OES - Organizational Effectiveness Solutions

Imagine a place where you came and went on your own schedule, did performance reviews for your boss, negotiated your salary every 6 months, could be fired by your peers and were encouraged to work in a different place each day so your boss couldn’t find you.  Sounds impossible?  Well one incredible company in Brazil has made this model work for over 40 years. Wait there is more, they also support unions, provide mini-retirements, dating services for employees and 23% pre-tax profit sharing!

(If you know of other incredibly innovate companies please let me know in the comments)

Semco is a maker of industrial machinery with roots in building equipment for the naval industry. They have now diversified into education, consulting, real estate and other areas.  There are over 3000 Semco employees.  Key to their success however is their participative management style,

At Semco, people work with substantial freedom, without formalities and with a lot of respect. Everybody is treated equally, from high-ranking executives to the lowest ranked employees. This means the work of each person is given its true importance and everybody is much happier at work - Semco Website

I feel that our Canadian way of managing is outdated and backwards, causing major dissatisfaction and misery for so many.  When I came across Semco my eyes lit up because it proved that it was possible to make work way better while still having a successful business.  There is no good reason why this model of openness and respect can’t be applied to Canadian business.

You must be asking, but do they make money?   From 1994 to 2003 Semco increased revenue from $35 M to $212 M, and grew at nearly 40% annually with NO public investment. 

This video on YouTube only is a real gem and gives us a look inside this daring and innovative workplace.  Surprisingly, it only has 59,405 views, about 20 of them are probably from me sharing it with my friends!

Semco Survival Guide

Semco has lots of great information on their website, including their Survival Guide.  It’s quite long, but I had to pull out some of the more radical yet incredibly common sense ideas to share.

Freedom 

• There is no space at the Semco Group for formalities. The doors are always open and people should say what they really think, without worries or inhibitions. *This is not just a feel good statement, they ensure that everyone speaks up and voices their opinion, group think is disastrous and Semco does everything it can to avoid that feeling of comfortable success

Unions 

• Unions are an important method of protecting workers. Unionization is free within the company. The Semco Group believes that constant relationships with unions are healthy for the company and the employees. The presence of union members at the company is always welcome. * “they have less of a role because we deal more openly with all of these issues anyways, but we ourselves are looking for ways to substitute the decline of unions for internal processes where people elect somebody who is a keeper of the cultural values, who has job stability, take a look at every hiring and firing and take an independent position in the name of the employee” – Ricardo Semler

Working Hours 

• The Semco Group has flexible working hours where possible. This is a method of meeting the needs of each person, without harming the company. *See the YouTube video because this is the most radical aspect of the workplace, they make sure that you work in a different place each day to make you less traceable.  Why we are stuck in a 9-5, Monday to Friday schedule makes NO sense to me, it is forced uniformity that benefits nobody.

Vacations

• The Semco Group does not believe that anyone cannot be replaced. Everybody must take their annual vacations, always. This is fundamental for the health of the people and the company as a whole - no excuse is good enough to justify accumulating vacations. *I guess they are strict on some aspects!  Vacations have been proven to be valuable at reenergizing people and injecting more creativity.

Evaluation by Subordinates

• Every six months you will fill in a questionnaire and say what you really think about your immediate superior. Be open and honest, when filling in the form and during the discussion that should take place afterwards. *Why doesn’t every company do this?  The team can evaluate the leader much more effectively and it ensures people who simply play politics are not promoted.

Personal Life 

• Each person’s life belongs to themselves and the personal life of each person at the Semco Group is sacred. Providing it does not interfere with the work of the environment, the company is not interested in what each person does with their own life. The human resources area is available to provide support in any area, but the company will never get involved in people’s private lives. *I didn’t think they even had an HR department

Here are a few more details on some of the radical policies at Semco which help drive innovation and openness.  These are not taken directly from the website.

Compensation

• Employees negotiate their salaries every 6 months, with all the information necessary to make sure they are fairly treated.  They also partake in 23% profit sharing which is dictated by each business units performance. The money is usually spread evenly, but there is a democratic discussion on how it should be distributed.  Finally, riskier employees can have Semco hold 25% of their salary until the bonus time, and if the company does well they receive 150% of their original salary, or otherwise they forfeit their 25%.  It’s great to see that performance is tied to closely with compensation!

