Interviewing Ricardo Semler of Semco Partners, for TED.com. Technology, Entertainment and Design, is a clearinghouse of knowledge from the world’s most inspired thinkers.
Ricardo Semler advocates revolutionary stuff that only a handful of companies worldwide practise. He dismisses as corporate window dressing ‘mission statements’ and ‘employee consultation’ and points out how far we claim to defend democracy, but practice Eastern bloc centralisation in our workplace.
He encourages people to start where they are and affect the few people under them, instead of moaning that it’s impossible. He notes how many business schools and consultants preach empowerment, but run autocratic, tightly controlled organisations themselves.
He writes about how he works constantly to pull back from being placed in the role of a guru with the Midas touch, how he wants the business to be sustainable through the efforts of all employees, not only the one with a reputation.
Is there a catch? Well no international audience of journalists and executives representing 2,700 companies, 200 magazines and most major TV networks can ordinarily be deceived for 25 years, this is not about slick marketing or even an isolated example, it is about an architecture of organisations that can serve as a seed for a more gratifying way to work.
When Ricardo Semler became the CEO of his father’s company, he reorganized it with the belief that less management and more flexibility meant a better workplace and bigger profits.
Ricardo Semler assumed ownership of Semler & Company (known as Semco) from his father in 1980. Since then he has tried to design a corporate democracy, allowing employees to design their own jobs, select their supervisors, and define pay levels. He has now applied the same principles to education, banking and hospitality.
“Think about some of the most top-down organizations you know – the military, political parties, mult-nationals, and maybe, the place you work… There are too many similarities between the way we run businesses and the way we run boarding schools. Here’s all the rules, here’s how you follow them, here’s what you can do, here’s what you cannot do“.
It was just what his father’s company was like when he first started to work there. It had the classic pyramid hierarchy, President, Vice-president, Directors, and so forth. The company made pumps and propellers for ships in Sao Paulo, Brazil, in the late 1970’s. The people there were very far from feeling free or looking happy about what they were doing. It was a place where people got bogged down very quickly in the organizational boxes they had been put in, by the people they had to ask authorization from, the people they have to ship papers out to. This is how the company operated until Ricardo took in over in his early 20’s.
He said: “I don’t want to spend 50 years of my life making people arrive on time, then give them a gold watch if they did so. There must be a better way. I started asking questions, Why do we want to know how many hours a week people are working? Why can’t people know what our profit and strategies are? and so forth. It became obvious as we asked these questions that the answers were just old-fashioned, and not current anymore”.
So Ricardo Semler decided to radically re-organize the company. His first day on the job, he fired most of the managers. He ripped out the punch-clocks for time-cards, and he started to create a system of self-organization. Over time, the company, Semco, became hugely successful, from 140 employees to thousands. They make rocket fuel, they build factories, they are involved in diverse partnerships and businesses all across Brazil, and Ricardo Semler has turned his ideas on radical re-organization into a movement.
“This is a complicated company with thousands of employees, hundreds of millions of dollars of business. We looked at it and said: Why do we want to know what time you come to work? Why are we building these headquarters- is it not an ego issue- that we want to look solid and big and important. So we’re dragging you two hours across town because of that? So we started asking questions one by one. How do we find people? We try and recruit people, we’d say, when you come to us, we’re not going to have two or three interviews and then you’re going to be married to us life, that’s not how we do the rest of our life. So, have your interview, then come back, spend an afternoon, spend a whole day, talk to anyone you want, make sure we are what you thought we were, and not all the garbage we put in our own advertising!”
“Slowly we went through a process- we’d say things like, We don’t want anybody to be a leader in the company, unless they’ve been interviewed and approved by their future subordinates. Every six months every manager gets evaluated anonymously, and this determines whether they should continue in that role”.
All this sounds like a recipe for anarchy?
“But when you think about it, the very sophisticated organizations are either self-managed, or managed by relatively chaotic outlooks. When you think about how geese fly north, how ants go left or right, how traffic manages itself, how the world economy manages itself, there ain’t no leader there!”
