Prelims

Half Title

Persistence and Vigilance

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Studies in the Development of Accounting Thought

Series Editor: Gary J. Previts, Case Western Reserve University, USA

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Title Page

Studies in the Development of Accounting Thought Volume 24

Persistence and Vigilance: A View of Ford Motor Company’s Accounting over its First Fifty Years

By

Yvette J. Lazdowski

United Kingdom – North America – Japan – India – Malaysia – China

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Emerald Publishing Limited

Howard House, Wagon Lane, Bingley BD16 1WA, UK

First edition 2021

Copyright © 2021 Emerald Publishing Limited

Except where otherwise indicated, all images are © The Henry Ford. All rights reserved.

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British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

ISBN: 978-1-83867-998-9 (Print)

ISBN: 978-1-83867-997-2 (Online)

ISBN: 978-1-83867-999-6 (Epub)

ISSN: 1479-3504 (Series)

Dedication

This book is dedicated to hard-working, diligent accountants everywhere, but especially to corporate accountants who serve as communications and data experts to their companies, helping them make strategic decisions. May the memories of James Couzens, Norval Hawkins, Frank Klingensmith, and Ernest Breech, as well as those of other accountants mentioned herein, continue to inspire their efforts.

Contents

List of Tables

List of Figures

Foreword

Much has been written about the history of the Ford Motor Company since its inception in 1903. Its story is rich with ambition, clashing personalities, mechanical innovations, and the transformation of society by access to affordable transportation for the masses. There are multiple components to the tale: the fast-paced implementation of mass production and mechanical advancements that changed peoples’ lives, with the human elements in achieving these goals, including men perceived as heroes and villains, along with geniuses, power-mongers, and everyday workers.

This book is not an attempt to retell the history of the Ford Motor Company in all of its details. ¹ Rather, it is an opportunity to experience the saga from the viewpoint of accounting and its practices within the company from its origin in 1903 through approximately its next 50 years. Given that accounting procedures and financial reporting depend on the professionals who perform these tasks, this is a story that calls attention to their efforts. It is a tribute to their contributions and hard work.

In 2005, after 20 years as a corporate accountant, along with years of raising three children, I made a career change to full-time college teaching. My initial interest in the Ford Motor Company began during my doctoral studies in 2005–2007. Always a major history “buff,” I was delighted to see that Accounting History was one of our required doctoral courses. Our required text was A History of Accountancy in the United States: The Cultural Significance of Accounting (Previts & Merino, 1998). I was mesmerized by the rich history of accounting in America and knew I found the topic for my dissertation – but precisely in what area of accounting history?

While discussing my dissertation anxieties with the then-Dean of our business college, he talked about his keen interest in the Ford Model T and his own mechanical abilities to tool various engine parts in his garage. His passion for the restoration and maintenance of the Model T was evident. At the time, I recall he owned at least eight different Model Ts of various years, and it was fascinating when he brought one of these cars to our university and took several of us for a ride in his nicely restored Tin Lizzie. Before too long, I was interested in the history of the Model T myself, and I devoured several library books on the history of Henry Ford and the Ford Motor Company. The Dean suggested I visit The Henry Ford in Dearborn, Michigan, a vast history museum and complex that includes The Henry Ford Museum of American Innovation and also Greenfield Village, an outdoor museum which consists of historical buildings, memorabilia, and events. Within The Henry Ford complex, the Benson Ford Research Center houses the Ford Motor Company archives in a climate-controlled setting, with stacks of data available to the public and accessed by library specialists. Visitors are welcomed to request and view the archival items at the library on weekdays from 9.30 a.m. to 5.00 p.m. During sabbaticals, the Dean himself volunteered his scholarly expertise at the Benson Ford, helping to organize and describe the contents of various accessions. He advised me to delve into several accessions that contained financial data, especially as some of these boxes had not been closely viewed since they were donated to the archival collections in the 1950s.

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Fig. 1.

Dean Boggess’ Restored Model T at Plymouth State University.

