Semco’s Transformation from an Autocracy to an Entrepreneurial Democracy Assignment

Semco’s Transformation from an Autocracy to an Entrepreneurial Democracy Assignment Words: 3363

Introduction The following case study is based on a company named SEMCO. SEMCO is best known for its industrial democracy and innovative business management policies. The objective of this case study is to analyze the transformation of SEMCO`s autocratic style of management to a decentralized, participatory style. Let us study in brief. History of SEMCO SEMCO, A Brazilian manufacturing company, invented by the founder’s entrepreneur son, Ricardo Semler, turning it into one of the worlds most unusual and admired workplaces.

SEMCO’s headquarters is located in Sao 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 those countries most successful companies. Ref: (http://www. freeonlineresearchpapers. com/history-semco) 50s Founded in 1953 by Austrian engineer Antonio Curt Semler, SEMCO starts manufacturing centrifuges for the vegetable oil industry. 60s

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Taking advantage of naval growth in Brazil in the 60s, SEMCO also starts producing hydraulic pumps, load pumps, axles and other components for the naval industry. 60s to the 80s During this 20 year period, SEMCO has equipped over 70% of the domestic naval fleet. 80s Ricardo Frank Semler, the founder’s son, takes over at the company and implements a series of changes. In the 80s SEMCO was directed towards a single industrial area and due to the small number of customers. Then, it’s started diversifying its businesses and purchases manufacturing licenses from other companies, such as Philadelphia Mixer and Little ford Day.

In 1982 SEMCO starts producing mixers for the chemical, pharmaceutical, food and mining industries. The stage is considered the first cycle of changes carried out by Ricardo Semler. In 1984 the company started manufacturing industrial refrigeration equipment, air-conditioning systems, food processors and other equipment. In 1984, SEMCO continues to diversify its services and purchases subsidiaries and foreign companies which were departing from Brazil, such as Hobart. In 1986, SEMCO changes to a entralized management system and started operating with four strategic business units: Naval Unit, Industrial Equipment Unit, Refrigeration Unit and Durable Goods Unit. In1989, all SEMCO businesses are developed based on a business unit concept. This provides greater freedom and also more responsibility for managers and everyone involved in the companies. 90s When globalization begins, SEMCO moves into innovative service areas. Thus, the company once again creates partnerships with well-known companies on the international market. In 1992, ERM Brazil is created, providing environmental consultancy.

In 1994, Cushman & Wakefield SEMCO is created to operate on the real estate consultancy and facilities management market. The following year the SEMCO Johnson Controls joint venture was created, to manage facilities in the industrial sector. SEMCO RGIS is created in 1998, to provide computerized inventories for retailers. 2000s SEMCO Ventures was created, a part of the Group specializing in prospecting and developing new businesses. In 2001, SEMCO Manutencao Volante created providing electrical and civil maintenance and other services. The company is characterized by its mobile maintenance services throughout the country.

In 2002, the SEMCO Group is one of the founding shareholders in Tarpon Investments. In 2005, SEMCO creates a partnership with Pitney Bowes, a worldwide leading company in document and postal management solutions. In 2006, SEMCO realizes its exits in ERM Brazil and SEMCO RGIS. In 2006, the Bio energy project was created, which later gives rise to BRENCO (Brazilian Renewable Energy Company). In 2007, Tarpon Investments concludes the listing process for it shares on the Luxembourg stock market and on Bovespa, making it one of the first asset managers in Brazil to access the capital’s market. Ref:(http://semco. locaweb. com. br/en/content. sp? content=1=610) ACTIVITY 1. SEMCO`s organizational designs and effective management of long term managing staff and projects. SEMCO has no receptionists, secretaries, or personal assistants. All employees, Semler included, receive their own guests, make their own copies, and draft and send their own correspondence. There are no private offices, workers set their own hours, and office attire is at the discretion of each employee. Job titles carry little formal status since all workers are actively encouraged to question and constructively criticize their managers. Ref: (http://www. freeonlineresearchpapers. com/history-semco)

Ricardo Semler enjoys life and he wants SEMCO’s employees, customers, suppliers and community to be happy as well. That is the real motivation behind SEMCO. Not growth. Not profits. Not power. Not status but happiness. This is why SEMCO has chosen to do thing somewhat differently. At SEMCO: ???Employees set their own working hours. ???Employees choose their own salaries. ???All meetings are voluntary and open to everyone. ???Employees hire their own bosses. ???HR has been almost abolished; because leaders need to be able to treat their employees right themselves. ???All employees rate their bosses twice a year and all ratings are published. Employees choose which leader they want to work under. ???Employees choose which SEMCO office they want to work out off. ???Employees can take early retirement, meaning they get one day a week off in return for working one day a week after they retire. It’s hard to find a single aspect of traditional organization and management that SEMCO hasn’t blown up, reinvented, abolished or turned upside down. Semler’s belief is that life cannot be divided into work and free time any more. If you can answer business related email on a Sunday evening, why can’t you go to the movies on a Wednesday morning?

