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Ricardo Semler’s huge leap of faith

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in Best-Practices Leadership,Hiring,Human Resources,Leaders & Managers,Management Training

To look at Brazilian equipment supplier Semco today, you might be struck by its bright walls, employee-set hours and pay, and lack of organization charts … or written rules.

You’d be even more impressed with its numbers. Semco has grown an average 27.5 percent a year for 14 years, despite wild fluctuations in Brazil’s economy.

The reason: Semco’s radical use of participative management. Of the employees’ 3,000 votes, CEO Ricardo Semler gets only one.

When Semler inherited the business from his father in 1980, Semco’s operating earnings had vanished as Brazil’s shipping industry tanked. In one afternoon, Semler fired 60 percent of the company’s top execs. He hired a series of get-tough managers and made acquisitions that diversified the business.

The strategy worked; Semco grew. But the transformation took a toll on employees, and only after Semler collapsed during a business trip did he have time to assess what he’d done. Sure, he’d turned the company around, but it had become a lousy place to work.

Taking cues from Peter Drucker and an educator named Clovis da Silva Bojikian, the CEO took a new path. He wanted to prove that work could be satisfying.

Convinced that employees who helped make decisions would be more effective, Semler and Bojikian started small and worked up. Examples:
  • In response to frequent complaining about the company cafeteria, they asked employees to help improve it and eventually turned it over to them.

  • To deal with crippling traffic, they asked employees to revamp company hours.

  • They had employees set their own compensation. That involved hiring an analyst to benchmark pay across positions and companies, setting average wage scales, adding 10 percent to make Semco more competitive, then publishing all salary levels.

  • The final step: opening the company’s books.
It sounds ironic, but participative management—operating as a democracy— depends on excellent leadership.

—Adapted from “Ricardo Semler Won’t Take Control,” Lawrence M. Fisher, strategy + business.

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