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RICARDO SEMLER AND SEMCO S.A.

“It is not the strongest of the species that survive, or the most intelligent, but the one most
responsive to change.”

— Charles Darwin

Situation Analysis:
It was in São Paulo Brazil that Antonio Curt Semler founded Semler & Company in 1953.
Semler & Company soon became a market leader by the acquisition of contracts that
provided marine pumps to the military. Semler & Company started as a paternalistic,
pyramidal company structured with rules and autocratic leadership. Antonio Curt Semler
followed a completely different organizational philosophy compared to his son’s future
management style. When Ricardo Semler graduated from Harvard at the age of 20, he began
working in his father’s company. Ricardo Semler’s idea of a participatory management style,
as well as strict separation of work and personal life, faced conflict.
Things changed in the early 1980s when Ricardo Semler took over his father’s company.
Ricardo Semler was convinced that the future success of Semler & Company lied in the
diversification of products but nobody listened. Frustrated by this, Ricardo Semler threatened
to leave the company. At that moment Antonio Curt Semler retired, as CEO of Semler &
Company and it became a turning point for the company and its employees. Ricardo Semler
immediately put some drastic changes in order. He renamed the company Semco, modernized
the management practices and expanded the company’s range with a product diversification
strategy. That is when he came up with the idea of a ‘democracy in the workplace’, which is
based on employee participation, profit sharing and free-flow of information.
Furthermore, Semco formed the Nucleus of Technological Innovation (NTI) teams. The
stated aim of the group was to invent and reinvent new products, refine marketing strategies,
expose production inefficiencies, and dream up new lines of business. It quickly became a
fast-moving and successful model for change at Semco. In 1990, Semler decided to
encourage the creation of more satellites like NTI throughout the organization.
The company culture of Semco promotes employees to be self-sufficient and independent of
supervision and management. Throughout this reconstruction period of Semco, corporate
staff was reduced by 75%. To generate real involvement from workers, each of them has a
vote that can be used for important decisions. In order to motivate employees, Semco
implemented a generous profit sharing program. It fits the company culture perfectly –
empower employees and let them make their own decisions- and proves the company is truly
committed to its workforce. The company believes that in order for employees to feel
involved, they have to dispose of all financial data. Finally, the great availability of
information has two main purposes. First, it enables all parties to make well informed and
thus good decisions. Second, it reinforces the nature of the decision-making process.

Semco’s potential:
This case presents us with various leadership models exercised at Semco. Under the
leadership of Ricardo, the company witnessed a rapid successful transformation from the
rigid management structure and autocratic leadership style to a more participatory decision
making form of the leadership which helped the organization build a strong behavioural
foundation to grow on.
Ricardo believed that all people desire to achieve excellence. His belief is in line with many
motivational theories which state that human beings have higher order needs of achievement.
He further encouraged the employees to work in autonomous work groups. He allowed
freedom to choose Jobs titles, choice of work and collective decision on the leader. These
groups took decisions that were earlier taken by the managers and the group members
were held accountable for the actions of the group. The managers now played the job of
facilitating the self-managed teams of workers and provided them with tools to make
informed decisions. He adjusted his behaviour as per the maturity and ability of workers to
take decisions by taking the situational leadership roles. He was close to an ideal case of a
team manager who has great concern for both people and production. He kind of leader who
works to motivate employees to reach their highest level of accomplishment, is flexible,
responsive to change, and understands the need for the change. This reflected in Semco as
empowered workers started multitasking in the workplace and cost reduction. Semco there is
no department, no rules and no audit that can govern how much a person can spend. Trusting
and giving responsibility to its employees is the way Semco found to build credibility among
its employees. Consequently, workers exercise more control over their jobs and assume more
voice in the company’s policy. By the introduction of transparency and accountability in the
organization, Ricardo was able to revolutionize the leadership style followed at Semco.

Results:

Sales grew from $35 million in 1990 to $100 million in 1996. Inventories fell 65%. Product
delivery time decreased substantially. Quality improved. Product defects declined to less than
1% of total production. Corporate staff reduced by 75%. Today two-thirds of new products
and two-thirds of employees come from satellite companies.

Conclusion:

What has kept Semco stable and growing is the organizational structure it follows. Its adoption
of a more democratic, participatory management style over autocratic style has made the
organization flexible which ultimately led Semco to defy all odds. As soon as Ricardo Semler
came at the helm of the organization he restructured the management. He felt that autocracy
thwarted people’s motivation and should be changed to a more inclusive management style.
He also believed that authority should be evenly distributed. All the changes which happened
in Semco took the company to new heights. The autonomy enjoyed by the employees, the free
flow of information, the freedom to choose one’s salary all helped Semco to grow. So Semco
should continue to follow this style of management and with time it should also evolve
accordingly. During future transitions, the company should maintain a highly empowered and
engaged workforce and if possible should invent new management styles. Semco has a huge
potential to grow given its organizational structure. The autonomy which its workforce enjoys
has helped the organization to grow manifold.

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