MAVERICK The Success Story Behind the World’s Most Unusual Workplace RICARDO SEMLER SUMMARIES.COM is a concentrated business information service. Every week, subscribers are e-mailed a concise summary of a different business book. Each summary is about 8 pages long and contains the stripped-down essential ideas from the entire book in a time-saving format. By investing less than one hour per week in these summaries, subscribers gain a working knowledge of the top business titles. Subscriptions are available on a monthly or yearly basis. Further information is available at http://www.summaries.com. Maverick - Page 1 MAIN IDEA The heart of the Semco philosophy is: 1. Every company should trust its destiny to its employees. 2. Employees should be treated like responsible adults rather than like children who have to have everything spelled out for them. In addition, Semco’s principles are: 1. Throw away all rule books. They discourage flexibility and comfort the complacent. Encourage people to use their common sense. 2. Employees work best and most productively in an environment in which they are self-governed and self-managed. 3. Sharing information rather than making money is the reason for existence for a successful company. Semco has managed to achieve two objectives that often conflict -- to make money and to improve the lives of the people who work for it. And, significantly, Semco has developed a more humane, more trusting, more productive, more exhilarating and more rewarding place to work. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 2 1. COMPANY PHILOSOPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 3 1. Business Focus 2. The Use of Good Common Sense 3. Transparency 2. COMPANY MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 4 1. Corporate hierarchy 2. Reduction of Support Staff 3. Reverse Evaluations 4. Optimum business unit size 5. Management by wandering around 3. EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5 1. Job security 2. Job rotation 3. Hepatitis leave 4. Flextime 5. Strikes 4. EMPLOYEE INCENTIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6 1. Profit sharing 2. Risk salary 3. Salary surveys 4. Self-set pay 5. Training 5. DEMOCRACY IN THE WORKPLACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 7 1. Democratic system 2. Factory committees 3. Family silverware 4. Manufacturing cells 5. Satellite program 6. Working at home 6. CONCEPTS AND IDEAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8 1. Cleanout 2. Corruption. 3. Headline memo 4. Lost in space 5. Nucleus of technological innovation Maverick - Page 2 INTRODUCTION Semco was now number 1 or number 2 in every market in which SEMCO and Ricardo Semler it competed. Even more impressive, the company is debt free. In fact, the company has continued to grow almost as quickly as Background it’s corporate culture has continued to attract attention. By 1993: Semco (a contraction of Semler & Company) was formed in Semco’s revenues had risen 600%, despite the fact Brazil was Brazil in 1952. The company’s founder was Antonio Curt Semler, in the middle of a sustained recession. an Austrian engineer drawn to Brazil by the commercial Worker productivity has risen 700%. prospects such a vast, undeveloped country represented. Profits have increased by 500%. By the end of the 1960s, Semco employed 110 people and had The company has a back-log of 2,000 people who would like annual revenues of $2 million per year. With the birth of the to become employees. shipbuilding industry in Brazil, Semco diversified into becoming a major supplier of marine pumps. Executives from some of the biggest and best known companies in the world make regular inspection tours to The shipbuilding boom in Brazil, however, was over by 1980 Semco’s head office to see what the company is doing. when Antonio Semler passed control of Semco over to his 20-year old son, Ricardo. By this stage, Semco’s exposure to the shipbuilding industry was very high, with more than Key Thoughts 90-percent of Semco’s business in marine products such as pumps, components for propellers and water-oil separators for ‘‘No, Semco isn’t a model, with programs to be followed with ship motors. precision, so many recipes for participation, productivity and profits. Semco is an invitation. I hope our story will cause other When Ricardo took over Semco, most of the first year was spent companies to reconsider themselves, and their employees. To trying to raise sufficient cash to keep the business afloat. forget socialism, capitalism, just-in-time deliveries, salary Gradually, however, Ricardo started assembling a new surveys and the rest of it, and to concentrate on building management team around him who were from outside the organizations that accomplish that most difficult of all challenges: industry and who were unafraid to try new ideas. To allow these to make people look forward to coming to work in the morning.’’ ideas to take root, Ricardo Semler fired most of the management -- Ricardo Semler that had previously worked for Semco, and hit the road to try and drum up some new business -- hoping to persuade some ‘‘People often assume that at Semco we have strict selection companies to let Semco manufacture pumps and mixers in procedures to ensure those who come to work for us are Brazil under license. philosophically attuned with our system. In fact, it’s the other way In those days, the company competed aggressively for around. We look for competence, and ignore all else. Many of business. When Alcoa built a vast aluminum mill in northern our employees regularly question our concepts. There are even Brazil, Semco was ultimately able to land a contract to supply pockets at Semco that are autocratic, and people who like to mixers for the manufacturing process. work in that kind of environment have slowly migrated there. But how can we lock out people who don’t think the same way we By 1983, Semco had turned around and was starting to make do without becoming like people who say things like, "This is not money, and made its first acquisitions -- buying Flakt, the the way we do things around here".’’ Brazilian subsidiary of the Asea Brown Boveri group and -- Ricardo Semler Baltimore Aircoil, a subsidiary of Merck Sharp and Dohme. As Semco continued to grow through acquisitions, Ricardo ‘‘When I took over Semco from my father 12 years ago, it was a Semler started to develop a set of set of corporate principles that traditional company in every respect, with a pyramidal structure impacted on the corporate culture within the company. His and a rule for every contingency. But today, our factory workers central theme was that traditional companies were not organized sometimes set their own production quotas and even come in effectively, and that the key to productivity was to create an on their own time to meet them, without prodding from atmosphere in which employees were treated like responsible management or overtime pay. They help redesign the products adults rather than like children where everything had to be they make and formulate the marketing plans. Their bosses, for spelled out. Ricardo Semler’s enthusiasm for this concept was their part, can run our business units with extraordinary freedom, to launch him on a crusade that would eventually impact on every determining business strategy without interference from the top part of Semco’s operations. brass. They even set their own salaries, with no strings. Then Before long, Semler launched a major campaign to rid Semco again, everyone will know what they are, since all financial of irrelevant rules and regulations. His philosophical basis was information at Semco is openly discussed. Indeed, our workers that rules: have unlimited access to our books (and we only keep one set). 1. Diverted attention away from important matters. To show we are serious about this, Semco, with the labor unions 2. Provided a false sense of security for managers. that represent our workers, developed a course to teach 3. Created unnecessary work for the bean counters. everyone, even messengers and cleaning people, to read 4. Taught men to stone dinosaurs and start fires with sticks. balance sheets and cash-flow statements. For truly big decisions, everyone at Semco gets a vote.’’ In fact, Semler considered a desire for rules and the need for -- Ricardo Semler innovation to be diametricly incompatible, and before long he launched a major company initiative to completely reengineer Semco. By 1988, Semco was the fastest growing company in Brazil. Sales had increased from $4 million in 1980 to $35 million in 1988, while the company grew from 100 to 830 employees. Maverick - Page 3 1. company. The solution? Do away with arbitrary rules and COMPANY PHILOSOPHY replace them with committees of workers that decide what is and is not reasonable behavior in the work place. Main Idea Let the committees look after the interests of the workers. 1. Business Focus Reinforce the role of the committee members by giving them At Semco, everything focuses on the four business activities paid time off work duties to serve on the committee. It’s that make the company money: amazing how many good idea people will come up with when 1. Manufacturing they finally start to realize they’re in charge and they can 2. Selling make a meaningful contribution that is actually followed 3. Billing through on. 4. Collecting 3. Transparency Anything that isn’t directly associated with these four If everyone in the company is to contribute meaningfully, they activities is deemed a distraction and is eliminated if at all have to understand the financial aspects thoroughly and possible. accurately. The only way to do that is by sharing everything 2. The Use of Good Common Sense with them. The abiding corporate principle at Semco is that employees Most companies feel full disclosure will give competitors vital and management are expected to use their common sense. information and cause trade secrets to become diluted in Therefore, there are no dress codes, no regulations on travel, effectiveness. In practice, however, the advantages of no internal departments to check if employees are obeying openness and accuracy far outweigh the potential the rules, etc. disadvantages. 