History of SEMCO – Business Management Essay

History of SEMCO – Business Management Essay
Maverick’s story refers to a series of changes occurred to SEMCO, a Brazilian manufacturing company, initiated by the founder’s entrepreneur son, Ricardo Semler, turning it into one of the worlds most unusual and admired workplaces. SEMCO, whose headquarters is located in São Paulo, started in 1952 by Ricardo’s father, Antonio Semler, with a small patent for a centrifuge

that could separate lubricating oil from vegetables, later growing under the entrepreneur’s hands into one of that countries most successful companies.

Ricardo Semler’s concise and efficient form of writing lay way to a textbook that reads like a novel and yet manages to render the vision under which his company should be run, a company who has proven itself a definitive success in business and economics. Certainly Maverick is a book for more opened-mined readers, an unquestioningly beneficial and stimulating novel, and a necessary narrative.

Semler’s vision was one which was not laid out to him from the very beginning it was drawn from not only his own ideas but from those of his close companions as well, he credits many of the people who work for Semler: Clovis, João Vendramin, Harro, Ernesto, José Fiasco, etc. A vision that spread from giving his workers the confidence of eliminating supervisors and the desire to make them feel more involve in the process of production to eliminating nine layers of management and letting them set their own pay.

A strong principal by which Semler has been guided is the trust in his employees. His view of them is not one of mindless slaves who are paid to do as they are told, but one of understanding individuals who are responsible for the cooperative effort of making a product.

In the book we can see that SEMCO does not use a formal organization chart. They believe that without them they can create great leaders. If it is absolutely necessary to sketch the structure of some part of the company, they always do it on pencil, and dispense with it as soon as possible.

The way SEMCO acquires new employees differs with other companies’ standards. When some one is hired or promoted, the other employees of that unit and his subordinates have the opportunity to interview and evaluate the candidates before any decision is made. This makes SEMCO a more united company because every person knows the capacities and abilities of his or her comrade.

The working environment there is very flexible, because at SEMCO they want their people to feel free to change and adapt their working area as they please. Painting walls or machines, adding plants or decoration the space around them is up to them. The company has no rules about this, and does not intend to have any. People change their area according to their tastes and preferences according with other people desires.

SEMCO has a philosophy built on participation and involvement. Any worker can give his or her opinion. It is not desired to have workers who are just one more person at the company they should be participants. An opinion is always welcome, even if it just an interesting observation. Workers should get in touch with committees, and participate in elections.

Another interesting point is the evaluation of your boss. This assessment is made twice a year by means of a questionnaire to be filled out enabling the employees to express what they think about their boss. Worker should be frank and honest, not just on the form but also in the discussion that follows.

Employees at SEMCO are guaranteed representation through the Factory Committee of each business unit. Each SEMCO unit groups of workers elect representatives to serve on committees. These committees meet regularly with the top managers at each unit to discuss any and all workplace issues or policies. They are empowered to call strikes, audit the books, and question all aspects of management. At SEMCO workers are motivated to defend their interests even though these will not usually coincide with those of the company. These conflicts are to be seen as healthy and necessary.

At SEMCO they offer job security which is than any worker that has been with them for three years, or has reached the age of fifty, has special protection and can only be dismissed after a long series of approvals. This does not mean SEMCO has no layoff policy, but it helps to increase the security of their people.

Women in Brazil have fewer job opportunities, promotion, and financial opportunities than men. At SEMCO, they have various programs, run by them, that seek to reduce this discrimination. They are known as “The SEMCO Women”. They inspire women to participate.

Every one at SEMCO should take thirty days of vacation every year. It is vital for their health and the company’s welfare. No excuse is good enough for accumulating vacation days for “later”. Ricardo Semler has named this hepatitis leave.

In his book he states his desire to make them feel more involved in the creation process. He uses a parable comparing three stonecutters and their response when asked what was their job. “The first said he was paid to cut stones. The second replied that he used special techniques to shape stones in an exceptional way, and proceeded to demonstrate his skills. The third stonecutter just smiled and said: ‘I build cathedrals.’” He understands the benefits for a company to have its people dedicated in what they build.

He gives his workers as much freedom as possible, giving them voice in short of every decision the company deals with, from how the plants should look and where each section should be positioned to where the plants themselves should be located, what uniforms they would like to wear and making a lunch committee to choose the food available at the cafeteria to letting them set their own working hours and schedules as well as their pay.

