Source: Source: Semco Style 2006; see also 'Happy Companies' in 1.5.1
Semco-style 'natural entrepreneurship': no management
The inspiring story of the most spectacular workplace in the world
Ricardo Semler (34) is Brazil's most eccentric businessman. His management book has been published in 14 languages and in 134 countries. What is so special about Ricardo Semler? Little in itself, except that he has his own unique idea about managing a company, and that is: 'no management.'Employees determine their own salary, subject their chosen supervisor to half-yearly professional reviews, paint their workplace in the colors they like and come to work when they feel like it. Abuse? 'No,' says Semler. 'At first, the employees of course choose the nicest boss, but when they want to attain their production quotas and profit share, the most competent is naturally chosen. People do not need a manager to choose their superiors for them; leaders stand out by themselves.'
Semler's philosophy sounds simple: if you want creative employees, do not confine them in a straitjacket of rules. You have to treat them as adults. It is only when you impose all kinds of rules on them (e.g. reduction in salary due to lateness or frisking at the gate to prevent theft) that they start behaving like children and see how far they can go.In this anti-paternalistic approach, the employees are asked to establish their own production quotas, according to which they can schedule their own work time. At Semco, overtime no longer exists, and employees on their own initiative involve themselves in design and sales plans, or so Semler claims. The bookkeeping has also been greatly simplified. 'Everyone bluffed at meetings and pretended to know every detail. We have eliminated all kinds of codes and initials which were "extremely essential" in the past. Now each manager has to make an estimate of the sales, costs and profit in his department at the end of every month. By comparing that to the official figures you can see whether a manager has any insight,' adds Semler.
In the twelve years that Ricardo Semler has been in charge, the company (a producer of washing machines, cooling units and pumps) has undergone impressive development, if we believe the figures in his book. Despite the Brazilian economy with its high inflation, the sales have grown by a factor of 6, production is seven times greater than at the beginning of the 1980s and the profit is five fold what it was. The company grew from 100 to 830 employees and now comprises six factories.
Whenever the company experienced less flourishing times and a factory had to be closed, the personnel took a surprising step: they turned in 30% of salary, paid for their own meals and gave up the travel-cost reimbursement. The cleaners, doormen and the cafeteria personnel were dismissed and their work subsequently done by other personnel. 'The employees had economized so drastically that after one month their factory made a profit,' says Semler. If sackings are really necessary, the group decides who has to go, and this is decided with the greatest possible consideration given to social concerns: someone aged 30 is discharged rather than an employee of 45 with seven children and a sick wife.
The practice of having Semco's middle and higher management determine their own salary functions smoothly, states Semler. 'Everyone knows what the rest earn, so you think twice before asking an outrageous sum.' His newest invention in the wage field introduces an element of risk into the salary of anyone who desires it. When things go badly, the employee gets 25% less, in a good year 25% more.
Ricardo Semler has his own ideas about efficiency too. 'In the reception area of our head office, a normal multi-storeyed office building of steel and glass, there is a counter but no receptionist. It is the first sign that something is different about us. We do not have receptionists. We do not think they are necessary, even though we have so many visitors.
We do not have secretaries or personal assistants either. We do not want to burden our wage costs with unsatisfying, dead-end jobs. Everyone at Semco, even the top manager, meets his own guests, makes his own photocopies, sends his faxes, types his letters and dials phone numbers himself. We do not have a separate cafeteria for management, and parking occurs according to the simple rule: first come, first served. All that is part and parcel of running a "natural company". At Semco we have eliminated all unnecessary extras, along with all privileges that are good for the ego but bad for results, and that only distract everyone from the actual tasks of the company: producing, selling, invoicing and so on.'
Everything at Semco seems idyllic, although the game rooms and the plants among the machines do remind one of the 60s. Higher placed employees are allowed to stay home for a few weeks or even a few months once a year in order 'to think' or 'to do something inspiring.' Democracy permeates all areas of the organization. 'I want everyone at Semco to be able to take care of themselves. The company is organized - well, for us that might not be the correct word - in such a way that it does not depend too much on a certain person. It gives me a sense of pride that, while away on some of my longer trips, I was twice assigned a different office - and each time it was a smaller one. My role is that of a catalyst. I try to create a context in which others make decisions. Success means that I do not have to make them myself.'
'At Semco we try to prevent stress. No, we do not have ping pong tables or a fitness room. Of course, stress will never disappear completely: we all worry about profit and other things at times. But we have eliminated the artificial stress associated with arriving too late and so on.'
Does anything ever go completely wrong? Is everything at Semco actually so ideal?
'There are some disappointments,' admits Semler. One of his frustrations is the failure of the antidiscrimination program in the company. 'It is still too much imposed from above. We currently have to prescribe how many people from minority groups are to become supervisors: the employees and those involved should decide that for themselves.' It is a matter of persistence, thinks the president. 'Semco-style is a kind of a mission. A belief that things have to be done in that way and no other. And just like the church's mission, many of our ideas have had to be cast aside and a new beginning made from scratch. The managers, for example, had to really get used to the loss of their authority. They confused authority with bossiness and wanted to be able to punish subordinates for making a mess of things. Now they cannot play the boss anymore and have to call on other talents to retain any sense of their power.'
