Ricardo Semler’s employees set their hours, determine their salaries and choose their bosses. Meet the Brazilian businessman who does everything differently.
Dominique Haijtema | Jan/Feb 2007 issue
His favourite questions start with “why.” Why should employees feel compelled to read their emails on Sunday evening, but can’t go to the movies on Monday afternoon? Why should they take work home, but can’t bring their kids to the office? Why should they have to sit for hours in traffic getting to the head office? Brazilian businessman Ricardo Semler loves to question everything. His guiding principle? If you want creative employees, don’t smother them with ridiculous rules.
For 25 years, Semler has been putting into practise what increasing numbers of modern management gurus are now preaching. He heads a democratic company, Semco, where employees set their hours, determine their salaries and choose their bosses. Managers don’t have secretaries, reserved parking spaces or even desks. There is minimal bureaucracy. No IT or human-resources departments. No mission statement, no five-year plan. Meetings are voluntary and every employee has a say in everything. Once, when Semler organized a meeting to discuss developing a speedier dishwasher for the consumer market, no one showed up. And the idea was shelved.
Semco was a traditionally managed engineering company when the young Ricardo Semler took over from his father. He was just 22 and had brought philosophical conflicts with his father to a climax: The son demanded that Semco steer away from its activities as a shipbuilding supplier and abandon autocratic management in favour of decentralization. He threatened to leave the company, so his father gave him a free hand. On his first day as director, Ricardo Semler fired 60 percent of senior management and began laying the foundation for a democratic organization.
Semco has long since abandoned its engineering activities. The company now develops software, is building a hotel and ecological resort and is involved with hospital and airport projects. Semler himself can’t even list all his company’s activities; he leaves that to his employees. Semco now has 3,000 staffers (with very little turnover) and is growing 20 to 30 percent a year, with annual sales of $212 million U.S. [190 million euros] in 2003.
Semco’s radical policies do have a downside. Demand from outsiders wanting to visit its offices is so heavy that employees have complained of feeling like exotic attractions at a zoo. But that seems a small price to pay for such runaway success. Semler has written two international bestsellers about his unusual management method and has taught at renowned business schools, including Massachusetts Institute of Technology and Harvard in the U.S. And he spends two months a year doing whatever he feels like doing.
Last March, while vacationing with his family in Switzerland, he agreed to meet me in a hotel bar before hitting the slopes, to discuss his groundbreaking management ideas. For a corporate executive, he seemed unusually cheerful and relaxed. Semler told me he had all the time in the world—confessing that he hadn’t worn a watch in years, and that suited him just fine.
Why are so few companies in the world run like Semco?
Ricardo Semler: “Because managers are afraid to lose power and control.”
What can managers do differently?
“In order to do things differently, you have to relearn how to think and have the courage to let go. Managers can learn to have more faith in their employees. That’s difficult in an environment where nearly everything is based on mistrust and control. But it’s not human nature to question who you should send which email to and whose permission you should ask. Absurd! If people behave like animals in a cage, I don’t think it’s because of the people but the cage. This faulty conditioning starts at school. That’s the foundation of conformity and submission to silly rules. Small start-ups often begin in an atmosphere of excitement in someone’s garage, but as soon as they grow, all the pleasure disappears with organization. Anyone with a little talent who can think won’t work for that kind of company, right?”
Doesn’t a major corporation with thousands of employees require a different style of management than a company with 10 staff members?
“Why? We were a small company and now we have 3,000 employees. Nothing has changed in the way we work.
“I often hear that my management style only works in small unlisted companies and probably only in Brazil. That’s a typical argument to rationalize not changing yourself. And it’s not easy. A democratic organization isn’t something you decide on and arrange from one day to the next. We’ve been doing this for a quarter century and are still learning every day. It’s a lengthy process because people’s conditioning is very strong.”
How can an organization become more democratic?
“By questioning all kinds of things. For example, we examined how much time our employees spend sitting in traffic. We figured out that they spend a million hours a year getting to and from work. We wanted to cut that down, which means you have to take drastic measures. We decided to close down our head office and start working in small units. In the 21st century, it makes no sense to get people to come to your head office from all over the country—because even if they physically all get together, they’ll still send an email to a colleague sitting two metres away.
“Added to this, if you wake up in a bad mood on Monday morning, you don’t have to come to work. We don’t even want you to come because you simply don’t feel like it and will therefore not make a contribution. We want employees who are ready and willing to work. If that means they only come twice a week, that’s okay. It’s about results.”
