Why Semco Doesn’t Want Your Company To Be Like Semco
Back in the early 80s, Ricardo Semler was nothing but a spoilt brat: He was the son of Antonio Curt Semler, who owned Semco, one of Brazil’s most successful manufacturing companies.
Ricardo took over from his father while still a law school student and barely 21 years of age. He walked around the company, making observations and completely disapproving of how Semco worked. As the new boss, he had tremendous power and very little respect for conventions.
Simply put, Ricardo had ideas for Semco’s future that were quite outrageous.
Counting the minutes
Clovis Bojikian came into the picture shortly after. He recalls one of the first observations Ricardo made: “People come here sort of crushed, as though they are carrying some weight. They sit on a table and keep performing tasks, counting the minutes until lunch time; and then counting the minutes until it’s time for them to leave. And, when they leave, it’s over.”
Adding that he didn’t feel any vibe, Ricardo wondered if the people had more to give the company than what they were. And, if that was true, he knew Semco’s leaders had to discover ways to reverse the current situation.
Not only was that an astute observation about Semco in the 70s and early 80s, it could equally be made about any other reasonably successful Brazilian company.
Moving From Ordinary To Extraordinary
Semco then was an autocratically styled company. The powerful ruled, and the wise obeyed. There was a fixed hierarchy, huge power distances, and no room for people to use their creativity. Highly bureaucratic in nature, Semco had lots of “confidential” information that the privileged few used to play power games. In short, it was a “regular” company.
Ricardo’s entry signalled a new chapter – full of daring actions and transformation. The company earned world-wide renown for its unique management style. Way back in the 80s, Semco was one of the first companies to experiment with democratic management principles: principles that put people before processes.
But when you think about it, the new style adopted by Semco was just simple, everyday, common sense. Ricardo Semler, and the leaders he recruited to help him turn things around, first studied who were the most motivated among their employees Invariably, the most motivated held managerial positions. They realized something very fundamental: The power to participate in decision-making processes held the key to motivation.
Opening The Floodgates Through Increased Participation
To verify this concept applied to people across the board, they began experimenting with employee participation in decision-making. They started with everyday issues that affected the life of employees, not with a big transformational program.
These simple issues included things like problems in the cafeteria, cleanliness of toilets, the colour of their uniform, and compensation for business days interspersed between a holiday and a weekend.
The increase in morale this created led to participation on bigger and more expressive areas. For instance, employees
- began offering suggestions to improve quality and the manufacturing process
- were invited to set their own targets
- decided where they wanted to work from
- selected their next boss and future peers
- evaluated their managers
- set their own salaries
- offered inputs on small investments
- became involved in how the company shared its profits.
Today, the Semco Style reflects the learning from 35 years of trial and error. Their impressive growth rate (average 46.5% for the past 20 years), and extremely low employee churn rate (less than 2%), are testimony to the success of the new style.
Why The World Needs No More Semco
The way Semco built its new management style wasn’t based on theory. It started the other way around, developing theory from practices implemented in the field. Which means it’s not a static or dogmatic methodology, but a live framework that is updated with new practices from all over the world. This learning offers an intercultural kaleidoscope of practices geared to empowering the collective.
The Industrial era might have defined corporate practices all over the world, but there are management styles that exist outside that definition. These are all united through the common thread of people centric thought. Although they’re interconnected, these styles aren’t replicas of each other.
They are unique interpretations by companies around the world, designed to fit very specific contexts.
In other words, these companies create a mix of styles suited to their singular needs. This says say something very simple: The world needs no more Semcos, but it definitely needs more companies who have built their own organizational models and management principles drawn from their real-life, in-the-field experiments.
The style they adopt needs to address their very specific problems – but it also needs to guard against the rigidity that can creep in silently. Instead, the aim should be to build something that coexists with most other people-centric management models.
Irrespective of the model that inspires you, choose to create a style that’s deep, simple and flexible enough for others to own. For that, your leadership style needs to shift to:
- Building trust and transparency as the core of your organization model and treating adults as adults;
- Busting silly bureaucracy with common sense and minimum alternative controls to help leaders be in control rather than controlling;
- Creating the space for self-management to flourish by empowering people and giving them autonomy to make decisions;
- Fostering extreme stakeholder alignment between all players through clear definition of roles, expectations and perspectives in daily work and, finally;
- Allowing creative innovation to flow from anywhere in the organization, supported by experimentation and continuous learning.
This is by no means the only way to go. It’s more like a vehicle that can get you where you hope to go; and an invitation to embark on a journey of change.
What’s Up Next
It’s old news that the future of work has no room for companies that are bureaucratic, command-and-control and hierarchical. Leaders and managers are increasingly moving towards a more humanistic style of management. What Semco did with itself is one among many examples.
However, it’s an incredible compilation of tried-and-tested practices for creating systemic change on a conventional canvas. Think of these as a source of inspiration, rather than a blueprint, one that allows you to explore ways to empower the collective over traditional hierarchies.
