Semco as a Most Unusual Workplace - Assignment Example

SEMCO ‘A’: A MOST UNUSUAL WORKPLACE INTRODUCTION Semco a small business located in an old industrial district in San Paulo Brazil, was started in 1953, by engineer Antonio Curt Semler. By 1950’s Antonio secured a patent for a centrifuge which could separate lubricating oil form vegetables and this was the starting point for Semco. The name Semco is a contraction of ‘Semler and company’. Semco was later joined by three Brazilian partners who provided capital, and were well versed with knowledge of the country. The Brazilian government made public its intentions to spur ship building in the country, with this opportunity, Semco signed partnership agreement with two between pump manufacturers and became a major marine pump supplier.By 1980, sales had been stable at US &4m. During this period, his son Semler joined Samco in the purchasing department at the age of 16. At the age of 20, his father transferred to him the majority of semco shares as well as the responsibility to run the business. 1) How Semco’s firm boundaries were continually revised and redefined between the early 1980’s and early 2000s. During early 1980’s recession loomed in Brazil businesses, especially capital-goods industries were battered. Semco was no an exception. This is the time Ricardo Semler rejoined Semco after graduating from Sao-Paulo’s prestigious stage law school. His father transferred to him the majority of Semco shares as well as the responsibility to run the business. Business from the shipping industry was in complete standstill. Ricardo Semler and Harro Heyede set out to broaden Semco’s product line. They set to expand Semco’s firm boundaries by convincing manufacturers around the world to let Semco manufacture their pumps and mixer in Brazil. Semler decided to avoid dependency on one industry by diversifying away form marine equipment through acquisition. Semco acquired two businesses from Asea, Brown Boveil and Merck. It required flast which manufactured refrigeration equipment for ships and ventilation systems for marine engine rooms. It also acquired BAC (Baltimore Aircoil), a company that manufactured air-conditioning equipment. This resulted to two new plant and an increase in labour force by 120 people. In 1984, it also acquired the Hobart plant, a Dart and Craft Brazilian business unit that manufactured dish washers, fryers, scaler and slicers. Semco’s labour force also increased by 150 new staff. When Ricardo Semler took charge of the business in early 1980’s his first action was to remove more than half management team. The old Semco which had traditionally been hierarchical company was to be replaced by new Semco which seemed organized and well disciplined. This is evident from Semler’s words “we could not get our people to perform as we wanted, or to be happy with their job’s” In mid 1980’s Semler started making unusual decisions concerning management. He started to experiment with unusual decisions such as eliminating the company dress code and the end-of-day security searchers. He also revoked parking privileges for management and eliminated executive dining rooms. This did not go well with member of management that were used to the old traditional Semco and hence, they left. by 1985, due to these changes in management, workers became increasingly more responsible for their own work and soon they were setting their own production quotas. The empowerment of the workers were perceived by some supervisors as loss of change. This is evidenced by their complain to Semler in hallways “I can’t even tell if my people are arriving on time” director also complained that they have control of some of the decisions which are made by the employees. By the late 1980’s, Semco had become an organization with an “amoeba-like” structure of groups of no more than 10 member. This was supported by Semler’s comment with more than 10 or 12 people at the same time. If you put together a group of 200, the transparency is lost and you need to put control system in place to make sure people are coming in on time. Than it all becomes a boarding school problem” By mid 1980’s two new kind of work unit was proposed by three Semco engineers. A small group of people rained in Semco’s culture were to beset free of day – to – day activities such as production problems, order and inventory. They were to focus on innovation of any type such as the creation of new product lines, improvement of manufacturing processes, or the development of new market strategies. This group came to be known as Nucleus of Technology Innovation (N.T.I) it members would be part of a totally flat hierarchy with neither bosses nor subordinates. Their performance would be assessed every 6 months by partners on whether they could continue or not. NTI member were entitled to royalties emanating identified. Semco also had a wide job rotation programme that touched every position. The CEO-ship would be shared by 6 rotating counselors. The CEO- ship would be rotated among the counsellor every 6 months. Semco hierarchy which had 12 levels was paired down to only 4. These levels are counsellors, partners, coordinators and the associater. Counsellors consist of six top most employees. They formed and informal board wihihc would frequently meet on day – to – day decision. The partners are those in-charge of business units. In the third circle are the first line supervisors called co-ordinators. The workers drawing of Semco structure on the floor are the associater. Semco is run by various committee which makes all the decision on strategy and operators. Semco also introduced the elimination of unnecessary controls. Nobody at Semco knows exactly how many people the company employees, as Samler explains “ when we walk through our plant, we rarely even know who works for us. Some of the people in the factory are full- time employees: some work for each other. We could decide to find out which is which and who is who, but we think it is all useless information. 