Warning: Long post. Read at your own risk
These days, I am reading a book “Maverick” by Ricardo
A few samples……
Every Wednesday afternoon dozens of men and women file through the front gate on their way to a third floor meeting room at Semco, the company I lead in Sao Paulo, Brazil. The guard at the entrance has been expecting them. For years now, executives from some of the biggest and best known companies in the world, IBM, General Motors, Ford, Kodak, Bayer, Nestle, Goodyear, Firestone, Pirelli, Alcoa, BASF, Chase Manhattan, Siemens, Dow Chemical, Mercedes-Benz and Yashica among them, have been making an unlikely pilgrimage to our nondescript industrial complex on the outskirts of the city.
Semco manufactures an impressively varied roster of products, including pumps that can empty oil tanker in a night, dishwasher capable of scrubbing 4,100 plates an hour, cooling units for air conditioners that keep huge office towers comfortable during the most sweltering heat waves, mixers that blend everything from rocket fuel to bubble gum, and entire biscuit factories, with 6,000 separate components and 16 miles of wiring. But it is not what Semco makes that has executives and management experts the world over waiting months for a chance to tour our plants and offices. It is the way the people of Semco make it.
When I took over Semco from my father 12 years ago, it was a traditional company in every respect, with a pyramidal structure and a rule for every contingency. But today our factory workers sometimes set their own production quotas and even come in their time to meet them, without prodding from management or overtime pay. They help redesign the products they make and formulate the marketing plans. Their bosses, for their part, can run our business units with extraordinary freedom, determining business strategy without interference from the top brass. They even set their own salaries, with no strings. Then again, everyone will know what they are, since all financial – information at Semco is openly discussed.
Indeed our workers have unlimited access to our books ( and we keep one set). To show we are serious about this, Semco, with the labor unions that represent our workers, developed a course to teach everyone, even messengers and cleaning people, to read balance sheets and cash flow statements.
For truly big decisions, such as buying another company, everyone at Semco gets a vote. A few years ago, when we wanted to relocate a factory, we
closed down for a day and everyone piled into buses to inspect three possible new sites. Then the workers decided. Their choice hardly thrilled us, since it was
next to a company that was frequently on strike. But while no one in management wanted front row seats to labor-management strife, we moved in anyway. In the lobby of our headquarters, a standard-issue office building with four floors of steel and glass, there is a reception desk but receptionist. That’s the first clue that we are different.
We don’t have receptionists. We don’t think they are necessary, despite all our visitors. We don’t have secretaries either, or personal assistants. We don’t believe in cluttering the payroll with ungratifying, dead-end jobs. Everyone at Semco, even top managers, fetches guests, stands over photocopiers, send faxes, type letters, and dials the phone. We don’t have executive dining rooms and parking is strictly first-come, first-served. It’s all part of running a natural ‘business’.
At Semco we have stripped away the unnecessary perks and privileges that feed the ego but hurt the balance sheet and distract everyone from the crucial corporate tasks of making, selling, billing and collecting. Our offices don’t even have the usual number of walls. Instead, a forest of plans separates the desks, computers and drawing boards in our work areas. The mood is informal: some people wear suits and ties or dresses, others jeans and sneakers. It does not matter. If people want to emulate Thomas Watson and don white button-downs, that’s fine. But turtleneck and T-shirts are okay, too. And I want our people to feel free to put their feet on their desks, just like me.
I am pleased to report that more than once a group of Semco executes has been interrupted by people who wanted to use their conference room to hold a birthday party. They use my room in office to hold conferences. Sometimes when I enter in my room, someone was sitting in my chair, using my phone. I have to wait on visitors’ sofa for the meeting to get over.
We have a sales manager named Rubin Agater who sits there reading the newspaper hour after hour, not even making a pretence of looking busy. I am sure this mystifies some of our visitors. Most modern managers would not tolerate it. But when a Semco pump on an oil tanker on the other side of the world fails and millions of gallons of oil are about to spill into the sea, Rubin springs into action. He knows everything there is to know about our pumps and how to fix them. That’s when he earns his salary. No one cares if he
doesn’t look busy the rest of the time.
My office is on the fourth floor – at least it was the last time I looked, I don’t use it much as other proprietors. Most mornings I work at home. I
concentrate better there, despite two sheepdogs that like to bark when I am on the phone to important customers. I encourage other Semco managers to work at home, too. I also take at least two months off each year to travel, and I like to roam far.