3. Transparency In addition to making the information available, employees Semco makes public all corporate information -- from have to be trained on how to interpret it. That will mean salaries to strategies to productivity statistics and profit seminars, training courses and other forums at which their margins. Employees are taught how to read financial analytical skills can be developed. The result? Employees statements. Employees are free to question managers on will be much better equipped to take an active role in making any aspect of the business at any time. Employees can talk management decisions -- even the hard ones that impact to the media whenever and wherever they like. directly on their own employment conditions. Supporting Ideas Key Thoughts 1. Business Focus ‘‘We found that in an office without secretaries it paid to reflect Many companies seem to be shrines to managerial egos before adding to the paperwork. We still make extra copies if rather than narrowly focused on the sole reason for forming there is a chance someone will feel left out. (By the way, when a company in the first place -- to make more money by we distribute a memo, we always list everyone getting it in working together than the employees could make by working alphabetical order, to avoid silly guessing games about individually. prestige). But generally, the fewer copies the better. And we think To avoid the tendency to award unnecessary perks and three times before filing anything. Read it, understand it, act on privileges to the chosen few, Semco has no executive dining it and throw it away -- that’s our motto now.’’ rooms, fancy office furniture or even designated parking -- Ricardo Semler spaces. The company has also completely eliminated: - Secretaries ‘‘We simply do not believe our employees have an interest in - Receptionists coming in late, leaving early and doing as little as possible for as - Personal assistants much money as their union can wheedle out of us. After all, these as these are dead end jobs that don’t train employees with same people raise their children, join the PTA, elect mayors, the skills required to be able to provide more value to the governors, senators and presidents. They are adults. At Semco, company -- thereby earning a higher salary. we treat them as adults. We trust them. We don’t make our employees ask permission to go to the bathroom, or have Everyone at Semco takes a turn working at the reception security guards search them as they leave for the day. We get desk. Employees fetch their own guests from the reception out of their way and let them do their jobs.’’ area. In addition, every employee sends their own faxes, -- Ricardo Semler makes their own phone calls, does their own filing and photocopying. The result? Less paperwork, less filing, less ‘‘The origins of corporate secrecy can be traced to the insecurity busy work and more direct communication between of executives who possessed the technical skills to scale the managers within the company. corporate pyramid but weren’t mature enough to handle the 2. The Use of Good Common Sense height. They wanted to be seen to be different from those who had not attained their perch. By keeping their salaries secret, Most rules in the work place are totally arbitrary -- they were they felt they would keep themselves apart from others. The either developed by insecure managers who liked the idea problem with secrets is that people just assume the worst, of specifying how employees should act as it made them feel whether it’s about profit or salaries. The truth may not always be powerful or by unions who were trying to gain control over pretty, or easily explained, but it is always better out in the open.’’ some aspect of their workers’ lives. -- Ricardo Semler Companies that are unencumbered by traditional thinking are looking for ways to make peace with employees and provide opportunities for employees to interact with the Maverick - Page 4 2. increases in efficiency far outweighs the loss in corporate COMPANY MANAGEMENT manpower. 3. Reverse Evaluations Main Idea Twice a year, Semco managers are evaluated through a 1. Corporate hierarchy multiple choice form which the employees fill out Semco’s management has been slashed from 12 layers to anonymously. The form has questions on technical ability, just three. All employees have one of just four titles: competence, leadership and other aspects of being a good Counselors -- who coordinate general policy and direction boss. Partners -- who run business units Before any new boss is appointed at Semco, the employees Co-ordinators -- the first level of management (as a group) get to interview all the candidates and make their Associates -- everyone else. decision on whom they want to follow. That way, they have 2. Reduction of Support Staff nobody but themselves to blame if they fail to support their Semco has reduced its corporate staff by 75-percent, business unit leader effectively and consistently. eliminating entire departments. 