Peers Can Fire You

• Your boss alone can’t fire you, but because of the profit sharing, all your peers have the power to kick you out if you aren’t performing.  Accountability is built into the system in a meaningful way.  Still, there are union representatives to ensure it is all done fairly.  The point is that the goal of the unions isn’t to protect jobs; it is to ensure people are treated fairly and to also ensure employees are working towards the organizational goals.  Sounds dreamy.

Office Design

• Very open concept, and employees are encouraged to move around their workspaces. They also have smaller satellite offices all over the city to make telecommuting more accessible.  Nobody can talk down to you for working from home, it doesn’t matter where you do the work, just that you do.

It goes on and on, but if you watch the video and continue reading you’ll see how different Semco really is!

Ricardo Semler, the man behind the magic 

Ricardo Semler has written bestselling books including The Seven Day Weekend: Changing the Way Work Works and Maverick: The Success Story Behind the World’s Most Unusual Workplace. These are very high on my reading list and I can’t wait to read the story of how he turned a fledgling $ 4M industrial manufacturing into a $212 M (as of 2003) business with the most radical workplace on the plant.

He is a world renowned thought leader and regularly speaks to business schools and groups around the world to further promote the cause of participative management.  As you can see from the video, he’s also involved in improving education in Brazil through the Ralston-Semler Foundation and the Lumar School.

To get a better understanding of his value system, here is an excerpt from Maverick:

To survive in modern times, a company must have an organizational structure that accepts change as its basic premise, lets tribal customs thrive, and fosters a power that is derived from respect, not rules. In other words, the successful companies will be the ones that put quality of life first. Do this and the rest - quality of product, productivity of workers, profits for all - will follow. At Semco we did away with strictures that dictate the “hows” and created fertile soil for differences. We gave people an opportunity to test, question, and disagree. We let them determine their own futures. We let them come and go as they wanted, work at home if they wished, set their own salaries, choose their own bosses. We let them change their minds and ours, prove us wrong when we are wrong, make us humbler. Such a system relishes change, which is the only antidote to the corporate brainwashing that has consigned giant businesses with brilliant pasts to uncertain futures. – Ricardo Semler

What is the Semco philosophy?

Semco is driven by a very clear philosophy, stop worrying about the bull shit control mechanisms, give people respect, empower them fully to do the work and the rest takes care of itself.  Another great quote from CEO Ricardo Semler:

We don’t want to know what time people came, how many hours they work, we want to negotiate and contract with them for much more important things that have to do with our survival, which is, what are they going to do this month?What are we going to get from them, what do they get from us? Out of this salary or value were paying and what do they get out of us in terms of gratification for their life? The rest to us is secondary. – Ricardo Semler

The rest to us is secondary.  This is so important!  How many times have you been in a meeting or talk with your manager and you thought to yourself, why does that even matter?  Why are you so focused on when I came to work, or what I did last night, or why my shirt isn’t tucked in perfectly?  I got my work done, I play well with the team and I’m working hard every day! Here is another gem by Ricardo which really resonates with my personal views on how workplaces should be run:

30% of peoples time is spent trying to understand why people make more than they do, how come some people came late, why weren’t you at the meeting, can you do this by Wednesday at 6 o clock, it’s all very silly and there’s an enormous waste and of course at a certain point in time, people just start dumbing down and they say, this is just too much work, what do you want me to do? I’ll just do my 9 to 5 thing, i’ll learn how to survive in this environment – Ricardo Semler

This is really what bugs me the most, our traditional top-down management is not only bad for business and bad for employees health, it also sucks the life out of well meaning employees.  Surviving instead of thriving and it’s probably the saddest aspect of our workplace culture today.

10 Reasons the Semco system works

These ideas of participative management and industrial democracy were made popular by great thinkers like Robert Townsend, Douglas McGregor and others but Semler brought them to life with Semco.  Until Semco, the ideas were never put into practice on such a scale.  Yet, nobody else has been able to recreate a similar work culture (if you know of one, please comment and let me know!) so why does it work for Semco and not others?

