of corporate leaders from around the world have visited São Paulo to find out
what makes Semco SA,
the Brazilian marine and food-processing machinery manufacturer, tick. Some of
Pakistan’s leading entrepreneurs should do the same, particularly those from
established family-owned businesses that are poised for significant growth in
the coming years.
Semler has become well-known internationally for creating the world's most
unusual workplace. Semler's management philosophy of empowering employees and
looking at corporate structures in new ways is a serious challenge to the traditional
model of the corporate pyramid. Imagine a manufacturing company in a developing
country, with over 3000 employees, without a formal structure. It has no
organizational chart. There's no business plan or company strategy - no
two-year or five-year plan, no goal or mission statement, no long-term budget.
The company often does not have a fixed CEO. There are no vice presidents or
chief officers for information technology or operations. There are no standards
or practices. There's no human resources department. There are no career plans,
no job descriptions or employee contracts. No one approves reports or expense
accounts. Supervision or monitoring of workers is rare indeed. Most
importantly, success is not measured only in profit and growth. This may appear
impossible, even ridiculous at first. But we find a glaringly inspiring example
in Semco SA.
Prof Charles Handy is regarded as one
of the most important and influential business thinkers of our times. I found
his thoughts in his book, The Age of Unreason (1989) refreshingly radical and
inspiring and they continue to guide management thinking to this day. Since Handy is
known for his unconventional ideas on management, it is not surprising to see
his support of
the “upside-down” ways of Ricardo Semler.
Semler has successfully demonstrated that management innovations which leverage
human capital can be made to work in organizations to achieve greater customer
satisfaction, better profitability and more endurance, even in a country like
While Brazil's economy
is progressive and regionally important, the problems of widespread state
bureaucracy, corruption, poverty and illiteracy (pre-literacy) are still major
barriers to further its development, much like in Pakistan. For example, the poorest one-fifth of Brazil's 182 million people account
for only a 2.4% share of the national income. Brazil is second only to South
Africa in a world ranking of income inequality. According to 2003 data, about
one-fifth of the population live on less than US$2 a day and 8% live on less
than US$1 a day. Brazil's Northeast contains the single largest concentration
of rural poverty in Latin America.
Despite the economic and social challenges in his country, Semler was able to
turnaround his company into one that is admired the world over. Given below is
some background information on Semco:
Semco, that manufactures over two thousand different products including
industrial pumps, cooling towers etc., and also provides environmental and
internet services, saw its revenues growing from $32 million in 1990 to $212
million in 2003. It achieved this growth rate in an economic environment
characterized by staggering inflation, and chaotic national economic policy in
Between 1982 and 1998, Semco's productivity increased nearly sevenfold and
profits rose fivefold. Semco was also one of the most sought after Brazilian
companies as far as employment was concerned. Turnover among its 3,000
employees was about 1% during the period 1994 to 2004. Repeat customers
accounted for around 80% of Semco's 2003 annual revenues. The culture at Semco
was unique in the sense that there were no power-packed job titles; employees
including top managers themselves did the photocopying, sent faxes, typed
letters, and made and received phone calls. There were no executive dining
rooms, and parking was strictly first-come, first-served.
Organizational profits were shared with the employees and the salaries were set
by the employees themselves. Behind this "maverick" organization was
Semler. Wrote Semler, "If you ask me to describe it (Semco) in conventional
business terms, I'd have to admit I have no idea what business Semco is in. For
years, I have resisted defining Semco for a simple reason: Once you say what
business you're in, you create boundaries for your employees, you restrict
their thinking and give them a reason to ignore new opportunities."
Semler's way of thinking resulted in an organization which had no conventional
structure, no organizational chart; no fixed CEO, no VP's, CFO's, COO's or
CIO's. There was no long term strategic business plans or dress codes for the employees. Some of the important
organizational decisions like relocating a unit or acquiring a company were
taken on the basis of employees' votes.
It all started with Semler's father, Antionio Curt Semler, an Austrian-born
engineer, who migrated to Argentina in 1937. A visit to Brazil in 1952 prompted
him to think about the prospects a "vast, undeveloped country" like
During this time, he was working on a centrifuge technology capable of
separating oil from vegetables. With an urge to start his own business, he
selected the city of Sao Paulo to start his venture, Semco, a contraction of
Semler & Co, in 1953. Soon after, he obtained a patent for his technology.
Through the 1960s and 1970s, Semco was mainly a manufacturer of marine pumps.
In the late 1960s, ninety percent of the sales of Semco were to the Brazilian
shipbuilding industry. Semco was a hierarchical organization with twelve layers
of management. According to a Fortune article, "Fear was the governing
principle. In those days, guards patrolled the factory floor, timed people's
trips to the bathroom, and frisked workers as they left the plant. Anyone
unlucky enough to break a piece of equipment would replace it out of his own pocket.”
According to Semler it was a company "with a pyramidal structure and a
rule for every contingency." Sounds familiar?
All this changed, when, in 1980, at the age of 21, Semler took over as the CEO
of Semco. Semler's views on running the company were completely different from
those of his father. He felt that the company in its existing form was too
rigid. He wanted to replace the old way of doing business and planning with a
participatory style of management. But the old guard at Semco was not open to
this, with the result that Semler fired two thirds of the top management.
Commenting on this decision, he later said, "The only solution was to make
a radical shift in the direction and capabilities of the company, and that
included changing the majority of the leaders and creating a new mentality.
This bordered on the irresponsible in terms of scope and speed, but in the end,
saved us. There might have been a safer or a more mature way of doing this, but
I was 21 at the time."
Semler has been profiled
in more than 200 magazines and newspapers, including the Wall Street Journal,
Financial Times and Fortune. He was also profiled in Time's special edition,
Time 100, which is published every 20 years to highlight leaders of the globe.
He was also named one of the Global Leaders of Tomorrow by the World Economic
Forum in Switzerland and is one of the world's most sought-after business
He has appeared on television and radio on four continents and has lectured to
audiences around the world. He also consults with major companies, including
some of the largest car companies, cable channels and telecom firms. CIO
magazine, using an elite jury that included Tom Peters, Jim Champy and Michael
Hammer, selected Semco as the only Latin American company among the most
successfully re-engineered companies in the world. The BBC included Semco in
its 'Re-engineering The Business', a series focusing on the world's five most
successful management structures.
Semler was named Brazil's 'Business Leader of the Year' in both 1992 and 1990,
the same year America Economia (The Wall Street Journals Spanish language
magazine) named him Latin American Businessman of the Year. A Harvard Business
School alumnus, Semler speaks fluent English. He is vice president of the
Federation of Industries of Brazil and a board member of the SOS Atlantic
Forest, Brazil's foremost environmental defense organization.
out of your comfort zones, empower yourself and those around you, and take the bold
steps needed for your businesses to excel.