Case Study: Ricardo Semler

Managing leadership helps the management to enhance the soft skill of each individual in the

company, since employees are one of the key assets which enable the firm to attain

organizational goals as well as facilitate it on the path to growth and success. Thus, according to

Stone (2007) managers who are able to develop the necessary skills in the employees through

effective coaching and mentoring are highly valued by an organization. Ricardo Semler is the

CEO and the owner of SEMCO SA, a Brazilian Company. He is best known for his convictions

on industrial democracy and radical management style which is a hands-off leadership which

according to Avolio (1990) is a type of leadership which avoiding any intervention.

Advantages and Disadvantages of Hands-Off Leadership

The Hands-Off leadership is taken from Laisses-Faire Leadership which is popularized by

Lewin, Lipit, and White in 1938. It is also known as hands-off, since the leader provides little or

no direction to the followers (Lewin, Lippit & White, 1939). As this type of leadership believe

in freedom of choice for his team, the team has complete freedom to carry out tasks and projects

even allow them to take decisions. Similar to having two sides of coins, this type of leadership

possessed both benefits and drawbacks.

The benefits

When autonomy is granted by the employees, they are free to make any decisions

affecting themselves to set their own targets and assignments, and arrange the exact person to be

in charge for each task. Leaders using this type of leadership allows their subordinate to have

complete freedom to make decisions concerning the completion of their work including the risks

that might appear. Besides, leaders will have guided freedom in which they provide their
subordinates with all materials which are necessary to achieve their goals. However, they will

not interfere the process of decision making directly, unless the subordinates request their

assistance. By having this type of freedom, the subordinates will earn a higher sense of

responsibility not only for themselves, but also among the team members and the leaders. As a

result, the subordinates will be able to gain more experience and grow faster. According to

Wadhwa (2012), leaders who provide minimal intervention are believed to be able to trigger the

maximum effort to push the limit of their subordinates by encouraging greater innovation and

out-of-the-box initiatives.

The Drawbacks

Even though this hands-off type of leadership is probably the best style of leadership for

some people, it can become a blunder if the leader cannot read the situation where they have to

distinguish when they should follow the standard practice of non-interference and when they

supposedly lead their subordinates. In addition to that, this type of leadership is inapplicable if

the subordinates do not possess any adequate experience or required skills. It will create a greater

risks particularly in achieving the target of a project. Since this type of leadership lets the

subordinates to make their own decisions, sometimes, any important decisions that need to be

taken at short notice can go wrong. Moreover, when the leaders have to deal with not self-driven

and undisciplined subordinates, it will be a time consuming in finishing the jobs as they mostly

cannot set their own priority on which matters should be done first. Wadhwa also believed that

the impacts of hands-off leadership is dominated by negative values in which the subordinates

become apathetic, lack of interest, and resentful of the organization and their leader. (Rakesh

Wadhwa, 2012).
 How Ricardo Semler influenced his team to achieve organizational goals

It is undeniably true that one of the factors influencing the success of the whole business

performance depends on the human resources, as they become the playmaker for a business to

run on its track as well as control the working process and develop the business system.

Precisely, the existence of a leader is needed in order to ensure that everything works as it is

expected, including reaching the goals. The most problematic issue happened in human resource

sector nowadays relies on the employees’ motivation for work. Initially, it is necessary to define

the key success of the company which can affect on the employees’ satisfaction, since

encouraging the human resources to willingly share their knowledge and experience with the

other will lead to both better performance of each individual and also time efficiency in

achieving the goal (Yeh, Ali in Ho, 2006).

Many consider Ricardo Semler, CEO of SEMCO Group from Sao Paulo, Brazil, to be a

radical leader, and he is not the type of leader that many people would expect to be responsible

for a multimillion-dollar business, because he basically breaks all the rules or traditional ways of

leading. He is the best "Hands-off" leader, he does not even have any office space at the

company's headquarters, his philosophy is simple: "Treat people like adults, and they will

respond like adults." Semler does not use this radical method of self-government with a hidden

altruistic intent. However, he feels it is the only way to build an organization that is flexible and

resilient enough to flourish in this chaotic and turbulent era. This approach has enabled SEMCO

to withstand on the uncertainty of the political and economic situation in Brazil, not only

surviving but even making greater profit. The growth at SEMCO has been enormous as well as

observable in the way it has a business outcomes undergoing against the trend of a business

through his leadership. This improvement is also one result of high motivation and trust the
employees gain from Semler. Kreiter and Kinicki (2010) believed that one of the key points

directing people to particular goals can be caused by the arousing process of psychological

concept, which is motivation. From the application of his leadership theory, Semler noticed that

the more freedom and trust he gave his employees, the more loyalty and trust he received

resulting on SEMCO becoming more efficient, profitable and success in achieving the goals

(Semler, 2007).

By looking for leaders who do not overly curb their employees and provide freedom in

making choices when working, this sets future leaders to be able to continue the success of

Semler in SEMCO. Semler's leadership is not an irresponsible leadership, but leadership that

gives full confidence to its employees. At SEMCO, CEOs and employees alike need leadership

training because both CEOs and employees alike have a big part in making decisions at the

company. From the management approach, Semler believes that the organization develops well

by entrusting employees to apply creativity and ingenuity in serving the entire company, and to

make important decisions related to workflow, even including the selection and selection of

bosses, an d this approach works (Semler, 2007).