Curiosity, as well as the dissertation countdown clock, outweighed my travel budget, and I was soon entrenched in the pleasant library at the Benson Ford Research Center. The Dean was absolutely correct – the wealth of detailed information was enormous, and I was convinced a dissertation was possible on the accounting history of the Ford Motor Company. After several trips to Dearborn in 2006 and 2007, with the helpful assistance of the Benson Ford staff, I was contentedly engrossed in gray and silver boxes of documents, correspondence, and photographs. Time in the library always seemed to pass by so quickly, with the awe and interest of viewing the original Ford Motor Company articles of incorporation, board minutes, journal entries, correspondence with original signatures, among many other treasures.

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Fig. 2.

The Benson Ford Research Center at The Henry Ford.

By the end of 2007, I completed and defended my dissertation. Along the way, I began acquiring my own book collection on the history of Henry Ford, the Ford Motor Company, and many key players in the progression of the company. Of course, I was particularly intrigued by the financial administration of the company, as I thought back to my own years as a corporate accountant for several manufacturing companies.

It was clearly noticeable that the evolution of the Ford Motor Company was complex on many levels, as in all ventures that involve humans and their interactions with life’s events. The Ford narrative included personality conflicts, egotistical behaviors, and power struggles throughout the early and later years, but there were also novel accomplishments, mechanical improvements that could rival today’s technological innovations (for their time), and proactive reactions to societal changes and events in an industry that was new in the early years of the twentieth century. While advancements in mass production revolutionized manufacturing and made the Model T affordable to the masses in great numbers, the pains of organizational growth strained the administration to adapt to the new scale of the company. The five-dollar day is an example of the effects related to the monotony of mass production and high labor turnover. The challenges of two world wars required amazing flexibility in production methods, scheduling, and fast-paced response to governmental contract changes. Throughout the years, the details of accounting activities and financial reporting remained on task, adjusting as needed to support these types of critical operations.

Hence, it is impossible to tell the financial side of the company’s history without paralleling the business and historical events that occurred, as well as the people involved. As is common in many businesses, there is often a certain disconnect between the financial and manufacturing administrations, especially when strong personalities are involved who focus on different priorities. The Ford account does not disappoint in that aspect, and I do not intend to cite blame or bias toward any faction or individual. For example, Henry Ford was known to have some indifference, some could say disdain, toward detailed financial reporting or cost accounting methods – and even accountants themselves – yet he understood the numbers and why they mattered. Thus, the tale of the Ford Motor Company’s accounting practices and reporting must be told in the context of specific events, personalities, and their reactions, and most importantly, with a minimization of present-mindedness.

Consequently, a caveat may be warranted in the narrative that follows. The National Council for History Education (NCHE) states that, among others,

history’s habits of mind empower and enable individuals to perceive past events and issues as they might been experienced by the people of the time with historical empathy rather than present-mindedness. (National Council for History Education, 2020)

They further suggest us to “realize that all individuals are decision makers, but that personal and public choices are often restricted by time, place and circumstance” (National Council for History Education, 2020). These statements readily apply in this case, as some occurrences reflect the societal norms and practices of the time, albeit many were also controversial and received strong criticism when they happened. When reading about business practices at Ford and other companies during the early 1900s, it is challenging to avoid exhibiting personal prejudice toward the behaviors and policies that were in place, and in this case, toward accounting.

While there were many prominent accountants and financial professionals who worked at the Ford Motor Company from 1903 to the early 1950s, the focus will include four particular individuals: James Couzens, Norval Hawkins, Frank Klingensmith, and Ernest Breech. It is not intentional to overlook the valuable contributions of other financial professionals and administrators in the company, such as Edsel Ford, among others, and they will be mentioned plentifully in appropriate circumstances. But the decision to emphasize Couzens, Hawkins, Klingensmith, and Breech relies primarily on their impactful and/or event-specific contributions to the company, as well as the amount of historical documentation available in the archives and elsewhere.

It is likewise unrealistic to avoid the involvement and leadership of Henry Ford himself throughout the story – he was invariably referred to as either Mr. Ford when spoken to directly, or “the boss” when referred to among employees. The financial administration and strategy of the company were highly influenced by his uneven attitude toward accounting overall, including costing methods, financial statements, and anything that related to banking. Written in conjunction with Samuel Crowther, Henry Ford’s autobiographical book, My Life and Work, relates his perceptions of finance and bookkeeping, with a particularly negative view of borrowing (Ford & Crowther, 1922).

