Management in Semco

Introduction
Semco is one of the most interesting companies of the modern century,
where there are no time clocks, job titles, security check and receptionists. It is
one company where people unanimously decide who their bosses will be, their
salary etc. Semco as argued by many management articles is an epitome of
Management incorrectness. Semco style of running business is today recognised
as one of the most effective method of management. “Reengineering the
business process”, a series run by BBC has also recognised Semco as one of
the top 5 successful management structures across the globe
(http://www.bbc.co.uk). Ricardo Semler, CEO of Semco, author of two books
“Maverick” & “ Seven Day Weekend”, chief manager has surely shown the world
a new style of management. Though many managers admire him, very few have
actually tried to reproduce his management style.

Background to Semco
Antonio’s father wanted him to be a good physician but Antonio after graduating
in engineering from Vienna had some other plans (Maverick, pg. 9). Founded in
the year 1953 by Antonio Curt Semler, father of Ricardo Semler, Semco’s
organization structure was very much similar to any other organization with very
rigid hierarchy and a rule or policy for every small thing. Ricardo Semler was
born in the year 1959 Sao Paolo, Brazil. Before Ricardo taking over the business
his dad ran, it had a very autocratic style of management. Initially, Ricardo
continued with the conventional way of working. He started running the
organization in a very controlled and disciplinary manner. Soon the stress work
and the Semler’s sickness forced him to rethink on his way of running the
business. This is when he started attacking what he believed was “Corporate
Oppression”.
(http://downloads.bbc.co.uk/worldservice/learningenglish/handy/semler.pdf)

Study Approach (inc aim)

Author’s approach in this assignment is to read numerous articles and journals
related to Semco to explore the new style of organizational structure, managing
the organization and Ricardo Semler’s leadership style in Semco. The aim is to
critically evaluate the effectiveness of the organization structure at Semco.

Semco surely had a unique system of industrial democracy. This could be seen
in the way the organization is run by its employees and not Ricardo Semler,
Chief Executive at Semco. Semco does not have anything that most of the
organizations in the 21st century think is very important for an organization to
compete. It doesn’t have a written statement of purpose, a rulebook or written
policies, neither a organization chart, an HR departments or receptionist and
secretaries (Interview with Ricardo Semler, by Simon Caulkin, 2007:
http://www.guardian.co.uk/business/2003/apr/27/theobserver.observerbusiness7)

Semco Org Design

There are basically three main organization designs, they are:
1. Centralization and Devolution: In an organization where the structure is
Centralized, all the responsibility for carrying out the operations and
developing strategies are take care off by the centre. Devolution is when the
 centre of the organization delegates responsibility and authority to the lowest
line of hierarchy.
2. Organizational Configurations.
3. Resource allocation and control process: In such a structure, employees
are put under a supervision wherein they are given various authorities to
achieve the expected results.
(Managing Structure, pg. 418 - 432)

Due to reduced organizational layers, delegation of work & responsibility and

other team issues like time flexibility etc reinforces team –based evolution (Tozer
1997). Semco organization design is truly interesting. In Semco, employees
choose their managers; decide their salary and their work timings. They are not
pressed on time clocks, security checks, dress code etc. Meetings are voluntary
and there are two seats reserved at board meetings for those employees that
turn up for the meeting. They do not have any long term plans for their
companies; maximum they plan out is for Six months. Every six months the units
plan out how many employees they need for the next six months and accordingly
hire or fire people. Similarly, it doesn’t have any concrete strategies on which
business to enter and which to not, they go ahead with trial, error and argument
basis. Its current portfolio of products is machinery, property, professional
services and fledging hi-tech spin-offs. On top of all the chaotic way of working,
Brazil’s economy and political stability adds to the stress of the organization.
Ricardo says the structure at Semco is so that he would readily invest all his
savings in Semco than any other blue chip company with a more rigid style of
working and with long term planning and control (Interview with Ricardo Semler,
by Simon Caulkin, 2007:
http://www.guardian.co.uk/business/2003/apr/27/theobserver.observerbusiness7)

Ricardo mentioned one common thing in both of his book “He who is given
responsibility takes responsibility” (http://www.peterbe.com/plog/blogitem-
20030814-0138). In spite of such a working environment, Semco is one of the
most successful and recognised organization in Brazil.

Similarities and Differences with Conventional Theory

Difference between Semco’s organization design and conventional theory:

Semler once asked about what business is Semco in. He quoted “If you ask me
to describe it in conventional business terms, I’d have to admit I have no idea
what business Semco is in”. Ricardo further adds that once you start defining
your organization, you create boundaries not only for your organization but for
your thoughts, ideas and most important employees. Ricardo’s way of giving
freedom to employees resulted in an organization which resisted conventional
structure, no organisational chart and no fixed bosses (Ricardo Semler, "The
Seven Day Weekend: Changing the Way Work Works", Portfolio, 2004).