There are pictures in my office from two recent expeditions, a balloon safari in Tanzania and a trek through the Khyber pass in Afghanistan. I never leave a number where I can be reached when I am away and I don’t call in. I want everyone at Semco to be self sufficient.
The company is organized – well, maybe that’s not quite the right word for us – not to depend too much on any individual, especially me. I take it as a
point of pride that twice on my return from long trips my office has been moved – and each time it got smaller. My role is that of a catalyst. I try to create an environment in which others make decisions. Success means not making them myself.
One of my first acts at Semco was to throw out the rules. All companies have procedural bibles. Some look like encyclopedia Britannica. Who needs all those rules? They discourage flexibility and comfort the complacent. At Semco, we stay away from formulas and try to keep our minds open. I knew our rule book was useless, when as a test, I once distributed some additional pages for it. I asked some managers to read the new sections and give me their reaction. Almost everyone said they were just fine. Trouble was, I had stapled the pages together so they could not be read without first prying them apart. Funny how no one mentioned that. All the new employee at Semco get today is a 20 page booklet we call The Survival Manual. It has lots of cartoons but few words. The basic message : Use your common sense. If you have not guessed by now, Semco’s standard policy is no policy.
Many companies have entire departments that generate mountains of paperwork trying to control their employees. Take travel. They have rules how much a person can spend in every possible situation. At Semco, we want our people to spend whatever they think they should, as if they were taking a trip on their own, with their own money.
There is no department, no rules, no audits. If we were afraid to let people decide in which section of the plane to sit, or how many stars their hotel
should have, we should not be sending them abroad to do business in our name, should we?
We have absolute trust in our employees. In fact, we are partners with them. On the assumption that a capitalist society must be capitalist for all, Semco has a profit sharing plan – but with a difference. Typically companies hand over these plans like god handed Moses the commandments. The owners decide who gets what, when. At Semco, profit-sharing is democratic. We negotiated with our workers over the basic percentage to be distributed – about a quarter of our corporate profits, as it turned out – and they hold assemblies to decide how to split it. It’s up to them. Profit sharing has worked so well that once during negotiation over a new labor contract, a union leader argued that too big a raise would overextend the company.
Some people have likened the Semco philosophy to socialism, in the old Eastern European sense. I think we are proving that worker involvement does not mean that bosses lose power. What we do strip away is the blind, irrational authoritarianism that diminishes productivity. We are thrilled that our workers are self-governing & self-managing. It means that they care about their jobs and about their company and that’s good for all of us.
In restructuring Semco, we’ve picked the best from many systems. From capitalism we take the ideals of personal freedom, individualism and competition. From the theory, not the practice, of socialism we have
learnt to control greed and share information and power. The Japanese have taught us the value of flexibility, although we shrink from their family-like ties to the company and their automatic veneration of elders. We want people to advance because of competence, not longevity or conformity.
When you eliminate rigid thought and hierarchical structure, things usually get messy, which is how our factories look. Instead of machines neatly aligned in long straight rows, the way Henry Ford wanted it, they are set at odd angles and in unexpected places. That’s because our workers typically work in clusters or teams, assembling a complete product, not just an isolated component. That gives them more control and responsibility, which makes them happier and our products better. Nearly all our workers have mastered seeral jobs. They even drive forklifts to keep teammates supplied with raw materials and spare parts, which they have been known to purchase themselves from suppliers.
We have also changed the way our departments do business with each other. If one does not want to buy services from each other, it is free to go outside the company and buy from someone else. The threat of competition keeps us all on our toes. Recently we have encouraged employees to start their own companies, leasing them Semco machinery at favorable rates. We buy from our former employees; of course, they are also free to sell to others, even Semco’s competitors.
This program has made us leaner and more agile, and given them ultimate control of their working lives. it makes entrepreneurs out of employees. We are not the only company to experiment with participative management. It’s become a fad. But so many efforts at workplace democracy are just so much hot air. Not that the intentions are bad, it is just that it’s much easier to talk about worker involvement than to implement it. We have been ripping apart Semco and putting it back together for a dozen years, and we are just 30% finished. Still the rewards have already been substantial.
We have taken a company that was moribund and made it thrive, chiefly by refusing to squander our greatest resource, our people. Semco has grown sixfold despite withering recessions, staggering inflation and chaotic national economic policy. Productivity has increased nearly sevenfold. Profits have risen fivefold.