Ford historians often consider the trilogy of the Ford Motor Company books written by Allan Nevins and Frank Ernest Hill from 1954 through 1962 as the foremost historical record of the company. This business history series was the result of a grant from the Ford Motor Company Fund to Columbia University (Nevins & Hill, 1954). Extensively researched over several years, the series was based on vast quantities of archival data, anecdotal reflections, and recorded oral reminiscences. This book will often rely on the same archival records and reminiscences referred to in the Nevins and Hill series, which are housed within the accessions at the Benson Ford Research Center in Dearborn, Michigan.

It is impossible to say enough about the depth and breadth of available archival material stored within the Benson Ford Research Center, and to the forethought of archivists to retain and catalog this material from the 1950s onward. A veritable treasure trove for Ford historians, the collections include millions of documents, photos, newspaper clippings, notes from Ford historians, correspondence, financial reports, and many other items. Of particular significance for this research study is the Owen Bombard Interview Series, begun in 1951 as part of the company’s 50th anniversary activities. Over the course of 10 years, Bombard conducted interviews with previous and then-current Ford Motor Company employees, as well as Henry and Clara Ford’s neighbors, relatives, personal employees, and friends. ² Some of these interviews date prior to the company’s inception from the younger years of Henry and Clara Ford. These manuscripts provide a first-hand account of the events, operations, and personalities as recalled by key members of the organization. In terms of accounting, they provide relevant and detailed day-to-day activities and operating procedures. For example, the branch and cost accounting methods are explained by the men who supervised and implemented these systems. Many Ford historians have relied on these reminiscences to piece together various events at the company, and this book does as well, with its emphasis on accounting systems and methods in the words of the people who were there.

Regarding the oral reminiscences, I spent considerable time reading through many of them, looking for mention of accounting, bookkeeping, record keeping, costing systems, financial reporting, and overall financial policies. On a personal note, it is impossible to read through these recollections without feeling an emotional response to statements made by real people who worked for many years under challenging circumstances. In many instances, it brought me back to the six years I worked as at a ball bearing manufacturing company, where I began as an accounting clerk and worked my way up to general accounting manager. Reading through the reminiscences, I was brought back to the sights, sounds, and smells of machinery, and the differences in attitudes between manufacturing and accounting. As an accounting manager, I remember the frustrated communications from the manufacturing supervisors when they received their monthly operating reports and their complaints about “this overhead thing.” Given my responsibility to create the company’s financial statements, I also remember the pressures of closing the books each month and responding to requests for information from the office of the vice president of finance. When reading the accounting reminiscences, in particular, I recognized a lot of the duties I had performed as well years ago.

Several themes emerged in these voluminous oral reminiscences. For one, the enormous scope and scale of the Ford Motor Company made it almost impossible to maintain control, especially given the rapid pace of growth. It is apparent the imposed lack of formal organizational structure, especially as the company veered toward vertical integration, caused unnecessary chaos, and in some cases allowed strong, power-obsessed people to attain significant authority. However, there were also many well-intentioned, clever people who consistently attempted to implement changes that would bring the company into a more modern structure, with specific titles and duties in certain areas. Unfortunately, their efforts were often in vain, with consequences that included dismissal, shunning, and even illness – the term “Forditis” was mentioned as a physical ailment that presented stomach trouble and overall fatigue. Several of the reminiscences mentioned the fear among factory workers to be fired at any time, with foremen and supervisors watching for any infraction, such as sitting, smoking, or putting one’s hand in their pocket. Accountants rested no easier, as their firings were swift and without compassion, with office areas virtually cleared out overnight. Yet, these reminiscences also exude a tremendous amount of perseverance, personal pride, and duty to one’s job at Ford Motor Company, along with immense loyalty to the company, the product, and to Henry Ford himself. Many of the reminiscences conclude with exuberance upon the company’s appointment of Henry Ford II as president. They hailed the reorganization implemented by Henry Ford II and his management team headed by Ernest Breech. No doubt, these reminiscences were an emotional roller coaster, and they are frequently referenced and quoted in the coming pages.