OK, but how do all the teams in the company know what they’re supposed to be doing, or what needs to be done?
“Well, when you’re imagining a business that you know very little about, let’s say a biscuit manufacturing business, or running a credit exchange, it sounds very far-fetched. But when you look at your own life, people know a lot more than they care to reveal. But when you put people together and say: ‘OK guys, what are we trying to do? Well, we’re trying to deliver eight pumps with 300kw motors to a shipyard in Korea by next May. OK, so who’s going to do what?’ In two minutes it’s all clear. The only difference is they all have a tremendous commitment to deliver, and they’ll make it on time”.
“Over time, we started asking other questions. We started asking questions like, Why can’t people set their own salaries? There’re only three things you need to know. How much people make inside the company, How much people make somewhere else, say in a similar business, and how much we make in general to see whether we can afford it? So let’s give people these three pieces of information. So we started having in the cafeteria a computer where people could ask what someone spent, what someone makes, and what benefits they get. They can ask what the company makes, what the margins are, and so forth. As this information started coming to people, we said: ‘We don’t want to know how many holidays you’re taking, we don’t want to know where you work’ ( at one point we had 14 offices across Sao Paulo), and we’d say work at the one closest to your house, or where the customer you’re going to visit today, in other words, don’t tell us where you are.”
Ordinarily, when you organize a company, it is in order to establish some kind of control. But it is almost as if you organized your company to cede control?
“Yes, because the idea that having control generates security is a very silly idea. You think about any kind of organization with a definite place. For example, the US Government, Congress, or any company. Do they really have any idea what’s going to happen say, 90 days ahead of time? The amount of things completely outside our control is indeed enormous. A board meeting may be very much in order, and people will start at say, 2pm and end at 6pm, by 6.30 they’re in their cars with their files thinking ‘we did a great job, we know where we’re headed’, but they know there is an enormous amount of bias in that, for they really have no idea what their competitors are going to do, what the economy is going to do, and so the idea that they’re in control is a complete fraud which everyone plays along with because it’s in everyone’s interest to pretend”.
Ricardo Semler is chairman of SemCo Partners but no longer CEO. Like all his employees he gets graded on his work, and about a decade ago, he was actually voted out of the top executive position, a decision, he says, he’s totally fine with. Here’s how he ended his talk.
“I was walking around Mount Auburn Cemetery, Cambridge, Massachusetts , a beautiful cemetery, it was my birthday, and I was thinking, what do I want to be remembered for? I did another stroll around and a second question came to me which did me better, which was, why do I want to be remembered at all?”
Interview with Alan Strutt, Management Centre Europe
How do you measure your employee’s efficiency? If they do that themselves, isn’t it risky?
Ricardo Semler: “This would be the same as saying that people are basically lazy, or that they want to come in as late as possible, leave as early as possible, and make more than they deserve. And we don’t believe in that, and have never seen this, even when we left people to set their own work hours, their salaries and choose their bosses. The pundits who pronounced us dead were wrong and, after 25 years, we have gone from 100 to 3,000 employees based on our concepts. That is what the book Maverick!: The Success Story Behind the World’s Most Unusual Workplace, was about. The new book is The Seven-Day Weekend: A Better Way to Work in the 21st Century.
What do you believe is so attractive of Semco to those thousands of young people who want to work for your company?
“They see there a degree of respect, freedom and self-propulsion that is hard to find. They know that they can customise their jobs, as long as they get their work done. And that is more contemporary, and therefore more seductive. They don’t want to be subject to more of the senseless boarding school mentality that they had to endure during their education”
“In addition, we have funded two schools, one of them public, based on the idea that adults arrive to work at Semco already programmed to accept, submit and conform – as well as throw away their dreams and talents. Our schools transfer the burden of making the class interesting to the educators – children are free to go to class or not, and we are the ones who look for interesting teachers to bring out the magic that resides in mathematics, sciences and art”.