SEMCO wants employees who are 100% themselves on the job or off it. Consequently, they treat employees as adults who are capable of making decisions for them. In return, people respond by honouring that trust and delivering fantastic results. SEMCO does not choose the easy way out. The easy, safe and comfortable way is to fall back on well-known, hierarchical control structures. SEMCO consistently resists this temptation and instead chooses to believe in its people and its corporate values. SEMCO’s top management’s most important leadership a tool is inaction. Not to do anything. Not interfere and to let the organization work out an issue n its own. To trust the process they’ve defined and see where that takes them. Not out of a laissez faire management style or a fear of conflict, but out of a realization that every time top executives step in and mandate a solution, they rob the rest of the organization of initiative and the will to act. Ref: Semeler Ricardo. The Seven Day Weekend: Changing the Way Work Works. Penguin (USA) Group 2003-2004. There’s no one right way to manage people. Finding the right way for you demands trust, trial, error and heresy. SEMCO has shown that eccentricity pays with people – but becoming a rich oddball has very orthodox rules.

Ricardo Semler spends much of his time travelling, partly because of his fame as way-out manager and best-selling author. If the boss is rated low, moreover, he can lose his job in consequence. The multiple-choice questionnaire refers to the boss as ‘the subject’. The first question out of 36 is ‘When an employee makes a small mistake, the subject is ???Irritated and unwilling to discuss the mistake. ???Irritated but willing to discuss it. ???Realizes the mistake and discusses it in a constructive manner. ???Ignores the mistake and only pays attention to more important matters.

There are no prizes for knowing the right answer, or for seeing that Semler has an ideal of management behaviour. He expects bosses to be relaxed, secure, fair, friendly, participative, innovative, very trustworthy, and highly competent. And so say all of us, no doubt. The issue is whether orthodox organisation helps people to behave in those ideal ways. Ref:(http://www. thinkingmanagers. com/management/management-behaviour. php) The workers know the organization’s objectives and they use common sense to decide for themselves what they should do to hit those goals. SEMCO’s 3,000 employees set their own work hours and pay levels.

Subordinates hire and review their supervisors. Hammocks are scattered about the grounds for afternoon naps, and employees are encouraged to spend Monday morning at the beach if they spent Saturday afternoon at the office. There are no organization charts, no five-year plans, no corporate values statement, no dress code, and no written rules or policy statements beyond a brief “Survival Manual,” in comic-book form, that introduces new hires to SEMCO’s unusual ways. The employees elect the corporate leadership and initiate most of SEMCO’s moves into new businesses and out of old ones.

Of the 3,000 votes at the company, Ricardo Semler has just one. Mr. Semler conducts many work-related conversations the ultimate hands-off leader, Mr. Semler doesn’t even keep an office at SEMCO. Ref:(http://www. strategy-business. com/press/16635507/05408) 2. Human resource planning traditional approach. Human resources are one of the most important features of every business – especially in an economy where there is an increasing shift towards service-based industries. Human resources account for a large proportion of many businesses’ costs and it is the people that invariably drive a business.

Management of these resources therefore is an integral part of business success. Recruitment and Retention. When candidates apply for a job, a business will have to make a shortlist and then draw up plans for the interview process. ???The criteria for the decisions on how many and who to place on the shortlist. ???The considerations should be business give to the interview process. ???The HRM team decides to all candidates be invited together or separately. ???How long should the interview take? ???Legislation does the business need to consider. The trade off between the time taken on the process and the cost, do the latter depend on the nature of the job. The recommended assessment procedure for this unit is to take part in role-play activities. Divide the class into four groups: Group 1 is the recruitment team. Their task is to identify the key questions they are going to ask candidates in an interview for a fictional job. Group 2 will consist of the candidates – they must write a short letter of application (no more than 100 words) for the post. Group 3 will identify, construct and assess an in-tray exercise for the candidates. This should not take more than 20 minutes.