2) Ricardo Semler in wary of strategic plans. He mentions in the case that his company “does not have a grand strategy” and that “strategic plans are often barriers to success. This is evidenced almost through the case. In 1980, Ricardo Semler become the CEO when he took over the company from his father, when asked why such a small company generate such a great amount of publicity, he explained that “At Semco, the basic question we work on is: how do you get people to want to come to work on a grey Monday morning?”. The statement clearly tells us that at Semco, there is no strategic plans’ on how to achieve the objectiveness. To achieve the objectives, employees 100% motivation is the key. This fact is also evidenced in that Semco’s reputation as a most unusual workplace has been projected internationally. Semco prides itself on being a democratic, transparent place with little controls as each individual in responsible for his or her own actions. Semler felt that the old traditional hierarchical ways of doing business hindered the activities on something about Semco had to be done. The management style had to change. As Semler states, “We could not get our people to perform as we wanted, or to be happy with their jobs” the company needed enthusiasm. Semler started implementing unusual decisions such as eliminating the company dress code and the end of day security searcher revoking of parking privileges for management, and that elimination of executive dining rooms. These decisions however did not go well with members of management that were used to the old, traditional Semco. The new Semco seemed organized and well disciplined. From 1985, Semler decisions started yielding fruits. What started as a seemingly innocuous strings of decisions took a much larger shape as workers in the Hobart plant became increasingly more responsible for their own work and soon they were setting their own production quotas and redesigning the dough mixers they made. Workers from the factory were given freedom to propose what they required in their jobs hence there was no time to think about the strategy of the company. By late 1980’s Semco had undergone a lot of changes in its management structure. The strategy process at Semco had completely changed. Instead of making long term strategies, Semco took a small group of people raised in Semco’s culture. Set them free of day- to – day activities such as production focus on innovation of any type such as a creation of new product lines, improvement of manufacturing process or the development of new market strategies. Focusing on innovations of any type suggests that Semco did not have grand plans on what was to be achieved and at what time. Semco believed in empowerment and transparency of the workers. To achieve this, there is need for elimination of unnecessary controls. Semler argues that apparent lack of control system does not harm efficiency. He cites the case where they delivered their last cookie factory with all to its 16,000 components right on time and one of their competition, a company with tight controls and hierarchies, delivered as similar factory to the same client a year and two months late. The strategy process at Semco gives every worker an opportunity to make decision that enhance him or her productivity. There is no laid out plans or strategies of enhancy productivity of the employers. Every single Semco employees, white collar or blue collar alike are given a monthly sheet with their business unit results. The employees are trained through crash course to read and interpret Semco’s profit and loss statements. This helps the employee to know his or her contribution towards the success of the business. The employees or her area improvement on his or her area of operation aimed at increasing the profitability of the company. The company wide transparency and the drastic changes that were made in Semco’s concept of management made productivity to improve dramatically. Employees sales increased from US $ 10.8 k per head in 1980 to US & 92k in 1992. By 1998, Semco’s sales had scared to US & 35, almost mine times of what it had been when Semler took charge in 1980. According to Semler, there was no hand out strategy of rewarding employees compensation and performance were closely related. For instance, NTI members were entitled to royalties emanating from new creation and a share of any savings identified. For example a Semco engineer that made US $ 25K a year on averages would be paid anywhere between US $ 15k and US $ 85k per year depending on performance. The counsellor felt it would be unfair not to implement a profit- sharing programme that would reach every corners of Semco including the factory floors. A profit sharing programmes was designed. Every quarter, it would deliver 23% of each autonomous business unit’s profits to the employees of each individual business unit. This clearly suggests that Semco’s strategy on renumeration of its employees was purely on performance and achievements. Semco has no support staff doing deed- end jobs recruit are let loose, with no bosses and no job description. They spend their time in all department for about a year after which they negotiate a longer-term involvement with a department. This tells us that at Semco that them is no strategic plans on what to be done and when. There is no laid down plans and procedures for promotion and ranks and salary. The concept here is that those to be promoted are voted on by those who have worked with the person concerned. There are no strategies or plans for dealing with strikes. Semco values- democracy