And then, develop something that fits your unique situation, testing its tenacity and allowing it to evolve at every opportunity.
This guest blog is written by Ian Borges. Ian is a co-founder of LeadWise and partner of Semco Style Institute helping leaders and organizations to change the way they work through training, practices & tools, coaching and consultancy. He also helps entrepreneurs to hack their lifestyle to live with more meaning and freedom at Lifestyle Hacking.
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I love what Semco did, and I think we should be clear about their achievements (from Semco Style):
"Semco Style first came into being in 1980, when a 21-year old Ricardo Semler took over the Semco Group, a mixer and agitator manufacturer, from his father. On his first day, he fired 60 percent of all top managers. He continued to democratize the company, turning the old corporate hierarchy on its head by delegating as much decision power to the workforce as possible. In 20 years’ time, he grew the company from 90 to 3000 workers and from $4 million dollars to $212 million dollars in annual revenue - with an employee turnover of only 2%. Today, Semco Group has evolved into Semco Partners."
So am I right in thinking that Semco Group no longer / barely exists and that most of those 3000 people now work elsewhere?
"Semco Partners works with foreign companies to help them expand into the Brazilian market. They do this by employing a sophisticated joint venture model that combines Semco Style management practices with the partners’ expertise and product lines.
Implementation of Semco Style in the new companies thus created has yielded an IRR of 46,5%. This is a testament to the fact that even today, companies that adopt Semco Style are more effective, profitable and flexible, and have higher customer satisfaction and happier co-workers. Partners works with foreign companies to help them expand into the Brazilian market. They do this by employing a sophisticated joint venture model that combines Semco Style management practices with the partners’ expertise and product lines. Implementation of Semco Style in the new companies thus created has yielded an IRR of 46,5%. This is a testament to the fact that even today, companies that adopt Semco Style are more effective, profitable and flexible, and have higher customer satisfaction and happier co-workers."
So at the very least there is an application issue here. We may be able to accept that Semco's approach has worked for these foreign companies in Brazil (though not, it would seem, for the group itself) but companies should certainly be careful applying it elsewhere.
What is the average IRR for foreign companies investing in Brazil?
And how many companies, with how many employees being involved, are we talking about here?
Hey Jon, good to hear from you... I just wanted to clarify some of the elements you mentioned.
Semco went from 90 to 3000 and then almost 5000 through a period of acquisitions and joint-ventures (national and international) between 1985-2006.
After this period, Semco started to sell back their shares in the business in a very profitable way as a result of years of developing the business and culture in Brazil. These agreements were negotiated since the beginning with some exit strategies.
That’s why the number of employees today is only a few hundred between Semco Equipamentos (Industry) as well as other initiatives like Lumiar (School), Hotel Botanique (Luxury Hospitality), Semco Style Institute (Consultancy and Training) and so on.
But in the total history of Semco Group, there were almost 20 new ventures and joint-ventures combining up to almost 5000 employees.
As a H R practitioner working with major P S U Steel Industry of India & later in various Private sector companies i have been much impressed to read about Semco employee engagement initiatives and the results they have achieved.
But in Indian context at least in many big companies there are still Trade Unions [ much like France and Italy just to name a few ] who hold on to their old world concepts and fail to appreciate that the Manufacturing industry itself is going through 360 degree change what with 3D printing manufacturing technology, pressure on zero emission , green technology, low carbon consumer movement etc .
Now i am 73, long retired from Office, i just wanted to check what is it like now at Semco in 2019. I am Happy to read that things are moving forward with so many new project like --
semco school, Semco Hotel, and Semco consultancy and Training.
By any chance, has any of the French / Italian companies ever borrowed and implemented the ideas of Semco i am interested to know.
I have read in literature that Germany has much participative culture between Management and workmen. Any way the world also is aware that how German Auto maker VW and Siemens were in shattered condition not withstanding all this public image building. This has also turned to be true of Sweden where their so called welfare state and concern for people are more an eyewash than reality.
As an outsider i have nothing to make as comment about all this.
One thing is certain from my own hands on experience in Indian context that we in India [ both Management practices and employee engagement /alignment ] has to go a long way in making India as a Industrialized nations among the world scenario. .
Hi Pim, did you mean to send a link to their financial performance in your reply? I didn't find it.
I hv followed Ricardo Semler for a while. His ways are certainly unorthodox and could be a way finder for many corporate bosses. What I meant about the title was it doesn't reflect in the piece.
In a previous post we introduced the concept of “middle-manager-less-organizations” (MMLOs for short). These companies run their businesses successfully without a middle management layer. Large and small, they point the way forward for organizations wanting to go beyond the traditional hierarchical/bureaucratic model, a way of organizing that is increasingly outdated and has deep roots in ‘industrial age thinking’.
In 2005, Vineet Nayar became the leader of Indian IT and consulting company HCL Technologies. As a result, 25,000 people looked up to him and waited for his direction. But there was a problem. "I knew in my heart that we as leaders had done nothing to win the trust of our employees."