Dr Letshwiti B. Tutwane
After discussing visionary American companies last week, this time I look at an amazing Brazilian company called Semco, together with its CEO Ricardo Semler.
Semco first came to my attention by chance over 10 years ago whilst feeding my addiction at a bookshop in one of the airports around the world. I can’t remember which. What I remember is that I bought Semler’s book, The Seven Day Weekend (2004) and it shocked me. I was not only shocked by the claims made by the author but also that his ideas work. They not only work but work very well. Semco is quite an unusual company, a radical one. A revolutionary one indeed. It is a beast in its own league! I do not know of any other company in the world with the same management approach. I have read about Jack Welch’s impressive approach at General Electric but it is still innovation within the conventional Western streak of management. Semco is something else.
Formed by Semler’s father Antonio Curt Semler in the 1950s, the company was an industrial entity famed for building ships and oil separating systems. Over the years, after changing names from Semco Group to Semco Partners the company broadened its scope which now includes manufacturing rocket fuel propelling systems and services as diverse as real estate, environmental consultancy, facilities management, taxation and inventory support.
Semco is however well known globally for its unusual management practices. The employees determine their own working hours and set their own salaries. The company detests bureaucracy and as such no designated parking lots for bosses. Parking space is utilised on first come first use basis. There is no receptionist and anybody takes phone calls, including the CEO. Ricardo, who is very friendly, unlike his father well known for his temper, also removed other bureaucratic clutter: no time clocks, no dress code, and no security procedures. He also eliminated the position of secretary. Anybody can type when required.
The workers set their own production quotas. They are also given unrestricted access to company records. In short, the company is run like a family one. Every worker is treated like a shareholder. What is interesting about these quotas is that, since they are based on flexible working hours, once you have finished yours you can go on holiday. Semler junior’s reasoning is that ‘when we have money we have no time. When we have time there is no money or there is no health’. As a corollary, it is better not to wait for retirement to go and holiday and enjoy your money. He believes pleasure and work mix. Quite contrary to the common rule that business and pleasure do not mix! He thus allows his workers to go to the beach when others are busy working.
A former lecturer in the MBA programme at the Massachusetts Institute of Technology, Ricardo believes in transparency. No information is deemed too sensitive for the staff to know. The way salaries are set there works like this. The employees are given three pieces of information: how much the company makes, how much people are paid in the comparison industry and generally how the company is doing financially. With this at their disposal the workers work out a fair formula that benefits both them and the company. If there is no money everybody sees. If there is a lot of profit, everybody sees and thus there is consensus as to what is the most appropriate cause of action. Ricardo, well respected for ‘industrial democracy’ also introduced profit sharing schemes for his workers. He believes, as I do, that workers are exploited. He talks of ‘corporate oppression’. In this regard he set up factory committees that manage his plants in an effort to promote worker involvement.
Ricardo believes that managers must add value. Like Peter Drucker, he sees leadership as a function and not a title. For that reason, when he took over as company President in 1980, at age 21, he is said to have fired 60% of the senior management that he inherited from his father. From then onwards, managers were to be elected by their co-workers. Nobody was imposed on the employees. The same employees fired these managers. Every six months the managers are evaluated in order to determine if they can keep the job. Those who score less than 78% lose their jobs.
Semler junior’s other major strength is creativity and innovation in the area of production. This company has gone through turbulent storms but he has always weathered them. In the 1990s for instance, the marine sector where 90% of their business was concentrated experienced a major decline, as was the Brazilian economy generally. His reaction was not just to downsize on staff but to diversify the portfolio and introduced new products in the services sector. By the next decade the company had witnessed a growth of 900%. By 2005 the company had moved from number 56 in the services to number 1 and 4th in the industrial sector. The company is so popular that worker turnout is less than 1%. There are always hundreds of people knocking on the doors looking for jobs. It has over 3000 employees.
Since reading the latest about Semco I have been wondering if this approach can work in Botswana. I am reminded of Hofstede’s Cultural Dimensions Theory where variables such as collectivism-individualism, feminity-masculinity, indulgence-restraint, long-term-short-term orientation and power-distance can affect an environment. Certainly this can apply to industrial relations. There could be other variables not mentioned by Prof Hofstede. For instance what is our work ethic here? Can workers be trusted to work from their homes and be productive? On the management side, can managers and owners allow themselves to be graded by their subordinates? Can they open up company records for workers to see? Finally and crucially, can they share the profits with the workers? I do not mean crumbs.