profit share and information that all workers in a complicated circle where each is dependent on the other two. These three values replaces the strategic plans Everyone in Semco participate in major decisions freedom, trust and commitment are Semco’s core values. This takes the fear out of the organization. At Semco, information is available to everybody. The employees determine what their profit share should be and also decide on how to split the profit share Fig 2: Semco’s share values 3) According to the case strategy may be defined as a concept. Semler introduced the concept of diversification. This war necessitated by the fact that the 1980’s recession of the Brazilian economy left slow downed the business severe enough to jeopardize it’s existence. Semco took of strategy of diversifying away from marine equipment through acquisitions. The concept of acquisition was characterized by incremental improvement to the new Semco, such as the streaming of budgeting by paring 400 cost certain down to go. The effort of integrating new acquisition into the old Semco was too much for Semler. As a strategy to overcome this problem, he took the concept of delegation so that he could manage his time more reasonably. As a strategy to increase employee productivity Semler took the concept of delegation initiative to get the employee perform as required, and to be happy with their jobs. Semler did not believe in the concept of hierachier. He wanted each employee to be his or her own boss. To achieve this, he started to formulate strategies such as eliminating the company dress code and the end-of-day security searches. He also revoked parking privilege for management and the elimination of executive dining rooms. All these strategies were geared towards increasing the enthusiasm of the employee and increasing in the sense of autonomous in their place of work. The concept of empowerment of the employee in their areas of work as a strategy improved employee productivity as employee sales increased from US $ 92k in 1992 Semco Company adopted the concept of transparency as a strategy to improving the performance and increasing the out put per employee. The employees were given access to vital company statements so that they could see their contribution to the Company’s profit This in effect gave the employee a sense of belonging boosting their morale hence increased productivity. In Semco, New recruits are let loose for about a year they have no bosses, no job description. They are asked to spend time in all departments. After about a year, they negotiate a longer – term involvement with a department. This strategy as a concept helps the new recruits to have a general understanding of the running of the company. They also get to run of all the activities undertaken in the company. The recruits are given the freedom to choose the departments in which they fit or feel they will be more productive in. Promotion in rank and salary as a concept are voted on by those who have worked with the person concerned after every six months. Members of Semco themselves decide what their pay will be. They are involved in salary surveys. This concept as a strategy helps the employees to think not only of their welfare but also that of the company. Due to this, the employees, on voluntary basis, have found the risk salary system where they take an automatic cut of 25% in pay when the business is bad but also get 125% of pay when the business has had a good year. This strategy as a concept helps to maintain the profit of the company all time high without affecting the productivity of the employees. The Company allows the employees to call strike anytime. They do not punish them for going on strike. They are allowed to enter Semco premises during strike and even use the cafeteria for meetings. There are also few rules on travel, and no internal audit group. These strategies as a concept help to reduce the impact of the strike as the associate feels they own the company and they should work for its good. Semco Company encourage everyone to do at home the work that can be done at work place, workers also decide on their working hours. These strategies help in that the worker does the work when and where he or she feels comfortable. This increases productivity Everyone is encouraged to learn new skills and to change jobs. This way, there is more than one person ready to take on a job that has been vacated. This strategy on a concept helps to ensure that there is no one time the business is affected when an employee leaves the company. CONCLUSION Most businesses especially large companies have short-term and long-term goals. These goals are what to be achieved during the set period. The companies formulate objectives on how to achieve the goals. They lay down strategies on how these objectives are to be met. From the case Semco Company with stewardship of Ricardo Semler, carried out its businesses without strategic plans. It’s run in a very unusual ways. It seems that there is no clear line of commands. Every worker is free to do so as he or she feels it best provided productivity is enhanced. Semler has managed to reduce layers of hierarchy of the organization from twelve to four. This has in effect eased decision making and management of the labour force. Decision on strategy and operation of the business is made by various committee where union is represented, unlike in many companies. From the case, it can be seen clearly that the productivity, profitability and success of any business entity in not by how many well the human resource is managed. Semco prides itself on being a democratic, transparent place with little controls as each individual is responsible for his or her own actions. According to Semler, the company’s greatest asset in its people. Read More