At Semco, the style is the give employees the freedom to make decisions about
their work timings, salary, who their bosses will be and how and where they want
to work. This is so much different from the conventional style of managing an
organization. Semco needed to relocate a factory, so they shut down the firm
took all the employees in buses to visit three sites and then came back and
decided the location by taking vote. In today’s modern working world no
organization involves employees so much into management decision. To reduce
his workload and involve more people in taking decisions, he removed eleven
layers that were inherited to him by his father. Today, there is only one front line
lathe operator which is just one step away from the general manager’s position.
Semler also introduced what he called “Factory Committees” to run the plants;
earlier the involvement from the employees was slow as they feared losing job.
But Ricardo guaranteed everyone that no one would be fired for their
involvement in factory committee while serving or for at least a year afterwards.
After this there were many more such ideas that were brought into the
organization which looked very risky for any mangers to implement but Ricardo
Semler built the trust within the organization he turned the culture of the
organization from one of fear to one of cooperation. In most of the organization, if
employees come up with new ideas they leave the organization and then start up
a new venture. But this becomes a risky affair in case of failure they will lose all
their savings and a secured job. Hence, Ricardo came up with the idea of letting
employees work within organization on their new ideas and sell the product from
the organization. In such a case company gets one more product to sell and
employees do not have quit their job to try new ideas (Charles Handy, The
Handy guide to the gurus of management, Programme 11 – Ricardo Semler,
BBC Learning English:
http://downloads.bbc.co.uk/worldservice/learningenglish/handy/semler.pdf).

Hence, if we see that our question to evaluate how effective is Semco’s Unique
Industrial democracy system in holding staff for long term and being loyal to the
organization is resolved. Semco’s unique system is 100% effective in managing
staff for long term and in result staffs are managing the organizations and its
projects, products and profits.

Perceived Effectiveness
More than choosing a good team leader, it is more important have an effective
leadership program (Turner 2000). Semco’s way of working was slowly but finally
accepted as a very effective and efficient method of business management. As
noted earlier, BBC during its series of Reengineering the Business included
Semco as most successful reengineered business process. This proves how
effective is Ricardo Semler’s management style, organization design with no
organization chart and least layers. Semco was also selected by CIO magazine
as the most successfully re-engineered companies in the world. Fortune
magazines referred to Semco as a Lab for creative management
(http://www.icmrindia.org/casestudies/catalogue/Human%20Resource%20and
%20Organization%20Behavior/Semco-Maverick%20Organization-Human
%20Resource%20Management-Case%20Studies.htm)

To what extent does the Semco system differ from traditional approaches to
strategic human resource planning? Make reference to either; recruitment and
retention; succession planning; or systems of appraisal in your answer
Human resource planning has traditionally been seen by organizations as getting
the right person at the right position at the right time (Susan E. Jackson and
Randall S. Schuler (1990), Human Resource Planning Challenges for
Industrial/Organizational Psychologists, American Psychologists Association Inc,
Vol. 45 No. 2, pp. 223- 239). In response to strategic human resource planning,
Ricardo’s answer was very clear. He believed in giving responsibility and not
having unnecessary pyramidal hierarchy. He believes that having a strategic
planning and a vision often acts as barrier to companies’ growth. He have
challenged the much remained concept of companies making profit are
successful. He does not believe in numbers as they do not speak for the likes of
the end user or the people that produce it. (Semler, R. (1989). Managing Without
Managers. Harvard Business Review September-October 1989).

3.1 Explanation and Critique of Traditional HRM Approaches

Earlier when there was a low performance in the organization, employees were
questioned and made responsible for it. Conventional HR approach was to fix the
employees by giving training or asking for discipline. This is not the case today,
in case of poor performance, we understand the employee in a better way and try
motivate him using different styles like fair pay, perks, holidays etc (David Ripley,
Ph.D., SPHR (1999), IMPROVING EMPLOYEE PERFORMANCE: MOVING
BEYOND TRADITIONAL HRM RESPONSES, Reviewed on July 2002). This is
one example of the conventional HRM approaches, initially the HR manager
was just sharing the role of looking after people, and recruitment was
conducted by the top management only. Now days, HR personel is the first to
take the interview, after which the employee is sent ahead for further rounds.
Earlier HR training & development was limited to new employees only. Ricardo
started initially attacking the traditional concepts of standard set salaries, dress
code, bonuses, wages linked to profit sharing, comfortable surroundings to
please employees etc (Mann 1994).