Some people have called the Semco philosophy socialist. 'Nonsense,' says Semler. 'What we prove is that greater participation does not mean bosses lose power. What we undo is the blind, irrational exercise of authority which undermines productivity. We love the fact that our employees take care of themselves and make decisions themselves. This means that they are involved in their work and their company, and we all profit from that.'
'In the restructuring of Semco,' continuous Semler, 'we have taken the best elements from many systems. From capitalism we have derived the notions of personal freedom, individualism and competition. From the theory, and not the practice, of socialism we have learned to eschew greed and to share information and power. From the Japanese we have learned the value of flexibility, even though we do not have an affinity for their family-like bonds within the company and their automatic honoring of the elderly. We want people to progress because of their abilities, not because they are so old or so cooperative. Our manufacturing people, for example, can start work in the morning somewhere between seven and nine o'clock. It is their choice, not ours.' But what if one wants to start at seven o'clock and a team mate decides not to come until nine o'clock? That would mess up the whole production, wouldn't it? 'That is what we were afraid of too, and so we set up a work group in order to mediate if problems occurred. Up to now, the group has yet to be convened. Our employees understood that production would suffer if they did not adapt their work times to each other - and so that is what they did. At Semco, we even prefer not to think in terms of employees and bosses. We would rather speak of employees and coordinators. And we like everyone to keep in touch with everybody else, regardless of position. In the office, we have combined the purchasing and the design departments, so that everyone is close to the production area. The idea is that we all can learn from each other.
Some managers still worry about their production cells. If we left the organization of the factory to the employees, they thought, we would never be allowed to install equipment that would reduce the size of the labor force. But our staff knew how important labor saving equipment is for our competitive position, and more than once, a company committee has pleaded for a new machine which they felt to be needed even at the cost of a few jobs.
Besides, the people in our cells are tending to take more and more responsibility for the management of the production process themselves. Take quality control for instance. In the past, every unit had a separate department for the inspection of products. But in the course of time, our manufacturing employees took over this task so that we could eliminate the inspectors. The employees also took over the task of recruiting new employees to their groups - or of eliminating members from them.
Nowadays, if someone wants to become a mechanic at Semco, he has an interview with a group of mechanics, not with a director. This is the worst thing that could happen to him, because he can perhaps fool a manager, but he will not succeed with people who know all about the profession and may even become his colleagues.
Sometimes, cells take longer to make a product than would be the case with a traditional assembly line. But our delivery times have nevertheless become shorter. And then there are all those departments of quality control which we no longer need. But, and this is the most important thing, the people in our cells clearly have more interesting jobs than those who have to execute mechanical clusters of tasks the whole day. And the cells enable the employees to attune their processes and make them more detailed. This has translated itself into higher productivity. With the cells, our inventory levels have decreased to a ridiculous degree and each year we can do with less storage room. Some of our cells sell their complete inventory seventeen times per year, while the line of business has a sales speed of a little more than three. "What do the supervisors think of all this?" I am often asked. Well, we don't have as many as in the past. The greater the influence employees have on their work and the larger the say in policy, the less the need for supervisors. We have reduced our staff department - which provides our production units with legal, administrative and marketing advice - by more than 75%. We don't even have an automation or education department anymore. Everyone is responsible for his own work and so we can do without a quality control department. We have taken a very close look at ourselves and then reduced the bureaucracy from twelve management layers to three, and designed a new structure: the traditional, limiting company pyramid has been replaced by a system of concentric circles.
We have also changed the way in which departments deal with each other. When one does not want to purchase services from another, it is free to get these from outside the company. This potential competition keeps us all alert. For a short time now we have been encouraging our employees to start their own companies - we will rent them Semco equipment at favorable prices. Of course we buy the products of our former employees, but they are free to sell to others as well, even to Semco's competitors. This has made us leaner and more flexible, and we have total control over our livelihood. It makes entrepreneurs of employees.
Of course, this is quite an unusual aspect, but we try to maximize the possibilities and minimize the supervision for everyone at Semco. Not that people are no longer held accountable. Before anyone is hired or appointed to fill a managerial position, he or she has to undergo an intensive interview and approval is sought from everyone who is going to work with him or her. And every six months, managers are evaluated by their subordinates. Everyone can express his opinion.'
Does this mean that employees can fire their boss? 'That seems to me to be the case, because when someone always scores badly, he usually ends up leaving Semco - one way or another.'
Ricardo Semler spends only 30% of his time at Semco. The rest of the time he writes a column in a weekly paper, is a board member for a political party and attends courses in golf and Chinese. At least two months of the year, Semler travels without leaving a number. 'I do not call in either. People who can always be reached everywhere are afraid that someone else will take over their job. And when nobody calls them during their holidays, deep in their heart they are disappointed.'
In what sense is the 'management leadership paradox' applicable to Ricardo Semler?
Viewed in McGregor's terms, what image of mankind is behind the Semco style?
Would you want to work at Semco as a middle manager?
Which of Harrison's organizational cultures applies to the Semco organization?
How do the style of leadership and the organizational structure at Semco help to satisfy the demands made on the organization in the areas of effectiveness, flexibility, continuity, clarity, efficiency and satisfaction?