Wednesday, 24 November 2010

The Brazilian Maverick

In Sao Paulo, Brazil in 1982, twenty four year old Ricardo Semler takes control of his father's struggling industrial equipment company, Semco. A not insignificant company, with a turnover of $6.8 million. In a radical approach to traditional management practice, Semler immediately sacked 66% of his top management team, and insisted that workers took responsibility for their own jobs, set their own wages and their own production targets.

From that moment on, Semler made financial data available to all employees, published all staff wages and let them choose and evaluate their own managers. Meetings and paperwork were kept to a minimum, with the focus on getting the job done.

Amazingly, despite Brazil's rollercoaster and volatile economy, Semco flourished, growing at between 30 and 40 percent a year. Today, company turnover is $273 million a year and employs more than 3000 people.

It is thought that Semler enjoyed success with his management style because it tapped into what we already know about people: that they are motivated and creative and self-disciplined when given the chance to contribute and be involved in decision-making; that they will take more and more responsibility when they are part of a team which maximises opportunities for self-fulfilment.

Letting go control is a leap of faith few CEOs are prepared to take - but over the past 20 years Ricardo Semler has proved it works.

Semco doesn't have a mission statement, headquarters, an HR department, organisational plans further out than six months, an organisation chart, a rulebook or any written policies. At Semco, all employees share in the company’s profits, so freeloaders at any level are unwelcome. Company units decide every six months how many people they will need, what business opportunities they will pursue, and how they will work. Teams are formed and reformed as needed and employees must continually prove their worth to the team in order to be sure of being part of future teams. The resulting high level of worker engagement - and a staff turnover below one percent - is something more traditional companies yearn for - along with their growth rates.

As part of Semco's constant attempts to unsettle the conventional order and unleash more flexibility and creativity, the firm's headquarters have been disbanded in favour of satellite "airport lounge" offices dotted around Sao Paulo. Staff no longer have fixed offices, or even fixed desks. Says Semler: "If you don't even know where your people are, you can't possibly keep an eye on them. All that's left to judge on is performance."

However, few companies have adopted Semco's democratic workplace design. The prevailing organisational system apparently has nothing to assist people make that leap of faith and give up control. Yet just consider - $100,000 invested in this barmy firm 20 years ago would now be worth a cool $5m.

Food for thought.

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