Semco Now Founding Implementing Change Strategy & Organizational Structure Semler Was Not Alone Conclusion
30% of employees choose their own salaries 7 day weekend No job titles All employees share company profit All employees have access to financial statements and balance sheets & are given classes to understand them
24% annual sales growth since 1980 3000 employees Employee turn around rate of less than 1%(Industry average just under 20%) Employee turn around rate of less than 1%(Industry average just under 20%) Title of CEO is rotated every 6 months between 6 executives Managers chosen by vote
Founded in 1912 by Antonio Semler Hierarchical & patriarchic structure Known for manufacturing marine pumps 90% of sales went to Brazilian shipbuilding industry
Employee Participation Information Transparency Profit Sharing
“Idid try to reconstruct the company so that Semco could govern itself on the basis of three values: employee participation, profit sharing, and open information systems.” “Participation gives people control of their work, profit sharing gives them a reason to do it better, information tells them what’s working and what isn’t” (HBR, p.4).
“The key to management is to get rid of themanagers.The key to getting work done on time is to stopwearing a watch.The best way to invest corporate profits is togive them to the employees.The purpose of work is not to make money. Thepurpose of work is to make the workers,whether working stiffs or top executives, feelgood about life.” Ricardo Semler
Initial goals • Abolish the existing hierarchical and patriarchic structure • Diversify Semco’s line of products One of the first things Ricardo Semler did was fire 2/3 of executives and got rid of all but three layers of management.
PYRAMID SYSTEM VS 3-CONCENTRIC CIRCLES-MODEL
Recession in 1980 In 1985 a manager suggested putting together self-managing teams of 6-8 workers – cut management costs. Semler introduces profit sharing President Collor introduced new regulation that limited access to liquid assets Second major recession in Brazil
Onlyoption left was layoffs Two year severance pay Worker’s committee approached Semler Would take pay cut if; • Increase in profit-sharing percentage • Management take 40% pay cut • Workers must approve every expenditure
Semco’s transformation from an autocracy to an entrepreneurial democracy took fifteen eventful years. In the words of Semler, the change proves “that worker involvement doesn’t mean that bosses lose power;” it merely strips away “the blind irrational authoritarianism that diminishes productivity.”
“Not long ago, the wife of one of our workerscame to see a member of our human resourcesstaff. She was puzzled about her husband’sbehavior. He no longer yelled at the kids, shesaid, and asked everyone what they wanted todo on the weekends. He wasn’t his usualgrumpy, autocratic self. The woman wasworried. What, she wondered, were we doing toher husband? We realized that as Semco hadchanged for the better, he had too.”