4. Optimum business unit size 3. Reverse Evaluations At Semco, no business unit has more than 150 employees. Every 6-months, all Semco managers are evaluated by the Building a larger, centralized organization breeds a people they manage using an anonymous multiple choice bureaucracy and alienation. In a small business unit, every questionnaire. And, before they are hired, managers must associate knows what everyone else is doing -- and how they be approved by everyone who will work for them. contribute. 4. Optimum business unit size Therefore, Semco splits business units that grow larger than Large organizations are inefficient. Whenever a Semco 150 into smaller units all the time. That way, business units business grows to more than 150 workers, it is split. stay at their optimum size. 5. Management by wandering around 5. Management by wandering around Semco is designed to encourage people to mingle. Offices Semco is consistent in removing barriers between workers don’t have walls, and every possible barrier to open and encouraging them to interact with each other, in order to communication is eliminated. let new ideas and new initiatives come to the surface Supporting Ideas unhindered. Towards that end, the company takes 1. Corporate hierarchy extraordinary lengths -- there are no walls in the offices, Almost every corporation uses a pyramid structure. Semco, people are only separated by plants. Managers are instead, uses this corporate structure: encouraged to be out of their offices as frequently as possible. Departments are mixed together in the same Counselors (about 6) building. SEMCO Develop policies and Key Thoughts set strategies ‘‘The pyramid, the chief organizational principal of the modern Partners (7 - 10) corporation, turns a business into a traffic jam. A company starts Business unit leaders out like an 8-lane superhighway -- the bottom of the pyramid -- drops to six lanes, then four, then two, then becomes a country road and eventually a dirt path, before abruptly coming to a stop. Thousands of drivers start out on the highway, but as it narrows Associates (100’s) more and more are forced to slow and stop. There are All other employees of smash-ups and cars are pushed off onto the shoulder. Some the company drivers give up and take side roads to other destinations. A few -- the most aggressive -- keep charging ahead, swerving and Co-ordinators accelerating and bending fenders all about them. Remember, (6 - 10 for each unit) objects in the mirror are closer than they appear.’’ First line of management -- Ricardo Semler - foremen, supervisors, ‘‘A manager imposed from on high starts with the count against him. Why not let the people elect their own boss? In a plant where 2. Reduction of support staff everyone has a financial stake in success, the idea of asking future subordinates to choose bosses seems an utterly sensible At Semco, employees take more responsibility for their own way to stop accidents before they are promoted. It’s a wonder it actions. Therefore, there is no need to have legal, isn’t done more often.’’ accounting, data processing, training, quality control or -- Ricardo Semler marketing expertise available at head office. These corporate positions can be eliminated entirely. Individual business units then acquire whatever specialist services they need in these areas at a much lower cost. The key lies in the fact that as workers exercise more control over their jobs, there is a reduced need for supervisors. The Maverick - Page 5 3. people can stop the day-to-day rush and think through their EMPLOYEES working lives and their own personal objectives. Most people resist this idea initially, so to stimulate their Main Idea thinking, they’re asked to consider what would they do if they 1. Job security contracted a serious disease like Hepatitis and were forced to spend two or three months recuperating. Once they Semco never offers employees a guaranteed lifetime job. answer that question, they’re then told to go ahead and do it People know they have to deliver or move on. -- but not to forget to come back once their period of 2. Job rotation recuperation is completed. Employees are encouraged to move on to another job within 4. Flextime Semco every two to five years. It stops them becoming Many companies allow office workers to decide what hours trapped in a job and encourages the development of new they work. Relatively few extend this same courtesy to skills. factory workers. Semco does, however. Every factory worker 3. Hepatitis leave still works 8-hours per day, but can arrive at any time Semco employees are encouraged to take a 2-month between 7 and 9 am, and leave accordingly. sabbatical every couple of years to learn new skills, redesign Again, it comes back to the concept of treating workers like their job or to rest. They are told to imagine they have adults. In situations in which a plant’s operation depends on hepatitis and have to take 2 months off to recover. groups of employees working together simultaneously, 4. Flextime employees are left to organize themselves along any lines they choose. In most cases, Semco factory workers tend to Factory workers and office workers set their own hours of prefer a 6:30 am start and a 3:00 pm finish so that travel to work, using just a group schedule to keep everything and from the plant can be more comfortable and less organized efficiently. crowded. 