Similarities and Differences with Semco

There is one similarity noted between Semco and traditional human resource
planning process is that due to relative environmental stability and certainty,
focus was majorly on short term goals and objectives. Similarly at Semco,
employees and units plan their aims and goal every Six months (Susan E.
Jackson and Randall S. Schuler (1990), Human Resource Planning Challenges
for Industrial/Organizational Psychologists, American Psychologists Association
Inc, Vol. 45 No. 2, pp. 223- 239).

Differences between Semco and traditional HRM approach:

 Well, Semco does not have a HR department only. So the first and major
difference between Semco and other all companies is very clear.
 Semco has created organizational change by empowering its employee’s
leadership (Christopher C. York & Peter A. Maresco, Ph.D., Ricardo Semler:
Creating Organizational Change through Employee Empowered Leadership).
  Employees are given the authority to choose their work patterns, work
times, salary, and projects and most importantly and surprisingly, employees
choose their bosses.
 Semler created an environment of friendliness by reducing the hierarchical
layers (Morgan & Zohar 1999). Because leaders often come with visions and
goal which restrict their thinking.
 At Semco, no formal training and development exists. Semco employees
are responsible for their own education and development (Semler, 1994).

Perceived Effectiveness at Semco

Ricardo Semler’s basic idea was to bring all employees together, make them
involve and participate and give their opinions (Ricardo, 1994). Change
management brought by Ricardo Semler after taking over the company from his
father was welcomed and accepted positively by all the employees (Atkinson
1990). Semler wanted to bring the idea of responsibility and openness and
transparency in the organization. Hence, employees selected their own salary
and then it was publicized. Any body had access to any sort of information
related to the company (Morgan & Zohar 1999).

Conclusion
Throughout the assignment and author’s reading of articles related to Semco and
other managerial subjects involved with this assignment such as team
management, working as a group/team, organization culture, design,
transformational leadership style and change management.

Author’s understanding after a critical analysis of the literature is that, the unique
system at Semco is very much applicable to companies like Semco only not to
big MNC’s. If any Multinational Company applies such a unique democratic
system in their organization, it will create confusion about reporting,
employees will believe themselves to be the Boss and may result in loss of
goodwill and profit etc.

Though the author is not completely opposing the innovative way of

working at Semco. Author sees this as a face of other reliable less risky
systems coming in the near future. Semco has surely made that initial start and
that to which has shown positive success. Semler started with an eclectic style of
leadership. From capitalising he took the ideas of freedom, responsibility and
competition. From socialising, he copied control greed and power and
transparency, access to information. For flexibility he used a Japanese model.
(Semler, 1994).
4.1 Key Findings

 Fortune magazines referred to Semco as a Lab for creative management.

 The company operates on the basis of three key principles: work force
democracy, profit sharing, and free access to information (Semler, R. (1989).
Managing Without Managers. Harvard Business Review September-October
1989).
  BBC included it into top 5 most successful companies across the Globe in
its “Reengineering Business Process” Series.
 For the first six months, employees are given the liberty to work in each
area of the company and decide which area suits for them best and vice
versa.

Personal Evaluation

How would you feel about working for a company like Semco? Personally, I
would put it this way “I would take the risk of working at a company like Semco”.
The reason is, few employees are given the authority to choose the project
they want to work, the way they want to work and when they want to work
(Work force democracy and free access to information). Another reason
noted was there is no receptionist, you make your coffee yourself, you send
your own fax and you attend your own customers. Other than bringing the
responsibility within employees it also earns points on Sense of
belongingness to the company – like a second home. Lastly, author feels
Semco is a place where you use your ideas, talent, skills, and potential 100
percent or in the six month period you are out of the company. Hence, there is
always the need to prove you. Everyday is challenging at Semco. The last point
might also be seen as negative point by others, as it also creates the sense of
fear of losing job in six months. I prefer it should be taken positively and
employees should work towards their goal to make themselves deserving at
work.

References

Morgan, G. & Zohar, A. 1999, Ricardo Semler’s Transformation at Semco,

[Online],
Available from URL: http://www.imaginiz.com/provocative/change//semco.html.

Atkinson, A. 1990, The Promise of Employee Involvement, CMA Magazine, 64

(3), pp. 8.

Mann, L. 1994, Maverick: The Success Behind The World’s Most Unusual
Workplace, [Online], Available from URL:
http://dpsinfo.com/essays/maverick,html
Semler, R. 1994, Maverick !, Arrow Business Books, London.

Turner, F. 2000, ‘As Market Changes, Good Leaders Must Be Good Learners’,
Business
Journal: Serving Jacksonville & Northeast Florida, February, vol. 15, issue 18, p.
20, [Online], Available from URL: http://ehostweb1.epnet.com/fulltext.asp

Semler, R. (1993). Maverick: The Success Story Behind The World’s Most
Unusual
Workplace. New York: Warner Books.