilet paper to China’s per-capita spending, the market growth in India will be $8.4 billion ($6.72 x 1.25 billion population). For China to catch up with the US would imply market growth of $24.3 billion ($17.98 x 1.35 billion population). And that’s just the increase in market size—not the total market.

Exactly the same logic applies across the market for ordinary household goods throughout the developing world. Already, China is the world’s biggest market for luxury items, such as Swiss watches, jewelry, and cars. Over the coming decades, China is also likely to dominate sales of ordinary items (such as toothpaste), and services (such as insurance). The potential sales volumes involved are huge. Today, China is the world’s largest car market, even though fewer than 10 percent of households own a car. In touch with reality

The television show Undercover

Boss sends senior executives

into low-level jobs in their own companies, under alias and

YOUR WORKERS ARE YOUR CUSTOMERS

disguise, to find out what the business looks like from that perspective. The show clearly illustrates how those in charge of a business are often unaware of the opinions, insights, and feelings of their customers and staff. Despite a world of online praise and blame, some companies are able to remain in a bubble of self-delusion.

However, this is unlikely to be true of an organization in which the worker is also the customer. These employees care about the product or service because they experience it themselves and realize that their job security relies on customer satisfaction and the company’s commercial success. If a customer waiting room becomes messy and dirty, for example, staff-customers will quickly draw attention to it.

In Europe, fashion retailer Primark enjoys huge success in the mainstream market. The company turns runway fashion speedily into low-priced garments with a target market of 15–35-year- olds. However, its growth was instigated by an unusually elderly senior management team. By

I will build a car for

the great multitude …