Ricardo Semiler and Semco Company and its Changes - Case Study Example

 SEMCO'S BACKGROUND (this section should be around 20% of the write-up) 230 What was the economy of Brazil like from the early 1980s until 1998? There was a Brazilian crisis in the1980s that hit Semler & Company particularly hard. It's core business had been severely affected that it threatened existence of the company. in the 1990s, there was a hyperinflation that struck the economy and Brazilian President Collor’s administration placed restriction on access to liquidity. As a result, a severe recession ensued during which many companies in Brazil were forced to file bankruptcy. semco, then Se miler & Company became financially moribund Are external factors the only reason to change an organization’s structure? No. The eventual transfer of majority ownership to Ricardo Semler and resignation as CEO of Antonio Semler were the factors that affected change in Semco and that involves but the internal and external factors Could the father, Antonio Semler, have changed the organization? Why or why not? No. The older Semler, Antonio was already culturally rooted in his management ways of being too bureaucratic and autocratic. He also cannot separate his personal affairs to business and this made Semler & Company under his leadership a moribund. Moreso, he did not have the modern business perspective of the time to change his style of leadership unlike the younger Semler, Ricardo who went to Harvard business school. Semco's transformation came during a dramatic economic crisis in the Brazilian economy. Could it have come if things were going well? Yes the transformation and change of the company would have still come even if things were going well. The external factors cannot change the trajectory of the company when Ricardo Semler assumed leadership of Semco because he really intended to change the autocratic leadership of the company. The crisis only highlighted how effective the change to teh company. SEMLER'S CHANGE (should be around 40% of the write-up) Were Semco’s changes too drastic? Were they even necessary? In a way the change was drastic. Upon assumption as the new CEO, Ricardo Semler fired two-thirds of the top management of Semler & Company and that included many close friends of his father. This would not have been possible under his father because Antonio Semler did not separate work from his personal relationships. The new set up of the company was also a total departure of the old autocratic style of leadership of the company. The young Semler felt that the old autocratic leadership thwarted people’s motivation and creativity. Thus, he decided that the authority to make decisions at Semco to be more evenly distributed. In the process, he dismantled the rigid bureaucracy and structure of the company to make it more flexible based on the new three values of the company – employee participation, profit sharing and free flow of information. To emphasize the change, even the name of the company was changed from Semler & Company to Semco. There were a lot of changes that can be considered drastic if it will be compared to the old leadership. Strategy wise, among them product was product diversification and the creation of Nucleus of Technological Innovation (NTI). Leadership style also changed to democratic and participatory to the point that employees can already direct themselves- set their own budget, even their own salaries and even the hiring and firing decision of both employees and managers. This change at Semco however proved to be good for the company. As Ricardo Semler put it, they have transformed the company from a moribund to a very productive, highly profitable and highly preferred employer company. Why was the name changed? The change of company name from Semler & Company to Semco was to signify the new era that the company is entering – the Semco Era or the beginning of the revolution within the company. The change of name signify the departure from the company’s old ways and this new era is encapsulated by Ricardo Semler’s words as; The key to management is to get rid of the managers. The key to getting work done on time is to stop wearing watch. The best way to invest corporate profits is to give them to the employees. The purpose of work is not to make money. The purpose of work is to make the workers, whether working stiffs or top executives, feel good about life. Why were administrative and secretarial positions eliminated? The removal of secretarial positions were just part of the company's transformation to save on cost so that profitabiity will increase. The change at Semco made everybody obsessed with increasing their productivity and ultimately their profit because employees are accountable to the profit of their own business unit where they could also share the profit. What outcome would you have predicted had the company not changed its structure? Had Semco remained to be Semler & Company and along with its autocratic leadership, the company would have folded and filed for bankruptcy already. During the early 1990s, Semler & Company was struggling due to the hyperinflation that beset the company’s liquidity. Had it not involved the employees in deciding what the best course of action to take during that crisis, they would not have found the solution and involvement of the employees to take salary cuts instead of laying off people. Laying off employees would render the company penniless because Brazilian law requires