5. Strikes 5. Strikes Semco still has strikes, but the striking workers are still At Semco, strikes, while not encouraged, are considered to treated like adults and workers who strike are never fired in be part of the democratic process at work. During strikes: retaliation -- their right to strike is respected. 1. Employees are treated like adults Supporting Ideas 2. No one is punished for striking 1. Job security 3. No records are kept of who went on strike and who did not For many years, Japanese companies and some U.S. 4. The police are never called to break up a picket line companies offered guaranteed employment for a person’s 5. Benefits continue to be paid, as if the worker was absent entire working career. Yet, when hard times came, these 6. Workers and union leaders are allowed access same companies were ultimately forced to break their word 7. The rights of those who choose to work are respected and lay off employees. 8. No employees are fired for organizing a strike At Semco, a sense of business reality reigns. Company Key Thoughts personnel are kept fully informed about the company’s ‘‘Almost all businessmen think their employees are involved in trading prospects, profitability and so on. The company has the firm and are its greatest asset. Almost all employees think an incentive not to lay off workers who have valuable they are given too little attention and respect, and cannot say experience, but no guarantees can be given. This is, in what they really think. reality, a more powerful position for workers to be in than How is it possible to reconcile these two positions? The sad truth blindly believing the company will continue to employ them is that employees of modern corporations have little reason to under all market conditions. feel satisfied, much less fulfilled. Companies do not have the 2. Job rotation time or interest to listen to them, and lack the resources or the The advantages of having people rotate areas of inclination to train them for advancement. These companies responsibility within Semco are: make a series of demands, for which they compensate 1. People get to learn new skills employees with salaries that often are considered inadequate. 2. The tendency to engage in empire building is reduced Moreover, companies tend to be implacable in dismissing 3. Employees get a broader view of the company workers when they start to age or go through a temporary drop 4. Management are forced to train more people for each job in performance, and send people into retirement earlier than they 5. Opportunities to advance are created for employees want, leaving them with the feeling that they could have contributed much more had someone asked. In practice, Semco has found that between two- to five-years The era of using people as production tools is coming to an end. is a good cycle for everyone to change responsibilities. Any Participation is infinitely more complex to practice than longer than that and employees are in danger of becoming conventional corporate unilateralism, just as democracy is much complacent or stagnant. more cumbersome than dictatorship. But there will be few 3. Hepatitis leave companies that can afford to ignore either of them.’’ Professionals within the company -- defined as anyone with -- Ricardo Semler a mid-level job or higher -- are actively encouraged to take a few weeks or even a few months away from their regular duties every year or two. It’s designed as a period where Maverick - Page 6 4. surveys to determine what comparable businesses are EMPLOYEE INCENTIVES paying their workers. The only problem is that these surveys lack credibility. Main Idea To offset this, at Semco, salary surveys are compiled by 1. Profit sharing management and the factory workers. As a result, everyone participates in the data gathering exercise, and therefore At Semco, the company negotiates with the workers what everyone trusts the survey results. percentage of corporate profits will be available for profit sharing bonuses. The workers then decide how to apportion 4. Self set pay those funds amongst themselves. At Semco, some employees set their own salaries taking into 2. Risk salary account four factors: 1. What they could make working somewhere else About 1/3 of Semco employees have the option to risk 2. What their