Thus, the tale begins with the inception of the Ford Motor Company during a time of heightened interest in producing a “horseless carriage.” Akin to the 1980s quest to develop personal computers, Detroit in the early 1900s was a hotbed of industrial aptitude and fledgling automobile entrepreneurs, all vying for a breakout prototype that would gain them fame and fortune. This is where the “silent heroes” of accounting and finance enter the picture, for without their expert guidance and involvement, some of these endeavors, including the Ford Motor Company, would be unknown relics of history. At least, this is the author’s opinion and a viewpoint for readers to ponder.

Acknowledgments

I am very appreciative to have the support and assistance of several persons in this venture. Without their help, this book would not have been possible.

A sincere thank you to the professionals at Emerald Publishing, especially Abi Masha and Melissa Close. Their patience and guidance were tremendous throughout the writing and editing process. I am fortunate they took part in this project and answered my many questions.

My appreciation goes out to Dr. Richard Vangermeersch. From the onset of the book, he provided wisdom, suggestions, and his experience in writing accounting history on multiple subjects and biographical works. He is a true inspiration as an accounting professor and friend to us all in the Academy of Accounting Historians. I also appreciate the knowledge and kindness provided by accounting professor and Academy member Dr. Martin Persson. His detailed answers to my formatting and logistical questions on preparing the manuscript were invaluable.

Thank you to a wonderful and always supportive colleague and chair, Dr. Kelly Kilcrease, from the University of New Hampshire. I have utmost respect for Kelly’s expertise in business history and teaching, but most of all I thank him for the “pep” talks I really needed to keep up the writing momentum at times. I enjoyed co-authoring a previous book with him.

I am grateful for the patience, advice, love, and encouragement of my husband of many years, Ed Lazdowski. He listened to hours of Ford anecdotes and facts, and wisely offered his suggestions to my frequent questions on book content. I will always remember our Thursday night takeout fish dinners during the time spent writing this book. Despite our busy workdays, we managed to take a day off to buy our newest Ford vehicle, which was fun while writing a book on Ford. Our cat Hampton did his writing support duty by navigating piles of Ford archival material on the desk, and then sitting for long hours beside the computer.

Much gratitude goes to Dr. Trent Boggess of Plymouth State University, who initiated my interest in the Ford Motor Company years ago. I have fond memories of long talks about the company’s history, and I recall our visit to Dearborn, Michigan. A true Ford aficionado, Trent took me to both of Henry Ford’s homes (one of which is privately owned), the restored Piquette Avenue plant, the abandoned remains of the Highland Park plant, and the gravesites of Henry and Clara Ford. I appreciate all the time he took to explain the mechanics of the Model T engine and to describe historical sites in and around Dearborn. Attending the Ford Motor Company’s 100th anniversary celebration of the Model T in 2008 was wonderful.

Thank you to the kind and accommodating staff at the Benson Ford Research Center at The Henry Ford in Dearborn. They were all so knowledgeable in finding materials and retrieving the accession boxes. A particular note of thanks goes to reference librarian Linda Skolarus and image services specialist Jim Orr of the Benson Ford Research Center. Linda’s assistance dates back to 2006 when I spent hours at the Benson Ford, overwhelmed by the massive collections. Jim Orr helped attain images and permissions that were pivotal to the project.

Dr. Dale Flesher continues to mentor, teach, and guide accounting historians, and I thank him for always being there for all of us in the Academy. Most of all, I would like to thank Dr. Gary Previts for his thoughtfulness, direction, and scholarly wisdom. As members of the Academy of Accounting Historians, we all appreciate what he has done to encourage research endeavors for us. When assigned to read the classic Previts and Merino book, A History of Accountancy in the United States, in my doctoral studies years ago, I never imagined this Emerald Publishing opportunity provided by Dr. Previts. A gracious and heartfelt acknowledgment for all you have done for accounting historians throughout the world.