payment of two years severance pay for each employee dismissed. The solution and involvement of the employees through the participatory management structure bailed the company from this dilemma by proposing the pay cut as an alternative to retrenchment How far should corporate democracy be carried? Corporate democracy can be carried for as long as it is not destructive to the company’s bottom line. Ricardo Semler himself called this the freedom that was wrought by taking care of the bottom line. Such, for as long as the company become productive and profitable due to corporate democracy, it should be continued. For Semco, it has been carried far enough to the point that Ricardo Semler no longer owns the company but just the capital. He does not sign any check nor approve anything because it is already the employees who are doing it for themselves. And this has been good for everybody in the company. What view did Ricardo Semler have with respect to mistakes? Ricardo Semler is unforgiving with mistakes, especially with mistakes that affect the bottom line negatively. For him, it is the positive bottom line that gives them the freedom or license to do the things the way they want it to be. If they make a mistake in how things are done, then that freedom will be revoked. According to Ricardo Semler; There’s not much compassion. There’s no place for it really when you’ve exchanged the bottom line for compassion, because the bottom line is what gave you that freedom. So when you screw with the bottom line, you screw with freedom, and that’s why the compassion goes away. Semler took a great risk by encouraging a democratic system of profit sharing, hiring/firing, and salary stipulations. Why did his system work? By giving the employee the responsibility, authority as well as the accountability to get things done by themselves, he unleashed their creativity and potential that soared their productivity at record levels. This is what is called TRANSFORMATIONAL LEADERSHIP where leaders bring about or facilitate the best trait among its employees and become leaders themselves. The employees became so effective that they assume leadership in many aspect of the company that Ricardo Semler does not have to sign checks anymore nor approve contracts or projects because the employees did it themselves. GENERALIZATION (should be around 40% of the write-up) Can such participatory management work around the globe? Why or why not? It could work around the globe for as long as the organization is not centrally planned because centrally planned economies do not welcome initiative from the organizations. Instead, directives usually come from the government. As long as there is a need for a business organization to survive and thrive in the market, participatory management structure that leaves decision making to employees to arrive at the highest optimum productivity output both for the company and for the employees, will always work. Can it work in the UAE/GCC countries? Why or why not? It could work in UAE/GCC countries. But it would entail a tough cultural change among its employees who are used to autocratic leadership and may be hesitant to take new responsibilities. But if the leadership is serious in making participatory management to work in a particular organization, it can albeit it could take time. It took Semco 15 years to fully implement a participatory management and the organization also came from an autocratic leadership. Such, it would be possible for participatory management to work in UAE/GCC countries. Also, the model of reducing stress in work to improve the quality of life of both the employees and managers are universal regardless of country. This business model at Semco will also be appreciated in the UAE. Can one model work in all industries, across all sizes of companies? No. No work model can work in all industries, across all sizes of companies. Even in Semco, the size of the business unit cannot exceed 150 because beyond that, people will become less effective and less efficient as the comfort and familiarity of knowing the people you work around with will diminish. Imposing a one model in all industries across all sizes of companies also signifies an autocratic mode of leadership which the Semco case has proven to be ineffective. Instead, employee participation must be encouraged through a democratic process where are a free flow of information (just like in Semco) to determine what model will work best for their industry with due consideration to their size as a company. What environmental factors are necessary for the participatory management structure to work? As what the Semco case has illustrated, leadership and openness is a critical factor for participatory management structure to work. Patience has to be added also because participatory management structure will not automatically work such as in the case of Ricardo Semler who tried several business models before arriving at the lattice organization. This idea was not even Ricardo Semler’s idea but a suggestion of Semco manager Joao Vendramin who convinced Semler to adopt the participatory management called lattice organization and had Semler been obstinate, the participatory management would not have prospered. It should be anticipated also that there will always be resistance to change. But such resistance can be allayed when employees will see that management is serious in implementing participatory leadership which is favorable to them. Read More