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Semco unique self organziation

Semco unique self organziation

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|Views: 6,601 |Likes:
Published by Aaron Ross

I love this company...it's not for everyone, but there are some gems in here!

If the paragraph tantalizes you, you can read the attached PDF.

If the PDF intrigues you, here's the book on Amazon:
http://www.amazon.com/Seven-Day-Weekend-Changing-Work-Works/dp/1591840260




--------------------------------------------------------------------------------


"Semco has no official structure. It has no organizational chart. There's no business plan or company strategy, no twoyear or five-year plan, no goal or mission statement, no longterm budget. The company often does not have a fixed CEO. There are no vice presidents or chief officers for information technology or operations. There are no standards or practices. There's no human resources department. There are no career plans, no job descriptions or employee contracts. No one approves reports or expense accounts. Supervision or monitoring of workers is rare indeed.
Most important, success is not measured only in profit and growth.

Strange, eh? My summary may make Semco sound like a company with an offbeat management style that wouldn't succeed anywhere else. Nevertheless, hundreds of corporate leaders from around the world have visited Sao Paulo to find out what makes us tick. The visitors are curious about Semco because they want what we have--huge growth in spite of a fluctuating economy, unique market niches, rising profits, highly motivated employees, low turnover, diverse products, and service areas.

Our visitors want to understand how Semco has increased its annual revenue between 1994 and 2003 from $35 million a year to $212 million when I--the company's largest shareholder-- rarely attend meetings and almost never make decisions. They want to know how my employees, with a show of hands, can veto new product ideas or scrap whole business ventures."

I love this company...it's not for everyone, but there are some gems in here!

If the paragraph tantalizes you, you can read the attached PDF.

If the PDF intrigues you, here's the book on Amazon:
http://www.amazon.com/Seven-Day-Weekend-Changing-Work-Works/dp/1591840260




--------------------------------------------------------------------------------


"Semco has no official structure. It has no organizational chart. There's no business plan or company strategy, no twoyear or five-year plan, no goal or mission statement, no longterm budget. The company often does not have a fixed CEO. There are no vice presidents or chief officers for information technology or operations. There are no standards or practices. There's no human resources department. There are no career plans, no job descriptions or employee contracts. No one approves reports or expense accounts. Supervision or monitoring of workers is rare indeed.
Most important, success is not measured only in profit and growth.

Strange, eh? My summary may make Semco sound like a company with an offbeat management style that wouldn't succeed anywhere else. Nevertheless, hundreds of corporate leaders from around the world have visited Sao Paulo to find out what makes us tick. The visitors are curious about Semco because they want what we have--huge growth in spite of a fluctuating economy, unique market niches, rising profits, highly motivated employees, low turnover, diverse products, and service areas.

Our visitors want to understand how Semco has increased its annual revenue between 1994 and 2003 from $35 million a year to $212 million when I--the company's largest shareholder-- rarely attend meetings and almost never make decisions. They want to know how my employees, with a show of hands, can veto new product ideas or scrap whole business ventures."

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Published by: Aaron Ross on Sep 16, 2007
Copyright:Attribution Non-commercial

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12/20/2012

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A15-98-0024
Copyright © 1998 Thunderbird, The American Graduate School of International Management. All rights reserved.This case was prepared by Kelly Killian and Francisco Perez under the direction of Dr. Caren Siehl for the purpose oclassroom discussion only, and not to indicate either effective or ineffective management.
Ricardo Semler and Semco S.A.
Introduction
In 1982 at the age of 24, Ricardo Semler took control of Semler & Company, a businessfounded and, until then, managed by his father. At that time, this Brazilian company’sorganizational structure, like many historical Latin American enterprises, was a paternalis-tic, pyramidal hierarchy led by an autocratic leader with a rule for every contingency. Upontaking office, the younger Semler began dramatic organizational restructuring. Among otherthings, he immediately renamed the company Semco, eliminated all secretarial positions,and implemented an aggressive product diversification strategy. Most observers predictedthat these actions would destroy the company.Semler’s changes, however, did not bring about the demise of the struggling industrialequipment manufacturer. Rather, they created a remarkably flexible organization whosesales grew from $35 million in 1990 to $100 million in 1996. Semco became one of themost sought-after employers in Brazil, manufacturing over two thousand different prod-ucts, including marine pumps, commercial dishwashers, digital scanners, filters, and mix-ing equipment, and diversified into banking and environmental services. Over 150 Fortune500 companies visited Semco in an attempt to discover the secret of its success. RicardoSemler’s accomplishments were all the more remarkable when considered against the back-drop of the erratic economy that all of Brazil operated under as the country weathered fourcurrency devaluations, record unemployment, hyperinflation, and a virtual cessation of allindustrial production.
Background
Attracted by Brazil’s rapidly expanding economy, Austrian-born engineer Antonio CurtSemler moved to Sao Paulo in 1953 after years of managing a plant for DuPont in Argen-tina. There he founded Semler & Company and began manufacturing centrifuges. Withina decade, the company became a market leader, primarily due to the acquisition of lucrativecontracts that provided marine pumps to the military. Antonio Semler quickly focused theresources of the company on providing these pumps to the government. Semler & Com-pany eventually grew into one of the major suppliers of the National Shipbuilding Plansupported by several Brazilian governments.
 
