Henry Ford’s shadow: from France 1944 to Covid-19

A Sherman tank of the US Third Army in WW2

In September 1944 the US Third Army under General George Patton approached the Eastern French city of Nancy. Its vehicles, notably Sherman tanks, had driven there under their own power after landing in Normandy in July. And not by the most direct route: the army pushed south from Normandy before turning east. This journey of hundreds of miles, with rail networks unavailable, had taken a very low toll on the army’s vehicles, including the Shermans. The Germans were organising a counterattack. But their Panther tanks had to make the trip mostly by rail, subject to Allied air attacks, and a third of their strength broke down while driving the 30 or so miles from the railhead to the jump-off point.

This was a triumph of US engineering and industrial organisation. The Panthers had a much better gun and thicker armour than the Sherman, but that was no use if they couldn’t make it to where they were needed. American industrial superiority was repeated everywhere: air, land and sea. Robust, well-designed weapons were put into combat in overwhelming numbers. The Germans produced clever designs in all these fields, but their artisanal industrial organisation led to unreliability, limited production capacity, and often, as in the case of the Panther, designs that were hard to fix when they went wrong. The Americans outshone their German and Japanese enemies and their British allies. Only the Soviet Union could compare. The Russians could not match the Americans’ production quality or sophistication, but their designs were robust and factory output reached the battlefields in vast numbers. They didn’t need to last long when they got there. Only for lorries did the Soviets crave those vehicles made in Detroit.

It is often assumed that the way the Americans and Russians outproduced their enemies was just a matter of scale and resources. But that is not so: superior industrial organisation was necessary for those nations to respond with the speed that they did to the German and Japanese onslaughts. They also needed strong military organisation and tactics: and both nations also had these, though the German methods continued to outshine both until mid-1944. But the lessons of military organisation were quickly forgotten when the war ended, whereas industrial organisation was needed to win the peace. It is no wonder that the way their industry won the war so dominated public policy in America and the Soviet Union, and in Britain too, as it tried unsuccessfully to emulate American prowess.

And what was the American method, successfully used also by the Russians? It was the production-line, developed in the motor industry by Henry Ford. Its key features were the use of standardised designs (“Any color as long as it is black”), simplified as far as possible, high technical specialism in the workforce, segregating human tasks so that minimal skill was needed, and a highly centralised, hierarchical command and control structure. And above all it celebrated economies of scale, the expectation of which became the standard for business and political elites Small was regarded as necessarily inefficient. It is an approach suited to those with an imperial frame of mind, so it is not hard to see why it was popular with Russia’s Communist leaders, and even in post-imperial but backward-looking Britain. It is interesting that it took such hold in democratic America, but the scale of that country invited imperial thinking too amongst it is business leaders.

But the Henry Ford method has weaknesses. It is slow to respond to change, and becomes very inefficient where a feedback loop is needed between user and supplier, or any area where complexity is built-in. Bottlenecks, delays and queues become routine. Furthermore organisations built around the production-line mindset, especially outside the urgencies of wartime, become ossified, divided into fiefdoms that fail to cooperate. But leaders remain locked into its thinking. When things go wrong, the management response is to tinker, by adding bureaucratic controls that slow things down and promises that lessons have been learned that always disappoint in their results. That the Henry Ford method was failing first became apparent when Japanese manufacturing started to outcompete American and British firms in the 1960s and 70s. At first this was put down to “cheating”: underpaid workers doing excessive hours, and so on. But then managers started to realise that the Japanese had been adapting their manufacturing techniques using an idea referred to as “Total Quality Management” (TQM), which involved much more delegated decision-making, and organisation-undermining cross-departmental teams. This realisation came too late for most of British manufacturing industry, with the motor industry weighed down by mediocre management and bad industrial relations, often driven by demarcation disputes, a common outgrowth of Fordism. The new ideas were beyond the imagination of management and union leaders alike. America embraced the new ideas more successfully, notably by Jac Welch’s General Electric in the early 1990s.

But the world was moving on, as Baumol’s law started to diminish manufacturing industry’s economic importance, just as it had done to agriculture a century before. Service industry became critical, and services are less easy to fit into a standardised mould. At first management thinkers adapted their manufacturing techniques, arguing that services were just another product. But by the mid 1990s thinking had moved on to an idea that was centred on a service mindset, where manufacturing products were seen as just another service. This was Business Process Reengineering (BPR). The user experience became central to business organisation, delegated decision-making critical, and layers of hierarchical management were dismantled. This was catching on just as I was taking responsibility for a mediocrely performing organisation administering savings plans. I used it to reorganise everything, doubling productivity and improving quality of output too (actually, that was linked). This was a heady time in management thinking, with optimistic “both and”, and “win-win” ideas taking hold. In Britain the most eye-catching business using BPR was Virgin Atlantic, offering a superior travelling experience at a reasonable cost. It even infected Tony Blair’s New Labour, who took on the heady optimism of leading business people, with the idea of “Stakeholder Capitalism”. Mr Blair’s subsequent period in office showed that he had no idea about what all this actually meant, however.

But then things turned darker. The rise of the internet was the most eye-catching aspect of this: but there is no reason that this should have undermined BPR thinking. A bigger issue was the rise of cheap labour in Asia, which new technology could help tie into longer supply chains. Meanwhile managers were bewitched by the idea of “Shareholder Value”, which quickly pushed away the fuzzier and more inclusive thinking of Stakeholder Capitalism. This legitimised management and shareholder greed and corporate empire-building.. The customer experience was given lip service but not priority. Ryanair replaced Virgin as the airline success story.

And Henry Ford made a comeback, with a twist. That was that businesses embraced outsourcing (Ford wanted his organisation to do everything itself), which improved communications technology now enabled. But hierarchical management, standardisation, deskilled work (preferably done by robots) and economies of scale reestablished themselves in the way managers thought about organising work. New technology, it was thought, could make up for Fordism’s defects (more recently with high hopes being placed on artificial intelligence). Conservative ministers in Britain accepted this without question as the remade public services by reorganising and outsourcing to firms that embraced the new Fordism.

Which brings us to Covid-19. A lot of the way Britain has organised itself to meet the challenge reflects Henry Ford thinking. This particularly applies to testing, but also to PPE procurement and the contact tracing system, which has been outsourced to one of the usual large-scale suppliers. And the weaknesses of the Henry Ford approach have become evident. Queues, delays, bottlenecks; promises made by management that cannot be kept; bureaucracy being added in to try and make a broken system work better.

But some countries never fell for Henry Ford ideology. Service efficiency is legendary in Switzerland partly because they never embraced large-scale thinking, and they know instinctively how organise and delegate decisions so there are no delays and queues. Germany stuck with its artisanal, delegated approach, with much of its modern industrial prowess driven by medium-sized companies, which Forders would dismiss as being sub-scale. In German Covid contact-tracing is done by small local and professional multi-functional teams who carry out their own tests; in Britain newly recruited tracers helplessly sit by their computers waiting for referrals to come through, while their German counterparts are kept busy, using local knowledge to solve problems. British political and business elites fail to comprehend. It is probably too much to hope that Henry Ford’s ghost will be one of the casualties of Coronavirus.

One thought on “Henry Ford’s shadow: from France 1944 to Covid-19”

  1. Excellent overview of the forces of change and responsiveness that gave us the broader PostWar affluence and lost us the Post1991 digital economy.

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