Ricardo Semler was just 23 years-old when, in 1982, he took over from his father as CEO of Semco, an engineering and high-end industrial products company in Brazil.
He immediately fired two-thirds of the company’s senior management.
Did it have the destructive effect that many had predicted? Well, in 1982, the company employed 90 people. Today, over 3000 people enjoy a totally different regime within the company.
Semler doesn’t abide by all the management philosophies that drive most businesses today. Here are a few examples of how he runs Semco:
* The company has knocked down its HQ and replaced it with an airport-lounge type facility that has no permanent staff
* All co-workers choose their own working hours
* There are no internal audit staff. The company trusts their employees. And as every employee has a share in the profits of their department, they have a big interest in stopping any fraud.
* Most people set their own salary base. They have all the competitive and in-house data they need to make this decision. If one person wants more salary, everyone else has to agree it and it eats into department profits so everyone suffers if it isn’t managed properly.
* There are no restrictions on company travel. Employees are responsible to each other, so stay within their own set guidelines.
Here’s what Ricardo Semler himself says about the culture of the company and why he runs it like this:
“Our principles are driven by the thought that if an employee has no interest in a product or project, the venture will never succeed. Too often, people are compelled to do jobs they couldn’t care less about, and that almost guarantees the company or product will not succeed.”
“All meetings are voluntary. The meetings are ‘advertised’ and then whoever is interested can and will show up, and will leave when their topic of interest has been covered”
“We reassure colleagues that their self-interest, not the company’s, is the foremost priority. This is a form of corporate alignment.”
“Why can’t workers be involved in choosing their own leaders? Why can’t they speak up….challenge, question, share information openly?”
Semler gives workers unprecedented control over their work lives, then relies on personal integrity, peer pressure, financial self-interest and free access to information to help his staff exercise their freedom wisely. There’s actually not very much for managers to do at Semco. The proof has to be in the fact that staff turnover is less than one-per-cent. And the company is highly profitable.
Semco’s example is used as a case study in 76 business schools. Many companies look at Semco and are envious of its style and results. Why don’t they change to follow the example? Because most companies are set up to follow management orthodoxies in ways that are set in concrete. And the risk is too great. It took Semler years to get to the position where it all worked smoothly.
But it’s a great example of what is possible in company culture. In a world where conformity is the norm, Semler has taken all convention and stood it on his head. Self-management is the norm, not the exception. Yes, it’s risky and, yes, the trust level is extraordinarily high. But if the passion is there, if the drive to make it work exceeds the negativity of the long-term change pain, then there is no reason why others can’t follow the same path as Semco, and produce highly-motivated, highly incentivised and highly-trusted teams.
Head of Training
Originally published: 25 July, 2012