Managing Without Managers

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Managing Without
Managers

by Ricardo Semler

Harvard Business Review
Reprint 89509

HBR

SEPTEMBER–OCTOBER 1989

Managing Without Managers
by Ricardo Semler

I

n 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. This may sound like an unconventional way to run

a business, but it seems to work. Close to financial
disaster in 1980, Semco is now one of Brazil’s fastestgrowing companies, with a profit margin in 1988 of 10% on sales of $37 million. Our five factories produce a range of sophisticated products, including marine pumps, digital scanners, commercial dishwashers, truck filters, and mixing equipment for everything

from bubble gum to rocket fuel. Our customers include
Alcoa, Saab, and General Motors. We’ve built a number
of cookie factories for Nabisco, Nestlé, and United
Biscuits. Our multinational competitors include AMF,
Worthington Industries, Mitsubishi Heavy Industries, and Carrier. 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 of mouth generates up to 300 applications for
every available position. The top five managers—we
call them counselors—include a former human
resources director of Ford Brazil, a 15-year veteran

Chrysler executive, and a man who left his job as
president of a larger company to come to Semco.
When I joined the company in 1980, 27 years after
my father founded it, Semco had about 100 employees, manufactured hydraulic pumps for ships, generated about $4 million in revenues, and teetered on the brink of catastrophe. All through 1981 and 1982, we

ran from bank to bank looking for loans, and we
fought persistent, well-founded rumors that the company was in danger of going under. We often stayed through the night reading files and searching the desk
drawers of veteran executives for clues about contracts long since privately made and privately forgotten. Most managers and outside board members agreed
on two immediate needs: to professionalize and to
diversify. In fact, both of these measures had been
discussed for years but had never progressed beyond
wishful thinking.
For two years, holding on by our fingertips, we
sought licenses to manufacture other companies’ products in Brazil. We traveled constantly. I remember one day being in Oslo for breakfast, New York for lunch,
Cincinnati for dinner, and San Francisco for the night.
The obstacles were great. Our company lacked an
Ricardo Semler, 30, is president of Semco S/A, Brazil’s
largest marine and food-processing machinery manufacturer, and his book, Turning the Tables, has been on Brazil’s best-seller list for 60 weeks. He is vice president of the Federation of Industries of Brazil and a board member of

SOS Atlantic Forest, Brazil’s foremost environmental defense organization.

Copyright © 1989 by the President and Fellows of Harvard College. All rights reserved.

international reputation—and so did our country.
Brazil’s political eccentricities and draconian business regulations scared away many companies. Still, good luck and a relentless program of beating
the corporate bushes on four continents finally paid
off. By 1982, we had signed seven license agreements.
Our marine division—once the entire company—was
now down to 60% of total sales. Moreover, the managers and directors were all professionals with no connection to the family.
With Semco back on its feet, we entered an acquisitions phase that cost millions of dollars in expenditures and...
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