Radical Works by Mar0n Simon
Ricardo Semler is the CEO and majority owner of Semco SA, a Brazilian
company best known for its radical form of industrial democracy and
corporate re-engineering. His brand of participative management has
attracted executives from around the world to pay weekly visits to Semco’s
Brazilian factory. In the early 1990s, Semler introduced a radical new way of
working at Semco, which led to employees setting there own salaries, their
own production quotas and their own hours of work. The company became
hugely successful. Semco manufactured items such as marine pumps and
cooling units for air conditioners.
In the past the company had a typical organizational structure and rules for
every contingency. Semler threw out all the rules when he took over the
business from his father. For decisions such as buying a new company, the
entire workforce now had a vote. The company employed no receptionists,
secretaries or personal assistants. Nobody wore suits and ties. Semco
preferred to trust rather than control its employees.
Employees at Semco are flexible and work in teams. They have flexible hours.
Head office staff such as legal, accounting and marketing were reduced by
75%. New recruits and those promoted to leadership positions are
interviewed by those who will be working for them.
Semler set up factory committees that would meet with top managers at
each plant. The company won national awards for labour relations. These
committes started by dealing with day to day issues such as factory redecoration and gradually moved onto issues such as questionning the
expense claims of senior managers. They also discussed major changes to
product lines. In hard times committees would lower wages to save jobs. They
also got involved in deciding who would be made redundant.
Semler stopped taking decisions and delegated these to his employees. This
is not consultation or participation – this is the boss giving up decision-making
and letting employees govern themselves! Once a team decided an issue
that was it – no approval was needed to make a change. Middle managers
had been taught about the benefits of structure and supervision. Committees
and task forces had been churning out regulations. It was decided to collect
and destroy all the policy manuals. Innovation was needed, not rules.
Semco decided that the only fair rate of pay was an average between what
an individual thought he was worth and what the company could afford to
pay. They shunned the salary surveys produced by US and European
management consultancies. After one pay round there was a strike but
managers were instructed not punish strikers in any way – they had a right to
strike.
Large organisations do not always realise that human beings need to feel
recognised for the work they do. Matrix organisations are currently
fashionable – but Semco decided on autonomous business units. Semco also
found that its expensive computer systems were churning out information
that took up managers’ time and appeared to have no positive inpact on
the business. So thay went back to manual systems and found invoicing rose
15%, as they now did not need to close down ledgers before the month end
in order to meet IT deadlines. Semler firmly believes that the fervour for
economies of scale is misplaced.
Clerical positions were phased out, the work distributed amongst remaining
staff. Secretarial and reception staff were phased out – the individuals
concerned were given up to two years advanced warning and asked what
they would like to do at the end of this period. The company decided that all
memos, reports, minutes, letters etc. would be restricted to a single page. This
had the effect of getting people to concentrate on the essentials.
Semco decided on job rotation as a means of staving off boredom amongst
managers. Job rotation can discourage empire building and gives people a
much broader view of the organization. Semco encouraged sabbaticals so
that employees could pursue their interests and recharge their batteries.
When staff misbehave or underperform at Semco they are not disciplined but
treated as adults and the matters are worked through. You won’t find a gym
or swimming pool at Semco. Many companies install these to reduce stress –
Semco try to get rid of stress in the first place.
Most organizations have a pyramid structure with lots of people at the
bottom and a few at the top. Semco decided on fewer levels and more
flexibility. Responsibities would overlap and change as people were required
to work across departments and across levels of seniority. Semco threw away
their organization chart. Staff were given blank business cards and they wrote
in their job title of choice.
Employees at Semco set their own salaries! Each employee and their
manager filled out evaluation questionnaires which helped determine what
the job was worth. The employee was asked to consider four criteria:
1) what they thought they could earn elsewhere;
2) what others with similar responsibilities and skills earned at Semco;
3) what friends with similar backgrounds made;
4) how much money they needed to live on.
It worked too, maybe because everyone knew that the resulting salaries
would be published for all to see. Top managers in the company had their
salaries capped at ten times that of the lowest paid employees.
Instead of the CEO taking all the final important decisions, Semler decided to
eliminate another level of hierarchy, his own. Semco would be run by a
committee. They would meet weekly to discuss and make all major strategic
and operational decisions. Every six months one of the committee would
become the acting CEO.
The key elements of Semco’s approach to participative management are:
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do not have rules for every contingency
eliminate organisational hierarchy and structure
trust rather than control employees
encourage flexible working
have regular meetings between staff committees and senior managers
reach agreement about pay on an individual, but fair, basis
work in manageable teams and autonomous business units
introduce job rotation as part of career development
let subordinates evaluate their managers
throw away the organisation chart and allow people to work flexibly
across the organisation as the need arises.
Semler believes that mankind has always lived in tribes and always will. This is
why he advocates small units, where people feel comfortable. There is no
need to homogenize everything. One size does not fit all. If people look
forward to going to work in the morning, they and their companies will
prosper. Semco boasted one of the highest growth rates in Brazil. “Semco is
on the fringe of business thinking, which tends to be very conservative, by
nature and design,” says Semler, “Rethinking ways of doing business will rarely
be popular or easily adopted.“
REFERENCES:
Semler, Ricardo [1993]. Maverick!. London: Arrow