Fixing Work That Sucks: Semco's Step-By-Step Transformation

Both played vital roles in the creation of one of the world’s most unusual workplaces: Ricardo as visionary owner of the company, and Clovis as the pragmatic HR Director who helped turn his crazy ideas into reality.

A brief history of SEMCO

In 1953, SEMCO was founded by Antonio Curt Semler. It was based in Sao Paulo Brazil, and in its first 20-plus years the company focused on manufacturing pumps and axles for the shipping industry.

In 1980, Antonio’s son, Ricardo, took over the reins. He was just 21 years old. And that led to one of the most unusual transformation stories we’ve ever come across.

An uncomfortable start

Clovis: “When I arrived for my job interview at SEMCO I was asked to take a seat in the waiting room. After a while, a young guy picked me up and took me to a meeting room. I thought he was one of SEMCO’s interns. After I took my seat, he continued talking to me. After a while, I figured out that he wasn’t actually an intern. To my surprise, he was the man I came to meet: owner and CEO, Ricardo Semler.”

It took only five minutes for Clovis to get over any reservations about the young man in front of him. He was inspired by Ricardo’s wisdom. Time flew by, and the two spent five hours dreaming about how work at SEMCO could be organized in a better, more inspiring way.

They met again the next day for another five hours of wildly entertaining conversations. Clovis was appointed as HR Director. It was not until a week later they realized they had never discussed his salary!

Getting to work

With Clovis on board, something crucial changed. Ricardo’s vision was now supported by pragmatism. They began working on how it could be realized.

The main problem then was that only the directors were engaged. Others clearly weren’t. In 1984 and 1985 that problem grew as SEMCO acquired 4 small companies in which the employees were even less motivated.

Clovis and Ricardo set out to change this. The first thing they uncovered was a strong correlation between an employee’s level of participation and their motivation.

So, with 800 employees, of which 80% were machine operators, spread over five different factories, they set out to radically change the way SEMCO worked. There was, however, a problem.

Clovis: “There was no inspiration, no consultants, and no books on how to make such a radical transformation. The only way forward was through experimentation: trial and error.” And so the quest began.

“The main question was: How could we make the daily life of our operators better? But we were not going to provide the answers. We wanted them to participate, to own both the problem and the solution.”

1. Bad quality beans

The first issue is a seemingly futile one. At its heart is one of Brazil’s most famous dishes—a bean stew called Feijoada. Everyone complained about how it was prepared in the factory restaurant. Some thought the beans were too hard. Some thought they were too soft. Everyone looked to HR for a solution.

Clovis: “We could have come up with anything, but it would never have been a good solution to all. Still, a lot of people would have complained. So we decided to let the ones that complained participate in finding a solution.”

“We simply asked them: “What’s your suggestion?”. Then we gave them time to come up with one. When they proposed a solution, we simply asked: “Is your solution viable? Did you talk those in the kitchen that have to execute it?”. They hadn’t, so they went back to talk to the kitchen staff. And they adjusted their proposal.

Clovis then said: “Great. Go ahead and do it. And by the way: you guys are the restaurant commission now. Every year we’ll have elections for this restaurant commission.” It worked like a charm.

Clovis: “From that point on, the complaining stopped. People took ownership of the problem via the yearly elected restaurant commission.”

While the change of the beans in the restaurant seems minor, it was an important turning point in SEMCO’s transformation. It is a perfect example of what they call participative management.

2. Uniforms

Next: the uniforms. There were heaps of complaints about them. Some didn’t want a uniform, others wanted a change, and some wanted to keep the current style. Once again, HR wasn’t going to come up with a solution.

They set up a new worker’s commission to find a solution to the uniform issue. The commission decided to get staff feedback. The first question: “Do you want uniforms, yes or no?” 99% voted ‘yes’. The next question: “What color do you want?”

Several people started a campaign for the color they preferred. Clovis: “The outcome? A rainbow of colors – there was no clear winner.” So the workers' commission added a step to the process. They picked the two most-voted colors and did another round of voting. 79% voted for one color, 21% for the other color.

Clovis: “The color was different from the one we previously had. Once again, the staff had made a small but significant change. The best thing about it? The employees decided all this. They owned the problem—and the solution. You could feel the levels of trust and responsibility improve. People started to change and they enjoyed it.”

3. Leave days

Next up? Another hot topic—leave days. Management used to select so-called ‘bridge days’. For example, if there was be a public holiday on a Thursday, management would decide to give Friday off as well, and then compensate with a Saturday in another week. This led, as you can imagine, to lots of complaining and trouble.