1 - Values 

• I write a lot on this blog about the importance of values, and I feel there is no exception here.  Ricardo fundamentally believes in human equality and the importance of each individual, otherwise there is no way he could commit to such a mission.  These values originated from him, but they’ve now permeated throughout the organization and every individual believes in them.

2 - Consistency

• This is an extension of values, because when your values are solid and clear, your behaviors and actions will flow from that.  There are no contradictory policies that would confuse employees.  Everyone is equal and all aspects of the organization from salary, profit sharing, job titles, power, working hours, leadership, and vacations reflect that.

3 - Peer Pressure

• There is nothing more effective for keeping order than peer pressure.  All the rules in the world can’t replace the power of your friends and colleagues holding you accountable.  It’s much more meaningful than a top down approach.  The pressure is real, it has teeth since peers can come together and fire employees that aren’t doing their job.

4 - Profit Sharing

• Touchy feely open management is nothing without something real to back it up, and 23% pre-tax profit sharing is as real as it gets.  Everyone is motivated because they know they will get rewarded for their hard work, and it also ensures that peer pressure is working well.  They also get creative with this, giving employees the option of deferring 25% of their salary until the end of the year, at which time they might get a bonus resulting in a 150% of their original salary depending on the business unit’s performance.

5 - Empowerment

• Giving people freedom and responsibility without the tools to get things done is a recipe for disaster.  All opinions are heard and there is value in the work of every employee.Nobody has an excuse for why they can’t get things done.

6 - Small Business Units

• Each business unit is small enough so that everyone involved understands everything that is going on and the outcomes.No way people can self organize if a unit is hundreds of people large.The magic number for the maximum effective size for a group is 150 and Semco will not allow a business unit to go beyond that.

7 - Total Transparency

• Semco goes to great lengths to ensure everyone knows how their financials are, even to the extent of displaying them in an easy to understand cartoon. There are no secrets, and this demonstrates trust and respect.

8 - No Symbols of Inequality

• There are no offices with huge windows, reserved parking spaces or other symbols that clearly show differences between employees.Everyone plays by the same rules, and everyone feels valued.

9 - Purpose

• Purpose is the cheapest way to align an organization.  When everybody feels their works is valuable, they know why they are doing it and take pride in it, things naturally align themselves. Everyone feels like they are part of something important.

10 - Long Term Thinking/Private Company

• Can you change corporate culture in a few days, months, even years?  Likely not, particularly if it is deeply ingrained.  Also, how quickly do managers resort to short term solutions such as layoffs, budget cuts or other forms of control to try and reduce expenses the moment things go badly?  Even under deep pressure, the company must stay the course and believe in the value of the open system.  You can bend but you can’t break and revert to old school management.With private companies this is probably a lot easier than with public companies that are measured on quarterly performance.

Conclusion

These are just some of the many reasons the Semco system works, but to me it’s just common sense.  Cut the bull shit, give people the freedom, respect and tools they need to get things done and they will perform.  Managers spend too much time focusing on controls, and it has led to an embarrassing amount of disengagement (only 1/3 of employees are actively engaged).

There is also far too much hand holding in our society.  Not only do people not have the freedom to get things done, we have a nanny state of controls from the household to the government. Individuals are bound by rules, and a rules based society is always going to underperform a principles based society.

I’m not sure where 9-5, Monday to Friday originated from, but a person’s life is far too complex and dynamic to fit in such a rigid schedule.  Everyone works a little differently, and with technology and the ability to telecommute, I don’t see why we can’t push for greater flexibility and autonomy at work.

Hopefully Semco can serve as a model for more organizations to emulate, if they did, the world would be a much, MUCH better place.

See more on why it pays to treat employees well:

Number 1 Reason Executives Fail to Engage Employees

Freedom Inc. – Book Commentary on a very Similar Theme

Employee Engagement. What, how and why.

Who Doesn’t Love Shopping at Costco?

Employee Engagement Value Chain

Out of this world: Doing things the Semco way (Journal Article by Ricardo Semler); Global Business and Organizational Excellence (July 2007), 26 (5), pg. 13-21