Group 4 will be observing the work of the three groups for feedback discussion. Group 1 will interview each of the candidates – in private – but this could be videoed for later discussion. They will then compare notes with Group 3 – then, together, make a decision as to who they would offer the job to and why. The group should also identify some brief key points of feedback to the rest of the unsuccessful candidates. Group 4 will offer their judgements on the process in a discussion session following the activity. Managing Employees Once appointed, staffs are entitled to a contract of employment.

This sets out the rights and responsibilities of the employer and the employee. ???Identify the key features of a contract of employment. ???The contract imply about the terms and procedures under which an employee can be dismissed. Functions Many businesses have clearly defined functional areas like personnel (human resources), finance, production, marketing, administration. Teamwork A good team consists of people with different skills, abilities and characters. A successful team is able to blend these differences together to enable the organisation to achieve its desired objectives. Motivation

An important part of the retention of staff, reducing staff turnover and minimising absenteeism at work is ensuring that staff are properly motivated. This is not as easy as it sounds. At first glance, it might be tempted to think that merely increasing wages is the way to motivate. Absenteeism If staff are absent from work, they are unable to carry out the functions for which they have been employed. In many businesses, these functions have to be taken on by someone else – if not, the customer could suffer. Reducing absenteeism is an important feature of human resource management.

The extent to which absenteeism affects businesses has been a topical feature. Not only does absenteeism cause problems, but employers are beginning to recognise the effects of ‘presenteeism’ – staying at work when you are ill or because you believe that in some way your ‘presence’ will help boost your promotion prospects. This is because workers who are tired or ill are not likely to be as productive as they can be. This stresses the importance to businesses of promoting a sensible ‘work-life balance’ policy in helping the business to achieve its goals.

Ref:(http://www. bized. co. uk/educators/16-19/business/hrm/lesson/hrm1. htm) SEMCO’s Approach Ricardo urges audiences to take a realistic look at what works, what’s possible, and what makes sense in today’s world, given our technologies, the rapid pace of change and the increasing failure of current practice to adapt. Technology that was supposed to make life easier laptops, cell phones, e-mail, pagers has stolen our free time instead and destroyed the traditional nine-to-five workday .

Ricardo proposes a way to run a workplace that leads to greater productivity and greater flexibility for managers and employees alike. Business, as usual that inspire creative solutions to modern management And for business leaders everywhere, he offers fresh alternatives to problems. Ref:(http://www. leighbureau. com/speaker. asp? id=186) Ricardo Semler redefines “business as usual” by encouraging people to stretch beyond their self-imposed limits. Surrounding him with great talent and staying out of their way. Hire people who act like adults and be radical about giving them the freedom to do their jobs.

In an environment in which power is delegated and trust is assumed, peer pressure keeps everyone performing at his or her highest capacity. People bring their talents, and they rely on their self-interest to use the company to develop themselves in any way they see fit. Semco may not be the worker’s paradise that it sounds like. People who don’t perform have a difficult time hiding. To stay at Semco, a manager has to choose as someone will need for the next six months. They will constantly updating their portfolio and building your brand within the company.

Only people with certain attitudes will succeed in a culture where self-discipline replaces top-down enforcement and control. This company attracts people who trust their own instincts and believe that the only genuine source of authority comes from within them. Survival is not in the hands of others; it’s in their own hands. If employees treat the company as though it’s their own, it naturally follows that they should decide what it will become. Ricardo Semler’s approach is based on an antithetical world view. He believes that people will act responsibly and in their own best interests, which are intricately tied to those of the company.

He encourages his employees to make strong commitments to what they are most happy doing. While working at what they enjoy and believe in, they will place more stringent demands on themselves than any authority figure could. Semler’s attitude is that when people are free to do what they enjoy, their successes will far outnumber their failures. Besides, what pumps their adrenaline will also make money. Ref:(http://www. nightingale. com/ae_article. aspx? a=hirepeoplewhodontsuck=201) Organizational Design of Volvo Background

Volvo was founded on July 25, 1924, when Gaustaf Larson, an engineer and Assar Gabrielsson, an economist, met over a meal and agreed to build a car suited for Sweden’s roads and climatic conditions. The two founders had worked earlier for SKF, a famous Swedish bearings manufacturer, where they nurtured the dream of building a car. In 1926, the duo prepared 10 prototypes of the car to convince SKF into investing in their company. The company’s automobile engines were known for their reliability and were used in cars, buses, boats, fire tenders and military tanks.