Not only is freedom offered, but also power. Ricardo Semler’s company is not a dictatorship, it is a cooperative democracy where titles are forgotten and unions are welcome with mutual respect and dialog, where committees recommend changes and surveys are made regularly, a place where it is possible for the employees to dismiss their boss or force their hire.

SEMCO’s managerial staff was reduced almost completely. In his view: “The pyramid, the chief organizational principle of the modern corporation, turns a business into a traffic jam.” That is why chapter 24 refers to “rounding the pyramid”, which is simply the elimination of unnecessary management positions as well as the need for sophisticated titles. He implemented a system of circles: in which the innermost circle would enclose a team of half a dozen people, who will serve as a catalyst stimulating decisions and actions by those in the second circle, to be called Counselors. The second circle would enclose the leaders of SEMCO’s business units and be called Partners. The last, immense circle would be comprised of everyone else and be called Associates. With triangles scattered about enclosing a single individual to be called Coordinators, who are the first crucial level of management. There would be six to twelve triangles floating about each business unit. As a consequence wages evened out and titles were simplified.

An important thing to remember is that all these things did not occur spontaneously, but more of a continuous flow of events, which started off a first-come first-serve parking policy.

Another point that is emphasized in SEMCO is maintaining its people motivated. They are pushed to exchange job descriptions and positions with job rotation, for a minimum of two years and a maximum of five. New employees are required to be “Lost in Space”, they must work for at least twelve departments in twelve months. He believes this helps maintain his people happy, allowing them to choose the right job for them, or simply let them work for the ones they like, not just a single occupation, obliging people to learn new skills, discouraging empire building, providing employees with a broader view of a company, which lets them appreciate colleagues problems, forcing management to prepare more than one person for a job and creating additional opportunities for those who might otherwise be trapped.

He also created the “Nucleus of technological innovation”, which are a small group of engineers who are free of day to day production or managerial responsibilities and have all their time to invent new products, refine old ones, devise market strategies, unearth cost reductions and efficiencies, even dream up new lines of businesses.

Not mentioned above are the setbacks the company has faced. It is said more is learned form mistakes then from a success. SEMCO experienced growing pains, unnecessary hype

So far as to what is considered to be different from other companies it is safe to say that almost every detail in his book is quire of the normal corporation. In fact his book is dedicated specifically to point out each one of these differences, why he believes them to be proper and how he implemented them. In general his view is one of democratic society where decision taking is not the role of one, but of many. He believes the only way to achieve this is with transparency, and a sense of equality where everyone is fighting for a greater good, the good of the company.

For this he believes his employees’ well being must reflect the well being of the company, if the company simply assigns wages no mater what goes wrong then people will not feel impelled to make things go right. His ideas of risk salary, where employees are proposed to take a pay cut of up to 25% of their wages for the chance to receive a 150% bonus if the company has a good year, and profit sharing, where company profits are not unilaterally distributed, but instead more is given to those who make less, provide this incentive.

Several other policies are promoted to ensure democracy at SEMCO. When strikes take place it is emphasized that everyone is an adult and should be treated as such, strikers are told that no one will be punished when they return to work, the police is never called upon, benefits are maintained, worker’s access to the factory, or access of the union representatives to the workers, don’t fire anyone during or after the strike, but make everyone see that a walkout is an act of aggression. This in our opinion protects their employees (which are the company’s greatest asset), the company itself and their politics. Their treatment towards union leaders is quite different as well. They are respected, union leaders are not kept waiting in line, they are attended with courtesy and equality as promptly as possible.

No aspect other than Brazil’s economic conditions make SEMCO’s situation as a corporation distinctively separates the company so as to have an unequivocal and unique situation. Nevertheless this in itself is quite a big difference from companies in other countries, especially the United States. In Brazil there is an average of a 400% yearly inflation rate, with a peak year of 1,600%, Brazils currency has had three zeroes knocked off twice. Banks have made billions with the inflations, and fired 150,000 clerical workers when things go bad. Brazil has become a warfare ground were a 10% pay increase turns out to be a fluke when inflation is calculated at 15%, and everyone is trying to arrange contracts to their own benefit. Most other companies in Brazil abide by the traditional form of organization and because of this are plagued with strikes, low profit or even debt. Brazil has grown so fond of SEMCO that 25% of all graduates say that they would love to work for SEMCO.