It’s striking that your books never mention the word “leader.”
“Leadership is way overrated. In fact I don’t call the courses I teach at the Massachusetts Institute of Technology “leadership courses.” I think the idea is outdated that leadership is only relegated to a few and that it can be planned, structured and developed.”
What’s wrong with cultivating leaders?
“The whole idea of leaders implies that only a few are capable of pointing us in the right direction. I’m more interested in the structures or the architecture of organizations that enable the company to survive in the future, independent of the leaders.
“An important facet of leadership is succession. Succession of managers is often arranged in a dramatic and hectic way. Take Louis Gerstner, who was taken on as an outsider at IBM, where there are thousands of people with management or business-economics degrees. Was there truly no one in the company capable of taking the lead? That’s pretty weak.”
But an outsider could have a more objective view of the company?
“Maybe. But in saying that you’re actually implying that a company can’t innovate or change without hiring outsiders. That’s a scary thought. I would consider it disappointing if an organization can’t produce any leadership talent capable of looking at the company objectively. Take [former General Electric CEO] Jack Welch. When someone puts such a strong mark on a company, as Welch did, it’s often difficult for his successor. Many strong leaders have left weak organizations in their wake. There’s a good reason why many companies—including General Electric—need major reorganizations right after those strong leaders leave.”
Have you arranged your own succession?
“Oh, I’ve been working on it for some 15 years. Sixty percent of the business is now comprised of initiatives I have absolutely nothing to do with. The company is doing very well without me. That was also the case when I had a car accident last year and spent a couple of months in intensive care. And a couple of weeks each year I’m travelling and not reachable. Everything runs smoothly.”
How do you develop managers at Semco? Do you send them to business schools?
“We never send anyone anywhere. Everyone is responsible for their own career and training. All the employees have a budget to do with as they see fit. We don’t say a word about the choice of courses. We’ve never had a shortage of people interested in taking on management duties, coordinating or guiding others. In our system, managers are anonymously evaluated every six months by their subordinates. If they don’t measure up, they’re no longer allowed to fulfill a leadership role. It’s as simple as that. At our company, you’re a manager as long as your staff approves.”
Do you see it as your mission to inspire entrepreneurs and managers?
“Not at all. I don’t see my methods as a gift to humanity. I don’t do it to teach others; I do it for myself. I simply wanted to create an organization where I wanted to work myself. It’s actually quite egotistical.”
Entrepreneur of the year Ricardo Semler, born in 1959 in São Paulo, became the director of Semco – his father’s company – in 1982. He helped take it from an ailing industrial enterprise with annual sales of $4 million U.S. [2.3 million euros] to a dynamic, fast-growing company active in numerous sectors, from air coolers to consultancy, with annual sales of $212 million U.S. [190 million euros] in 2003. Moreover, Semco is enjoys a reputation worldwide as the example of a “democratic organization” www.semco.com.br. In 1990 and 1992, Semler was named Brazilian businessman of the year. His first book, published in 1993, was Maverick: The Success Story Behind the World’s Most Unusual Workplace; ten years later, he published The Seven Day Weekend: Changing the Way Work Works. In 2003, he founded Lumiar, a democratic school in São Paulo, where children between the ages of 2 and 10 are encouraged to learn whatever they consider interesting (www.lumiar.org.br).
Ricardo Semler’s tips for democratic management:
- Do away with bureaucracy, which creates a sense of false security.
- Let employees determine everything themselves: their salaries, their working hours, their managers.
- Let go of control to stimulate creativity.
- Strip away special treatment for managers – no parking space or secretary, not even their own desk.
- Continually question whether what appears to be self-evident is actually good for the company.
- Regularly take a break from work when you are unreachable for a period of time.
- Read classic literature instead of management books.
- Remember that leadership has nothing to do with hierarchy, because everyone can develop leadership skills.
Taken with kind permission from the Dutch book De essentie van leiderschap (“The essence of leadership”) by Dominique Haijtema (Business-Contact, ISBN 9047001826), a collection of interviews with Madeleine Albright, Deepak Chopra, Jack Welch and Muhammad Yunus, among others. Most of the interviews were previously published in the Dutch business magazine Management Team. Haijtema is a journalist with the Dutch business daily Het Financieele Dagblad