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Ricardo Semler: The undeniable link between self-management and openness

Harvard laureate Ricardo Semler is universally celebrated for his highly innovative approach in revitalizing his company Semco in the 80s. Once a rusty, ailing bureaucracy, Semco has evolved into a dynamic participation-driven organization that just won’t stop growing. Semco is also highly profitable and by far the most admired employer in Brazil. No more than 2% of its employees leave the company every year. In this blog I explore the role of communication in Semler’s successful leadership style.

Shortly after taking over his father’s business in the 1980s it struck Ricardo Semler that the traditional way of running a business, based on hierarchy and rules, was bringing the company nowhere. Convinced that people will only thrive when they experience sufficient freedom to do their work in the way they seem fit, he started to radically turn things around at Semco.

How is Semco different?

What follows next might to some readers sound vaguely reminiscent of long-forgotten Marxist-Leninist (or maybe Trotskyist) ideas about worker self-organization. This is merely a coincidence. Semler is not a communist – au contraire – and Brazil is no Cuba.

Semco has reduced the number of management layers from 12 to 3. Corporate staff has been reduced by 75%. The hierarchical pyramid organization structure has been completely discarded (explaining what they replaced it with – fluid concentric circles – is beyond me). Whenever a business unit grows bigger than 150 co-workers it is split up. Production workers are organized in highly autonomous manufacturing cells. There are no managers in charge of these cells, there are only coordinators to streamline upward and downward communication flows. No memo’s are allowed of more than a single page, starting with a newspaper headline that comes right to the point. No exceptions.

Co-workers have a say in who is hired or promoted and get to vote on important business decisions. Using one’s hierarchical status to enforce business decisions is not tolerated. Coordinators are evaluated by team members twice a year and the grades are posted for all to see. Everybody is encouraged to take 30 days of vacation per year and to take regular sabbaticals. There is more but these examples cover the essence of Semlerism pretty well.

The price of freedom

All this freedom comes with a price though: the responsibility for getting your work done, to treat others respectfully and to collaborate well. Also at Semco there is no such thing as life-time employment. On the other hand, the company invests handsomely in the employability of its people, and always encourages them to hunt new opportunities within or outside Semco.

Is it working?

Yes, Semco’s revenue grew impressively from $ 4 mln in 1982 to $ 212 mln in 2003 and has continued to grow ever since. The company is also highly profitable. And people love working at Semco. No more than 2% of employees leave the company every year, compared to more than 20% at most other companies.

How Semco harnesses the real drivers of human motivation

Semler’s approach is clearly based on the notion – one that is backed by recent research – that employees tend to be more strongly motivated when experiencing autonomy, mastery and purpose (see Daniel H. Pink) rather than the traditional carrot-and-stick approach.

Instead of being worn out by Henry Ford-style, mind-numbing assembly lines, teams of workers assemble complete products, not just an isolated component. This gives workers a strong sense of purpose, autonomy and responsibility. Nearly all factory workers also learn to master several production jobs, including setting production quotas and developing product improvements. In fact, all of the examples of the Semco-style mentioned above seem to have been carefully designed to maximize workers’ sense of autonomy, mastery and purpose.

Semco-style employee communication

Semco places its workers in the driver seat and expects a lot in return. Obviously, such a people-centered vision needs the support of equally non-traditional, non-hierarchical communication. After all, there would be very little point in having that fresh sense of autonomy crushed prematurely by those old-school, top-down communication ukases from the corporate communication department.

This is where open communication comes in. Open communication implies substituting multi-directional corporate conversation – in short: dialogue – for top-down corporate communication. Rather than following the formal organization chart (which has ceased to be at Semco after all) communication flows in all directions, upward and lateral as well as downward. But dialogue does not just emerge by itself. Real, authentic dialogue needs a healthy communication climate to take root, in other words: a safe and trusted environment which fosters participation and teamwork.

A climate of openness & trust

Obviously, everything about Semco relates to giving and receiving trust. No bosses, no central ukases, no internal audits, no checking of bags and working hours and so on. Semco is also completely transparant about things like salary surveys, strategy, productivity statistics, profit margins and the scores of the so-called reverse (coordinator) evaluations. They are just there for everyone to check.

A climate of participation

„Semco’s philosophy is built on participation and involvement”, says Semler. Co-workers have a say in just about everything, including who is hired or promoted. Strategy is debated openly and workers even get to vote on the acquisition of other companies. Symbolic of this culture is the custom that in Board meetings two seats are always kept open for the first employees that sign up. Two more seats are available for any person in a leadership role “who cares to show up” in Ricardo Semler’s words.

A climate of supportiveness

Interestingly, there is little mention in Semler’s narrative of anything that relates to supportiveness or collaboration. Supportiveness describes the degree in which employees’ mindets are geared towards teamwork and supporting each other. Supportiveness is regarded as an important pillar of a healthy communication climate. This absence might partly be a matter of priority. Semler’s focus was clearly on giving workers breathing space by cleaning up the restrictive organizational structures. And it might partly be a matter of reading between the lines. Cornerstones of the Semco culture – such as servant leadership and job rotation – implicitly point towards supportiveness.

Why are not all companies run Semco-style?

Semco is wildly successful and adored by its employees. So why have so few companies followed in Ricardo Semler’s footsteps? Is it a lack of belief, lack of urgency, lack of opportunity or something else? How could your organization benefit from Semco-style?


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