friends with similar backgrounds were making 25-percent of their salary. If the company does poorly, they 3. What others in Semco with similar responsibilities made may get nothing for the risk portion of their salary. If the 4. How much money they needed to live company does well, they might double that 25-percent proportion. It allows employees to take whatever degree of This was successful at Semco because: risk they feel comfortable with from year to year. 1. Everyone knows how much everyone else is making 2. Top managers are paid only 10-times an entry level salary 3. Salary surveys 3. People realize someone with a high salary will be the first Semco employees visit comparable companies and analyze to be eliminated should the business enter a difficult trading their salary scales. That way, everyone trusts the data that period. is gathered. To date, everyone down to coordinator level sets their own 4. Self-set pay salaries. Semco hopes that all employees will be able to set About 1/4 of Semco’s employees set their own annual their own salaries in the near future. salaries. In the future, the company hopes to extend this idea 5. Training to factory workers as well. In some companies, training is doled out paternalistically -- 5. Training with the company dictating what training courses should be Semco has no compulsory training programs. Employees attended and so on. are asked to consider where they’d like to be in 5-years and At Semco, employees take the initiative to develop new skills. what skills they require to get there. They then request the They identify training programs they would like to participate training they require, with approval to come from the in, and apply to their business unit for funding. The business unit. expenditure item is then discussed openly and reasonably Supporting Ideas by the unit. Upon approval, the company then pays for the training, and allows the employee time off work to attend. 1. Profit sharing As a result, the process is more open, less susceptible to Before a profit sharing program can work, people need manipulation and accessible by all. information about how the company derives its profits. The company then decided that its profits would be allocated: Key Thoughts -- 40-percent for taxes ‘‘As principal shareholder of Semco, I have to admit I initially -- 25-percent for dividends to shareholders thought 23-percent was awfully high. At other companies, it runs -- 12-percent for reinvestment between 8- and 12-percent. But I kept telling myself I stood to -- 23-percent for profit sharing with the employees make at least as much money in partnership with a motivated Each business unit then decides how to allocate the profit workforce as I would as the sole beneficiary of the fruits of less share amongst its employees -- which in practice always inspired workers. What would you rather have, the tail of an ends up being an even split, which makes profit sharing more elephant or an entire ant?’’ valuable to those on lower salaries than on higher salaries. -- Ricardo Semler 2. Risk salary ‘‘In good times and bad, self-set salaries have encouraged our By making up to 25-percent of salary a risk component, workers to take that rarest of corporate perspectives, a long-term employees can tailor their salary package to suit their own view. And they have the added virtue of eliminating complaints individual requirements. For example, those with large about pay, which is always among a company’s most families tend to be risk averse, and would place no contentious issues.’’ component of their salary at risk. Those with lower fixed -- Ricardo Semler costs, however, will view this as an excellent way to make more money as the company prospers. ‘‘If you haven’t guessed by now, Semco’s standard policy is no policy. Most companies have entire departments that generate It also helps the company as the cost of labor fluctuates with mountains of paperwork trying to control their employees. We the profitability of the company. When business is good, have absolute trust in our employees. In fact, we are partners everyone makes more money. When business is slow, labor with them.’’ expenses are lowered. -- Ricardo Semler 3. Salary surveys When most companies are re negotiating the employment packages for their workers, they use government sponsored Maverick - Page 7 5. is older than 50-years old. Other than that, they can do DEMOCRACY IN THE WORKPLACE anything they like to improve the performance of the business unit. Main Idea 3. Family silverware 1. Democratic system Employees are actively encouraged to apply for jobs with Representative democracy is at the heart of Semco’s greater responsibilities they can grow into. To encourage corporate culture. No major decisions are made without this, Semco even gives them preferential treatment over every interested party getting a vote in the decision. more qualified outsiders. It’s part of the company culture. Subordinates vote on their bosses through regular surveys. 