How The Work Practices at SEMCO are geared towards efficiency and effectiveness

Historically, in 2003, SEMCO had several product lines in manufacturing, namely

production of industrial mixers, manufacturing of cooling towers for commercial estates,

property management services, inventory management, environmental consulting, and e-

businesses. In 2007, SEMCO also added product lines in services such as hotels, hospitals and

airports. SEMCO is a company that does not have a vision, mission or working rules. SEMCO

also does not have an official organizational structure and almost all company activities depend
on employee enthusiasm and creativity. Each division has the autonomy to allocate their

respective funds, where each division forms a work team consisting of 10-12 people. Each of

them is given their own responsibilities and freedoms to manage work, strategy and decision

making. Each month each division must estimate the number of employees needed for the next 6

months. In making the decision to expand the company, SEMCO always involves employees to

determine whether to buy a new company or not. If a new business proposition submitted by the

team has been approved, then the team has an obligation to run the business and is allowed to

maintain a predetermined percentage of profit, even sometimes reaching 50% of the previous

profit. As a result, SEMCO can grow from a marine manufacturing company and a small

industry to an alliance of 16 companies, which also consist of 10 online businesses. Employees

are able to join all company meetings they want and also to participate in hiring new staff as well

as open new business (Semler, 2007). In addition to that, Semler embraces the sharing

information regarding to salary and financial information in his organization which also means

of sharing power. Employees are encouraged to grow and trust each other. Moreover, he strives

for high motivation among his employees by distributing a portion of SEMCO’S net income to

each individual and by treating them equally (Semler, 2004).

At SEMCO, as the employees are permitted to be fully autonomous as they can control

and arrange both their work and life balance, they are able to customize their own schedule,

whether they would like to work from home or in the office. The point is one, they have a

complete responsibility to work on their interest with a one aim, achieving the project goal

within a target. Maresco and York (2005) claimed that workers at SEMCO set their own

production quotas, they can decide among themselves the best time to come to work, redesigning

products they make, their work environments, and even arrange their own marketing plans.
Having such policy eventually makes the employees to gain both trust and motivation, as they

are believed to set everything by themselves. Consequently, they work efficiently to achieve the

target set before. Semler also explained that employees will have poor performance when they

feel controlled, because 30% of their productive time is spent solely dealing with small issues

such as dealing with employees who arrive late, so employees lose initiative (Semler, 2004).

SEMCO believes that pleasure can increase employee productivity and believe that the success

of each employee is different depending on the time, place, and how they achieve it.

Learning from Ricardo Semler’s approach to leadership

There are some ideas that can be applied and learned from Ricardo Semler's leadership

style at SEMCO. The first thing is on how to balance between organizational goals and

individual goals, I am sure that when employees feel challenged, excited and productive, their

efforts will naturally pour into profit and growth for the organization where they work.

Democracy at Work "and" Balance of Privacy and Profession "are keywords that can be

formulated to achieve mutual prosperity (Semler, 2004).

Another lesson that can be learnt from the hands-off leadership is how leadership can be

defined as a catalyst, idea formation and selection of the right people. Semler puts leadership on

three pillars, namely freedom, respect and trust (Semler, 2004). Democracy requires freedom,

freedom demands acceptance of differences and differences cannot occur without respect. Most

organizational paradigms today equate companies as the army and use military paradigms such

as the Sun Tzu strategy, but Semler argues that organizing a company is likely to be arranging a

symphony orchestra in which individuals have the initiative, discipline and love for art together.

I believe that advancing the organization should be done with confidence in the values that exist
in individual employees who are integral to the organization. For this reason one other lesson

that can be used in order to increase the company’s performance, and achieve the goal on time is

to stop controlling. Stopping control will create values because values grow in organizations like

moss that grows on rocks. Stopping control means letting employees organize themselves,

trusting workers implicitly, sharing power and information, encouraging debate and practicing

true democracy.

Semler also teaches two major things in leading an organization; leadership and self-

management. The human aspect of management is expressed here in the statement "Let the

followers lead". Semler in his book tells some experiences of self-management which I can

conclude that self-management functions more effectively by letting people escape from policies,

procedures and regulations. On the other hand, Semco makes them accountable only to

themselves. The result of this self-management is that extra productivity comes not from orders

and coercion but flows unconsciously.

In conclusion, Semler understands that despite the fact that this type of leadership might

have advantages and disadvantages, motivating and trusting the employees are the key in order

to achieve the goals both efficiently and effectively.

 Reference Lists

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 Lewin, K., Lippit, R., & White, R.K. (1939). “Patterns of aggressive behavior in

experimentally created social climates,” Journal of Social Psychology, 10, pp.

271-301

 Maresco, P A & York, C C. (2005). Ricardo Semler: Creating organizational Change

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 Rakesh Wadhwa. (2012). Laissez Faire. Retrieved from

http://wadhwarakesh.com/tag/laissez-faire/

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http://wadhwarakesh.com/laissez-faire-leadership-an-oxymoron/

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