1980. Ricardo Semler, a 21 year old Brazilian graduate, takes the reins of his father’s company SEMCO.
At the time, SEMCO (revenue then 4 million dollar) is mainly producing ship pumps and propellers for the crisis-prone shipping industry. And it is losing money.
Diversification is urgently needed. Young Ricardo goes to work very hard and almost immediately lays off most of the senior managers. Success soon follows.
1983. Ricardo, now 25, physically collapses during a business trip. At the hospital, the doctor puts him before a simple choice: continue working as hard as he can and inevitably ruin his health - or thoroughly revise his way of life.
Semler quickly chooses the second option. First, he has a hard look at himself and his time management. Then he abolishes the majority of the existing company rules to turn SEMCO - in his own words – into a "natural" company where people are treated in an adult manner and interact accordingly with each other. The foundations of his view on "radical corporate democracy" are laid. Its implementation will be a remarkable success.
What had actually changed in Semler's consciousness? His analysis was that an excess of rules and procedures stifled employees, smothered their creativity and enjoyment of life, produced a lot of useless work that inevitably generated useless expenditures and resulted in a loss of profitability. Moreover, the new Ricardo found it all too absurd that, in their private lives, employees were perfectly capable of taking important decisions independently, while they had to give away that responsibility as soon as they entered the company doors and obediently execute what they were told to do. For him, the era of the industrial revolution with a majority of unskilled labourers was definitely over and such an archaic stance was no longer defensible.
Gradually, Semler begins implementing the basic principles throughout the company. He strengthens the employees’ autonomy and responsibility, stimulates initiative and entrepreneurship, increases financial transparency and allows employees to share financially in the company’s results.
His next step is to let employees recruit new colleagues on their own and pick their managers. Over time, employees can even determine their own salary in consultation with their colleagues.
When a reorganization is required, instead of firing people, Ricardo encourages them to set up their own businesses and partner with SEMCO. As soon as the organization becomes too large, he splits it up to keep the whole sharp and decisive.
Did this whole process run smoothly? No. Initially, Ricardo stumbled upon suspicion among his employees and met with resistance among the managers, particularly the middle management. The whole revolution took around 15 years. But it turned into a success. In 2013, SEMCO Partners had 3000+ employees, a turnover in excess of 200 million dollars and the very profitable company continues to grow. The SEMCO approach received - and continues to receive - a lot of interest from all over the world.
Over the years, SEMCO Partners has gradually evolved towards a highly diversified service group. Ricardo barely interferes with the leadership because it is deeply embedded in the organization. In his own words: "I work at my best when I do nothing". Today, he sees himself as an advisor, someone that his people can call upon if they deem it necessary.
Why is it that business owners and managers keep being attracted or fascinated by SEMCO style? Because this entrepreneur had the vision and the courage to do away with the strongly ego-bound and fear-driven command & control way of managing and rely fully on the talents and sense of responsibility of his employees.
Granted, such vision and courage are not given to everyone. That may be why today many organizations are still at the stage where SEMCO was when Ricardo took over the company from his father in 1980. It should be clear, however, that such organizations are going to struggle increasingly, due to their lack of agility, innovation and – last but not least - attractiveness for new talent.
Next case: Morning Star: the mission is the CEO.