4. Manufacturing cells There are no executive perks -- not even dining rooms or Workers who have more autonomy and more responsibility reserved parking spaces. tend to be happier and more productive. The manufacturing 2. Factory committees cell structure achieves those objectives, as workers can see Each business unit has a committee onto which groups of the results of their labors rather than seeing them disappear workers representatives are elected. These committees down the line. meet with management and can declare strikes, audit the In addition, manufacturing cells enable people to cross-train records and question all management decisions. -- to master more than one production job in the overall 3. Family silverware process. Manufacturing cells can also take responsibility for production quotas, for developing product improvements Employees are given preferential treatment for new and other practical matters. In all these areas, the workers positions. An employee that meets 70-percent of the criteria rather than the managers are the most directly concerned, has preference over an outsider that meets 100-percent of and are, therefore, given the most power to influence the requirements. proceedings. 4. Manufacturing cells 5. Satellite program There are no assembly lines at Semco. Production People act differently when they are their own bosses. Their machinery is clustered into cells, so workers can see the priorities are aligned in completely different directions from finished product. That provides autonomy, responsibility and those of employees. To encourage this, the satellite program greater job satisfaction. encourages workers to buy their production machinery and 5. Satellite program become a supplier to Semco (and other companies). Wherever possible, workers are encouraged to set up their To assist, Semco offers: own businesses supplying to Semco and other companies. 1. Favorable finance arrangements on equipment That transforms them from employees to business owners. 2. Training courses on business planning and other topics 6. Working at home 3. Contracts to buy products and services Everyone who can work effectively and productively from In addition to helping employees build businesses of their home is encouraged to do so. That provides flexibility and own, the satellite program also helps Semco by providing enhances productivity. flexibility in forward planning and an opportunity to focus on design rather than manufacturing. It also positions the Supporting Ideas company favorably to be able to ride out market upturns and 1. Democratic system downturns. Semco carries the concept of democracy throughout the 6. Working at home entire corporate structure. Company employees are given Semco actively encourages workers to work from home. In numerous opportunities to influence the direction the some cases, employees work part of their week at home and company takes, and their role in that direction. part at the office. As long as suitable conditions for Again, this is an extension of the concept employees are concentrating on business issues exist, the company is all actually responsible grown-ups, who don’t need to be for telecommuting or working at home. supervised in arbitrary and meaningless ways. Key Thoughts 2. Factory committees ‘‘Workers in our manufacturing cells have a way of managing Each business unit has various logical groups of workers -- more and more of the manufacturing process. Workers also machinists, office personnel, maintenance workers, recruit and expel new members of their teams. Today, anyone stockroom personnel, draftsmen, etc. To represent the who applies for a job as a machinist at Semco will be interviewed varied interests of all these groups, each business unit forms by a group of machinists, not an executive, which is the worst a committee onto which representatives of each group are thing that can happen to him, because he might be able to talk elected. his way past a manager but not past people who know all about The committee members are encouraged to speak freely -- machinists and may one day be his coworkers. If they say yes, being guaranteed they can’t be fired while on a committee or the person has the job. I’ve not heard of a case in which the for a year afterwards. Committees can then get involved in shop-floor workers have opposed someone and a manager has whatever aspect of the company’s operation they choose -- gone ahead and hired him. Nor do I know of a case in which and the management are required to answer any questions someone is approved by everybody on the shop floor but they pose and to meet with them regularly. rejected by the manager. In our system, it just isn’t possible.’’ The only restriction -- a committee can’t recommend the firing -- Ricardo Semler of anyone who has been with Semco longer than 3-years or Maverick - Page 8 6. 