2A15-98-0024
After graduating from Harvard at the age 20, one of the school’s youngest-ever MBAgraduates, Ricardo Semler returned to Sao Paulo to work for his father. From his arrival, itwas clear that Ricardo’s organizational philosophy clashed with that held by his father. Theelder Semler firmly believed in autocratic, paternalistic control, as well as the inextricableconnection between personal and business matters. Ricardo advocated a more participatorymanagement style, as well as a strict separation of work and personal life. During the yearsthat followed, these differences in philosophy were a constant source of conflict. Both fa-ther and son began to realize that any eventual transfer of power would not represent acontinuation of the status quo.The Brazilian recession of the early 1980s hit Semler & Company particularly hard.At that time, the company derived 90% of its sales from shipbuilding products. The youngerSemler was convinced that the future success of the company hinged upon diversificationinto other product lines, but no one, least of all his father, was willing to listen. Because of Ricardo Semler’s dissatisfaction with both the management of the firm and its strategicdirection, he threatened to leave during his third year. Faced with this possibility, AntonioSemler retired as CEO and transferred majority ownership to his son. Ricardo Semler wasfinally in a position to implement his own managerial and strategic philosophy.
The Semco Era
The key to management is to get rid of the managers.The key to getting work done on time is to stop wearing a watch.The best way to invest corporate profits is to give them to the employees.The purpose of work is not to make money. The purpose of work is to make the workers,whether working stiffs or top executives, feel good about life.
Ricardo Semler
On his first day as the new CEO, Ricardo Semler fired two-thirds of the top manage-ment of Semler & Company, many close friends of his father, and began plotting a productdiversification strategy for the newly renamed Semco.Semler worked long hours to save the faltering business and made some limited progressin his first year toward the eradication of the old Semler & Company organizational legacy.However, it was not until he fainted while touring a factory in the United States and wasdiagnosed with a severe case of stress that he decided to drastically change his lifestyle andthat of his employees. Semler had not yet postulated a strategic vision, but clearly perceived“a sense of lifelessness, a lack of enthusiasm, a malaise at Semco, and [knew] that [he] had tochange it...During the years that followed, Semler dismantled the rigid management structureimposed by his father in favor of a more flexible organization based on three interdepen-dent core values: employee participation, profit sharing, and the free flow of information.
The Beginning of the Revolution.…
Semler firmly believed that
all
people desire to achieve excellence. He felt that autocracythwarted people’s motivation and creativity. He thus decided that the authority to makedecisions at Semco should be more evenly distributed.
 
A15-98-00243
His first attempts took the form of a matrix structure similar to that of Delaware-basedW.L. Gore, a company Semler had long admired.
 
Under this system, Semco managers re-ported not only to their plant manager but also to a director at headquarters. This, Semlerfelt, would provide managers with multiple perspectives on each problem. Initial reactionsto the matrix were less than favorable. If pleasing one boss was difficult, pleasing two simul-taneously was impossible. In order to avoid conflict, Semco managers became overly cau-tious, took few risks, and learned little.The shortcomings of the matrix structure prompted Semler to divide the companyinto autonomous business units, each headed by a general manager. He believed that thiswould eliminate what he considered to be the main obstacles of effective participatorymanagement: size, hierarchy, and insufficient flow of information. The business unit ap-proach, however, revived the fiefdoms and inter-unit competition that had inhibited growthin the days of Ricardo’s father.Finally in the mid-1980s, Semco manager João Vendramin convinced Semler to createa
lattice organization.
Under this program, self-managed groups of six to ten manufacturingemployees were placed in charge of all aspects of production. To promote a sense of trueownership of the process, the groups were charged with setting their own budgets andproduction goals. Tying salaries to monthly budget and production performance alignedemployee and organizational goals. With the implementation of the
lattice
, unit productioncosts fell dramatically while employee productivity soared.Employee adoption of Semler’s
lattice
organization was by no means easy. BetweenOctober 1985 and January 1987, one-third of Semco’s middle managers quit. They werenot accustomed to self-managed teams and perceived a sudden loss of power. Factory work-ers were reluctant to accept the increased responsibility and accountability. Both workersand managers were forced to dispense with deeply rooted cultural values concerning corpo-rate governance.
Profit Sharing
Semler also resorted to more traditional means of employee motivation, instituting a profit-sharing plan in which employees receive roughly one-quarter of the net profits of theirrespective divisions. Given Semco’s rapid growth, these distributions could easily double ortriple a worker’s salary. A distinguishing feature of Semco profit-sharing was the use of ademocratically selected committee to develop and implement the program, as well as dis-bursement of the profit-sharing funds. Although the funds were generally divided equallyamong all workers, there were times when the committee took it upon itself to distributethe bonus via housing loans to qualified workers.The democratic nature of the process drastically reduces employee complaints regard-ing the allocation of funds. It also exemplifies Semler’s trust in his employees’ abilities tomake decisions, as well as his firm belief in the democratic process.

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