Another worker’s commission was set up. Their first response: “Deixa com nóis”. (Leave it with us.) After several rounds of consultation, the commission came up with a decision: a six-year plan for all holidays, bridge days, and compensation days. The decision was implemented, and the complaining was silenced.

"Why the hell do you do this?"

Employee trust continued to grow. In fact, some were so surprised by the new approach that they started to ask why the hell SEMCO was listening to its employees so well.

Clovis: “The fact that employees started to ask why we went down this path was perfect for us. Now, we got the chance to properly explain why we were transforming the company. We told them the honest story. We want everyone to enjoy work and we want to do better business and make more money.”

Clovis continues: “When the employees realized we were sincere about the transformation, they came up with even more suggestions. It was time to take bigger, more serious steps toward a more human workplace.”

Some of the changes that followed were:

• Target setting: Employees started to set their own targets. The targets they set were higher than those managers set. And they were not just higher. They were exceeded more often. (This is a result we’ve witnessed in other pioneering workplaces around the globe.)

• Flexible working hours: Setting your own working hours became the new standard. During our visit to their factory in Itatiba, Brazil, we saw this first hand. Employees had the freedom to decide when to work. Rafael, one of the production workers, in one of our interviews, said: “The best thing about SEMCO is the freedom: freedom to do whatever you want as long as you have the right outcome.”

• Salaries: Salaries were all over the place and there was lots of gossiping about them. Representatives from the business joined the salary commission and in 1987/1988 they started to open up salary levels. In later steps, they allowed employees to set their own levels.

• Recruitment: Instead of HR deciding who was hired, the teams themselves became responsible. Everyone was involved. They could ask the candidates anything. And the teams owned their final decisions.

• Profit sharing: Besides profit sharing for all, SEMCO set out to reward entrepreneurship. They wanted employees to benefit from success, and they also wanted employees to feel ownership in rough times. So they created the option for a reduced base salary with greater profit sharing. In good times employees would earn more and, in bad times, less.

• Full entrepreneurship: Employees were encouraged to set up their own companies and become suppliers, or customers, of SEMCO. SEMCO provided support like finance, equipment, and its network.

• Breaking the hierarchy: SEMCO broke down the command-and-control hierarchy, reduced bureaucratic layers, and formed so-called concentric circles. Within these circles, employees selected their managers and regularly provided bottom-up feedback to further reduce hierarchy.

The transformation story continues. Even though most changes were made in the 1980’s and 1990’s, they are still challenging the status quo of today’s workplaces.

And of course, there’s much more to what SEMCO has done—much more than could be covered in one blog post, a book, or even an entire bookstore. But one important question remains, and we set out to answer it in Brazil: What is left of SEMCO’s unique organization?

What's left of SEMCO?

Academics, admirers, and consultants continue to share SEMCO’s unique story. Many of them base their knowledge on sources published before 2003. They all show the amazing results of SEMCO’s transformation in terms of profit and growth (90 to 3000 employees).

We couldn’t find many new stories about the last 15 years of SEMCO, and this was one of our aims when we set out to visit the factory, the employees, Clovis and Ricardo. We wanted to know what has happened recently.

At SEMCO’s peak (in employee numbers), it had around 5,000 people (including employees in some joint ventures). As of 2001, Ricardo Semler decided to change focus: “We proved that this democratic way of working worked. In fact, we proved that it worked really well. Now it was time to move on.”

A new focus

“I wanted to see if similar approaches could be applied in other environments. That’s why I started Lumiar (schools), Hotel Botanique (luxury hotel), and Semco Style Institute (consultancy and training).”

Semler started selling his SEMCO shares in 2001. Nowadays, SEMCO Equipamentos is the one remaining industrial company in his portfolio. It has around 50 employees. Another 200 work in schools, hotels, and consulting companies. Ricardo's passion is now “changing the system at the roots. We need to change the way we educate our children. If we start there, the impact of what we do can be so much bigger.”

Our interviews with Ricardo, Clovis and factory workers gave us powerful new insights. The kind of stuff you can’t get from outdated or second-hand citations of all the articles out there.

We got to experience it ourselves: the fascinating stories from Clovis Bojikian, the inspirational vision of Ricardo Semler, and the small but highly inspiring factory that is a beautiful testimony to SEMCO’s pioneering work.

In the end, a comment from a SEMCO factory worker sums it up perfectly: “We’re not heaven and we’re not hell. But I think we are definitely closer to heaven.”