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Nov

2011

Managing without Managers

In Brazil, where paternalism and the family business fiefdom still flourish, I am president of a manufacturing company that treats its 800 employees like responsible adults. Most of them –including factory workers – set their own working hours. All have access to the company books. The vast majority vote on many important corporate decisions. Everyone gets paid by the month, regardless of job description, and more than 150 of our management people set their own salaries and bonuses.

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semco ricardosemler empowerment management autonomy participation decisionmaking

In Brazil, where paternalism and the family business fiefdom still flourish, I am president of a manufacturing company that treats its 800 employees like responsible adults. Most of them –including factory workers – set their own working hours. All have access to the company books. The vast majority vote on many important corporate decisions. Everyone gets paid by the month, regardless of job description, and more than 150 of our management people set their own salaries and bonuses.
Management associations, labor unions, and the press have repeatedly named us the best company in Brazil to work for. In fact, we no longer advertise jobs. Word
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- Semco has three fundamental values on which we base some 30 management programs. These values – democracy, profit sharing, and information – work in a complicated circle, each dependent on the other two.
- The first of Semco’s three values is democracy, or employee involvement. Clearly, workers who control their working conditions are going to be happier than workers who don’t.
- We found four big obstacles to effective participatory management: size, hierarchy, lack of motivation, and ignorance.
- it’s clear that several thousand people in one facility makes individual involvement an illusion.
- there were too many managers in too many layers holding too many meetings. So we decided to break up the facility into three separate plants.
- I don’t claim that size reduction alone accomplished all this, just that size reduction is essential for putting employees in touch with one another so they can co-ordinate their work
- The organizational pyramid is the cause of much corporate evil, because the tip is too far from the base. Pyramids emphasize power, promote insecurity; distort communications, hobble interaction, and make it very difficult for the people who plan and the people who execute to move in the same direction.
- One tiny, central circle contains the five people who integrate the company’s movements. These are the counselors I mentioned before. I’m one of them, and except for a couple of legal documents that call me president, counselor is the only title I use. A second, larger circle contains the heads of the eight divisions – we call them partners. Finally, a third, huge circle holds all the other employees.
- The linchpins of the system are the co-ordinators, a group that includes everyone formerly called foreman, supervisor, manager, head, or chief. The only people who report to co-ordinators are associates. No co-ordinator reports to another co-ordinator – that feature of the system is what ensures the reduction in management layers.
- Managers and the status and money they enjoy – in a word, hierarchy – are the single biggest obstacle to participatory management.
- We insist on making important decision’s collegially, and certain decisions are made by a company-wide vote.
- Employees also outvoted me on the acquisition of a company that I’m still sure we should have bought. But they felt we weren’t ready to digest it, and I lost the vote. In a case like that, the credibility of our management system is at stake. Employee involvement must be real, even when it makes management uneasy. Anyway, what is the future of an acquisition if the people who have to operate it don’t believe it’s workable?
- We have other ways of combating hierarchy too. Most of our programs are based on the notion of giving employees control over their own lives. In a word, we hire adults, and then we treat them like adults.
- One of my first moves when I took control of Semco was to abolish norms, manuals, rules, and regulations. Everyone knows you can’t run a large organization without regulations, but everyone also knows that most regulations are poppycock.
- It’s also true that common sense requires just a touch of civil disobedience every time someone calls attention to something that’s not working
- So we replaced all the nitpicking regulations with the rule of common sense and put our employees in the demanding position of using their own judgement.
- No one checks expenses, so there is no way of knowing. The point is, we don’t care. If we can’t trust people with our money and their judgement, we sure as hell shouldn’t be sending them overseas to do business in our name.
- We encourage – we practically insist on – job rotation every two to five years to prevent boredom.
- By the same logic that governs our other employee programs, we have also eliminated time clocks. People come and go according to their own schedules
- The union has never objected because the initiative came from the workers themselves. It was their idea.
- When we introduced flexible hours, we decided to hold regular follow-up meetings to track problems and decide how to deal with abuses and production interruptions. That was years ago, and we haven’t yet held the first meeting
- We form the groups, but they find their own leaders. That’s not a lack of structure that’s just a lack of structure imposed from above.
- Everyone agrees that profits should belong to those who risk their capital, that entrepreneurial behavior deserves reward, that the creation of wealth should enrich the creator. Well, depending on how you define capital and risk, all these truisms can apply as much to workers as to shareholders.
- Profit sharing won’t motivate employees if they see it as just another management gimmick, if the company makes it difficult for them to see how their own work is related to profits and to understand how those profits are divided.
- In Semco’s case, each division has a separate profit-sharing program. Twice a year, we calculate 23% of after-tax profit on each division income statement and give a check to three employees who’ve been elected by the workers in their division. These three invest the money until the unit can meet and decide – by simple majority vote – what they want to do with it.
- But nothing matters more than those vital statistics – short, frank, frequent reports on how the company is doing. Complete transparency. No hocus-pocus, no hanky-panky, no simplifications.
- On the contrary, all Semco employees attend classes to learn how to read and understand the numbers, and it’s one of their unions that teach the course.
- Many of our executives were alarmed by the decision to share monthly financial results with all employees
- If executives are embarrassed by their salaries, that probably means they aren’t earning them.
- In preparing budgets, we believe that the flexibility to change the budget continually is much more important than the detailed consistency of the initial numbers.
- And that’s all there is to it. Participation gives people control of their work, profit sharing gives them a reason to do it better, information tells them what’s working and what isn’t.
- So we don’t have systems or staff functions or analysts or anything like that. What we have are people who either sell or make, and there’s nothing in between
- Everybody knows the price of the product. Everybody knows the cost. Everybody has the monthly balance sheet that says exactly what each of them makes, how much bronze is costing us, how much overtime we paid, all of it. And the employees know that 23% of the after-tax profit is theirs.
- And because we’re so strict with the financial controls, we can be extremely lax about everything else. Employees can paint the walls any color they like. They can come to work whenever they decide. They can wear whatever clothing makes them comfortable. They can do whatever the hell they want. It’s up to them to see the connection between productivity and profit and to act on it.

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