INTRODUCTION

• Semco SA (Brazilian company)

• Manufactures over two thousand different
products (industrial pumps, cooling towers
etc)
• Also provides environmental and internet
services.
• Between 1982-1998 its productivity
increased nearly sevenfold and profits rose
fivefold.($32- $212 million)
 THE CULTURE

• No Power-packed job titles

• Employees including Top level managers themselves did all the
work.(photocopying, faxes, letter typing, like parking was strictly first
come first serve basis)
• No idea about what business Semco is in.
• No organizational structure/chart; no fixed CEO; no VP’s, no CFO’s,
COO’s or CIO’s.
• No long term strategic business plans, no career plans, no job
descriptions or dress code for the employees.
 BACKGROUND NOTE

• Semler’s father, Antionio Curt Semler. (Austrian- born engineer)

• Migerated to argentina in 1937.
• Visited brazil 1952 (while he was working on a centrifuge technology
capable of separating oil from vegetables.
• Started contraction of Semler & co in 1953.( obtained patent for his
technology)
• 1960-1970s, it was mainly manufacturer of marine pumps. (90% of the
sales were to Brazilian shipbuilding industries)
• According to Semler it was a company “with a pyramidal structure and a
rule for every contingency.”
 SEMLER ENTRANCE

• In 1980 Semler took the CEO’s

position(21 years old)
• With the different opinion he wanted to
do some changes(fired two thirds of the
top management.)
• Later on said to make a redical shift in
the direction and capabilities of the
company this was the only solution.
Organization Structure
I don’t want to know where Semco is headed. It doesn’t unnerve me to see nothing on the company’s horizon.
I want Semco and its employees to ramble through their days, to use instinct, opportunity, and ingenuity to
choose projects and ventures.
- Ricardo Semler, Semco.
 Organization Structure

• Semler started out with a functional organizational structure at

Semco.
• Under this structure, decision-making took a long time and each
department took independent decisions that sometimes were not in
the interests of other departments.
• Then, the company shifted to a matrix structure. But, unhappy with
its effectiveness, Semler changed the structure of the organization
once again.
 Organization Structure

• The company was divided into autonomous business units, each headed
by a GM.

• According to Semler this would result participatory management.

• After this Semco adopt a kind of lattice structure.

• Also established factory committees in the various business units.

PARTICIPATORY MANAGEMENT

FUNCTIONAL
STRUCTURE Counsellors

Partners

Associates
MATRIX STRUCTURE & Co-
ordinates

LATTICE STRUCTURE
Results :

• The factory committees created an

environment of trust and cooperation,
and employees started taking a number
of work related initiatives.
• These radical changes made the middle
managers feel threatened, as they felt
like they no longer held positions of
power & authority.
Results :

• The empowered workers started multi-tasking for work place

improvement and cost reduction.
• Employees divided themselves into three units of 150 people each,
with independent responsibilities in the area of finance, sales and
manufacturing.
• This practice was reinforced by the development of (NTI).
• The group had the freedom to select the area of work and set their
own work practices.
Results :

• The salary compensation went down but employees were given share in
revenue they generated through operational cost savings and earned
through the development of new products.

• At the end of six months, when the first review occurred, the group had 18
projects to work on.

• Around two-third of Semco’s revenue came from such units.

Organizational Culture
 Organizational Culture

• Replication of Business units into Smaller units

- Common set of values, philosophy and culture
- Core values: Employee Participation, Profit sharing, Free Flow of Information
• Pay & Performance
- Costs reduced while production and profits went up
- To Workers: 1/4th of divisional profit
- Governance: Elected committee for design and allocation of funds
 Organizational Culture

• Participatory Culture
- Early 1990’s : Cost reduction remained the main objective, Layoffs exception.
- Pay-Cut Proposal: Landmark in development of the culture at Semco
• Reward System
- Option to choose one 1 of 9 (Exexcutive-11)
- Encouraged to innovate & take risk
- Organizational support
- Decisive & quick decision making
 Organizational Culture

• Freedom
- Free to choose job-titles
- Choice of work
- Collective decision on leader
• Career Development
- ‘Lost in Space’
- No specific responsibilities or JD for the first 12 months
- Try their hand at various jobs
- Continuous career & skill development
Voucher System:

• Mutual Benefit

• A Free Floating Organization

• Transparency
Control Mechanisms:

• Freedom & Accountability

• Budgeting & Planning

• Effective Utilization of Resources

Inquisitiveness &
Innovation:

• “ I have no particular talent. I am merely inquisitive.” –

Albert Einstein

• Semco due to inquisitiveness, focussed on:

• Profit & Growth
• Profitability & Happy Customers
• Innovation
• Eliminating Massive Layofffs
3 Step Test:

• High Level of Complexity

• High End Product or Service

• The Idea should aim at making Semco a Major Player in that

industry.
LEADERSHIP
 Leadership

• Taking away Power and Authority.

• Employees innovate continuously.
• Clean out sessions
• Semco was transformed to a
culture based on democracy and
shared leadership.
• Change management process.
 Leadership

• Small changes make a big

difference.
• A new leadership network.
• A bonfire of bureaucracies.
• Appraise your boss.
• Rounding the pyramid.
 Contingency Theory

• Contingency theory explains that group performance is a result of

interaction between two factors such as leadership styles and situation
favourableness. In Fiedler's model of contingency theory leadership
effectiveness is the result of interaction between the leadership style and
character of environment where the leader works.
• It shows how the organization firmly adapts themselves in the
environment.
• Shows the importance of decision acceptance and quality.
• The leaders ability to lead is contingent upon various situational factors
which includes the leader's explicit working style, the capabilities and
behaviour's of follower's and also the various situational factors
 Transformational Leadership
• Most of the leadership theories presented have been about transactional
leaders. These kinds of leaders guide or motivate their followers in the
direction of established goals by clarifying role and task requirements.
• There exists a kind of understanding between the leader and the follower
that if the goal is achieved the follower’s own interests and desires will be
rewarded.
• But there is another type of leader who inspires followers to transcend their
own self-interests for the good of the organisation, and who are capable of
having a profound and extraordinary effect on their followers.
• These are transformational leaders like Ricardo Semler. They also pay
attention to the concerns and developmental needs of individual followers,
they change followers’ awareness of issues by helping them to look at old
problems in new ways.
 MAKING NEWS

• The Semco way of running an organisation is slow but steadily accepted as a very
effecive way of running a business.

• Semco believes in treating people as adults has created a benchmark.

• The BBC series ‘Re-engineering the business’ selected Semco five most successful
management structure across the globe.

• CIO magazine selected Semco among the most successful re-engineered company in
the world.
 MAKING NEWS

• Semco has been profiled into more than 200 magazine across the globe.

• Semler played a very major role in the way Semco became no. 1 choice for
his stakeholders.

• Charles Handy said

“The way that Semler runs his organization is impossible; except that it
works, and works splendidly for everyone.”