About Semco Case

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A ‘Maverick’ Organization

I don’t want to know where SEMCO is headed. It doesn’t unnerve me to see nothing on the company’s horizon. I want SEMCO and its employees to ramble through their days, to use instinct, opportunity, and ingenuity to choose projects and ventures. - Ricardo Semler, CEO, SEMCO1.

Admiring though many are, few have tried to copy him. It seems that the way he works, letting his employees choose what they do, where and when they do it, and even how they get paid, is too upside-down for most managers, But, just maybe his is the way for the new world of business. -Charles Handy, in “The Handy Guide to the Gurus of Management”2.

SEMCO SA (SEMCO), a Brazilian company which manufactures over two thousand different products including industrial pumps, cooling towers etc. and also provide environmental and Internet services, saw its revenues growing from $32 mn in 1990 to $212 mn in 2003 (Refer to Exhibit I). It achieved this growth rate in an economic environment characterized by staggering inflation, and chaotic national economic policy in Brazil.3 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.4 ------------------------------------------------------------------------------------------------------------ 1. Ricardo Semler, The Seven Day Weekend: Changing the Way Work Works, Portfolio 2004. 2. www.bbc.co.uk

3. Brazil defaulted on its foreign debt in 1981 and the nation’s inflation rate touched 3000% in the year 1994. The gross industrial product was down by 14%, 11%, and 9% in 1990, 1991, and 1992 respectively, and between 1990 and 1994, 28% of Brazil’s capital goods manufacturers went bankrupt. 4. Ricardo Semler, The Seven Day Weekend: Changing the Way Work Works, Portfolio 2004. ---------------------------------------------------------------------------------------------------------------------------------

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 fist-come, first-served. Organizational profits were shared with the employees and the salaries were set by the employees themselves. Behind this ‘maverick’ organization was Ricardo Semler (Semler), the CEO of the company who referred to himself as the Chief Enzyme Officer. Wrote Semler, “If you ask me to describe it 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.”5 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 were no long-term strategic business plans, no career plans, no job descriptions 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.

|Exhibit 1: Annual Revenue of Semco SA | |Annual Revenues of SEMCO ($ mn) | |1990 |32 | |1994 |35 | |1996 |50 | |1997 |70 | |1998 |95...
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