Volvo began exporting vehicles on a major scale to Latin America, Japan, China, Israel, Ireland, Holland and Belgium. Volvo’s financials were boosted during the war period (1939-1945), when it supplied a large number of vehicles to the military Ref:(http://www. icmrindia. org/casestudies/catalogue/Human%20Resource%20and%20Organization%20Behavior/Volvo%20HR%20Practices-Job%20Enrichment-Human%20Resource%20Management-Case%20Study. htm#Background_Note) HR Volvo is among Sweden’s leading employers with employees numbering 41,000 in company-owned plants. Its dealer network provided employment to an additional 10,000 people.

An additional 15,000 people were employed through Volvo’s sub-contractors. Volvo’s products were marketed in 120 countries with 75% of its total production exported mainly to other European countries and the US. The Job Enrichment Experiments The changes in the organization structure facilitated easier implementation of job enrichment concepts. Volvo’s efforts involved both employees and the management. The management decided to experiment with five job enrichment measures – job rotation, management-employee councils, small work groups, change implementation and employee-oriented facilities – at its manufacturing facilities.

Job Rotation. Job rotation involved shifting around of jobs among workers according to a pre-determined plan. Each employee within a group was offered a job, which was different both physically and psychologically from his/her previous job. HR Initiatives Volvo introduced three new HR programs in the late 1970s and early 1980s. These were Match Project, Full Rulle (Full Speed Ahead) and Dialog. The first was introduced in 1983. It aimed at achieving five HR objectives,are. . ???Training new recruits intensively. ???Disseminating organizational objectives to all employees in the company. Framing rules and regulations for employees to establish discipline. Socio-Technical Approach While Volvo was going ahead with its human-centric approach, the external market forces in the automotive industry were changing. This forced the company to take serious measures, which stopped the progress of its job enrichment initiatives. Ref:(http://www. icmrindia. org/casestudies/catalogue/Human%20Resource%20and%20Organization%20Behavior/Volvo%20HR%20Practices-Job%20Enrichment-Human%20Resource%20Management-Case%20Studies. htm#The_HR_Problem) Organizational Structure of Volvo

Organizational Design of Semco Semler did not have a strategic vision but clearly perceived ‘a sense of lifelessness, a lack of enthusiasm, a malaise at Semco, and that he had to change it. Semco’s flexible organisation is built upon 3 interdependent core values: Employee Participation Profit Sharing Free Flow of Information Semler believed that all people desire to achieve excellence, feeling that autocracy thwarts people’s motivation and creativity. He further decided that the authority to make decisions at Semco should be more evenly distributed. Profit Sharing

He instituted a profit sharing plan in which employees received roughly one quarter of the net profits of their respective divisions. A distinguishing feature of this profit sharing was the use of democratically selected committees to develop and implement the programmed, as well as disbursement of the profit sharing funds. The democratic nature of whole process reduced employee complaints regarding reallocation of funds ??? it also exemplifies Semler’s trust and belief in his workforce’s skills and also in the process of democracy. Free Flow of Information

Semco made all of its financial data available to all employees. It also developed a training course to train people how to interpret the balance sheets and statements of cash flow. Profit and losses for each division were made common knowledge and salaries of senior management was also known. Profit and Loss Responsibility Every Semco Associate is measured according to their contribution to the bottom line. Those who didn’t measure up were ultimately pushed out. Semco’s transformation from an autocracy to an entrepreneurial democracy took Semler an eventful 15 years to achieve.

Ref:(http://www. livefortraining. co. uk/content. asp? pagerequested=228034=Ricardo-Semler–Semco–A-Real-Life-Case-Study-of-an-Empowered-Workforce) Semco`s organizational structure References Book References ???Ref: Semeler Ricardo. The Seven Day Weekend: Changing the Way Work Works. Penguin (USA) Group 2003-2004. Web http://www. freeonlineresearchpapers. com/history-semco http://semco. locaweb. com. br/en/content. asp? content=1&contentID=610 http://www. freeonlineresearchpapers. com/history-semco http://www. thinkingmanagers. com/management/management-behaviour. hp http://www. strategy-business. com/press/16635507/05408 http://www. bized. co. uk/educators/16-19/business/hrm/lesson/hrm1. htm http://www. leighbureau. com/speaker. asp? id=186 http://www. nightingale. com/ae_article. aspx? a=hirepeoplewhodontsuck&i=201) http://www. icmrindia. org/casestudies/catalogue/Human%20Resource%20and%20Organization%20Behavior/Volvo%20HR%20Practices-Job%20Enrichment-Human%20Resource%20Management-Case%20Study. htm#Background_Note http://www. icmrindia. org/casestudies/catalogue/Human%20Resource%20and%20Organ

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