SEMCO was conceived under the chaotic, corrupted, inflation filled, strike infested society of Brazil, where a company must be as dynamic as possible to be able to adapt to the ever-changing hostile environment. A situation where all the techniques, described in Maverick, are constantly put under the test to prove themselves useful. Ricardo Semler’s ideas, if implemented correctly, are all catalysts for solidarity, cooperation, and friendship among the ranks of his workers. These attitudes are of great help in times of need where everyone instead of fighting each other, attempting to place the blame of hardship elsewhere in order to liberate the conscience and assure the position in the company are trying to find ways to levy the companies burden by voluntarily taking pay cuts and reducing expenses so as few people as possible will be acquitted by adversity, and if dismissal is the last surrender committees are formed to take into account who are the ones who can cope best without their paychecks; seniority and the costs of living all outweigh a newly employed single individual.

Not withstanding, SEMCO has been through several setbacks; since the very beginning with Ricardo’s first aggressive leap into the market SEMCO was suffering from crushing losses when buyers became very hard to come by, then later on as well as the company experienced what the author called growing pains as the company grew beyond its capacity by buying too many companies which were in bleak economic conditions.

The writer later goes on to explain his opinions on a very important topic, economies of scale. It is the authors opinion that economies of scale are overrated, that worrying about buying and producing in large scales eventually ends up consuming what was saved through the need for warehouses and overstocked inventories where there are hundreds of units for a specific piece but none for another which will freeze the production process entirely, apart from the fact that once this occurs, receiving a shipment of that piece takes a considerable amount of time when anyone from the factory can just run to the nearest shop and by several unit with which to work with in the mean time, it is SEMCO’s policy to encourage this behavior as SEMCO employees have been known to present such receipts and the company gladly pays for them, just as long as what was bought falls between a rational set of items.

Another trail and error mistake came in the eighties, when mainframe computers at the core of businesses were a new and coming trend. SEMCO had decided it too would enter the information age. So in preparation for a new computerized system to handle all of the company’s affairs the old hand written system had been left, and yet after several months past the deadline had gone by and the problem was either bug in the software or a glitch in the hardware it became clear that the project, as ambitious as it was, was destined to fail. Again SEMCO learned to take it slow.

‘The era of using people as production tools is coming to an end. Participation is infinitely more complex to practice than conventional corporate unilateralism, just as democracy is much more cumbersome than dictatorship. But there will be few companies that can afford to ignore either of them.’

Certainly Brazil’s situation as a country was a very crucial first step, if thing were to have been going well when Ricardo first entered the corporation then he would never have been so aggressive in implementing these radical changes.

Another condition must be Ricardo’s personality, his qualities as a human being, his humility, always with an open ear to a new suggestion, his openness and forwardness. Ricardo Semler is a revolutionary individual, who had the balls to dismiss 75% of a stagnant company’s managerial staff immediately after receiving possession of it, risking everything for the desperate hope of breathing new life where the industry itself is loosing ground. Fortunately through much pressure and with plenty of luck, Ricardo had the ability to find talented people, individuals who gave much of their selves in support of the company.

The transparency with which as much information as possible must be made accessible to the employee’s, as well as the means which allow for their comprehension. This appears to be the single most important factor for SEMCO’s successful change, transparency and the ability to think he has given his employees help make the efforts for cooperation between management and the working class as both sides learn to understand better each others situations, allowing the company to achieve its goals by means of favors and compromise.

Concluding; the history of SEMCO is closely related to that of its leader, as the author matures into a more prudent individual so does his company, the large step of removing all the heads of a corporation without any replacement nor due time is no longer a part of SEMCO’s ways. And yet it remains fluid, ever changing dynamic and as little mundane as possible, just as the author is, the author and principle proprietor of SEMCO managed to instill his own personality into his corporation, just as his father had made it the strict, neat organizational reflection of himself. What is interesting is the authors respect for the working class, his humility in front of ‘unnecessary expenses’ and his transparency, strait forwardness and trust of his fellow man. Just as he sees himself, so he wished to see his company. Of course it was not the work of this one man, but he managed to surround himself of similar individuals who shared his ideals and most importantly his vision.

Through hard work and dedication they managed to surpass the many obstacles in place before this goal, of which other peoples closed mindedness was the most important one. Every time a new idea came into play, at least someone had to be convinced for its implementation. It is very hard to make a coordinator become more flexible and understanding of not only his subordinates, but of his equals in other areas. This has been such a difficult exploit that most of the changes were made to force superior attitudes towards bending in and those who simply could not learn where expelled.

At the end, Maverick and the story of SEMCO help us remember that there is more than one way to do things, and being pleasant and courteous is indeed one of them.