5. Nucleus of technological innovation CONCEPTS AND IDEAS This business unit has no boss and no employees. The engineers in the team are free to look at any aspect of Main Idea Semco’s business and suggest changes. Twice a year, they 1. Cleanout report progress to the Partners, who then decide whether or not the unit should continue. Twice a year, Semco shuts down for an afternoon and everyone throws away every piece of obsolete equipment or To encourage innovation, the engineers are given an unnecessary paperwork. incentive -- in addition to their salary, they got royalties on the new products developed, a percentage of the cost 2. Corruption savings they achieved or a share of the profits earned by new Semco refuses to accept work place corruption in any way, products. They can also sell consulting services to anyone shape or form. that is interested. 3. Headline memo Key Thoughts All Semco memos are limited to 1-page and have a headline ‘‘Corporations have notoriously short life spans. Even in the at the top that gets right to the point -- like a newspaper. stable and relatively prosperous United States, a company has 4. Lost in space a less than 5-percent chance of being in a better position 50 Every good year, several promising new employees are years from now. These cautionary tales illustrate what I believe recruited for a think tank -- no responsibilities, no boss, no is the biggest challenge any business faces: change. Semco has job descriptions -- as long as they work in 12 departments in succeeded despite some of the harshest economic conditions their first year. imaginable because we have learned to see the need for change and have been smart enough to seek our employees’ help in 5. Nucleus of technological innovation implementing it. A small group of technical employees who are free of To survive in modern times, a company must have an day-to-day responsibilities and are expected to think. They organizational structure that accepts change as its basic are even paid according to what they deliver. premise, lets tribal customs thrive and fosters a power that is Supporting Ideas derived from respect, not rules. In other words, the successful 1. Cleanout companies will be the ones that put quality of life first. Do this and the rest -- quality of product, productivity of workers, profits Most employees have a compulsion to collect whatever may for all -- will follow. be useful in the future. To offset this, have a twice annual day At Semco, we did away with strictures that dictate the flows and on which everyone stops to unclutter themselves. Semco created fertile soil for differences. We gave people an does this, and finds it sharpens the thinking, clears the clutter opportunity to test, question and disagree. We let them and refocuses the business. determine their own training and their own futures. We let them 2. Corruption come and go as they wanted, work at home if they wished, set Semco has zero tolerance for corruption, and has turned their own salaries, choose their own bosses. We let them change officials who have attempted to extract bribes over to the their minds and ours, prove us wrong when we were wrong, authorities. In return, the company has generated a vast make us humbler. Such a system relishes change, which is the amount of attention from other government inspectors. It only antidote to the corporate brainwashing that has consigned causes delays and additional headaches, but also sends a giant businesses with brilliant pasts into uncertain futures. signal the company operates above boards and ethically at Semco is more than novel programs or procedures. What is all times. important is our open-mindedness, our trust in our employees and distrust of dogma. We are neither socialist nor purely 3. Headline memo capitalist, but take the best of these failed systems and others to Every written document in Semco is 1-page long, with a reorganize work so that collective thinking does not overpower headline at the top that gets right to the point. It eliminates individualistic flights of grandeur; that leadership does not get unnecessary paperwork, avoids ambiguity, stops meetings lost in an endless search for consensus, that people are free to dragging on too long and focuses attention on critical issues work as they like, when they like; that bosses don’t have to be rather than writing skills. parents and workers don’t act like children.’’ 4. Lost in space -- Ricardo Semler Each year, some entry level employees are given an opportunity to work for the company unrestricted by job descriptions and bosses. They are expected to come up with some business idea that will generate enough revenue to cover their salary. They are also required to work in a broad range of departments -- 12 over the course of the year. If they see a position they like, they are then free to negotiate a more permanent arrangement with that department. © Copyright 1998 All Rights Reserved The program lets Semco unearth some exceptional people, and exposes the company to some new and original thinking.
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