Keep Asking Why

On a routine visit to one of his factories, Ricardo Semler collapsed and passed out. He was just 25 years old.

For the last 4 years, Semler had been at the helm of his Dad’s company Semco; a São Paulo based supplier of major shipbuilding equipment.

When Ricardo took over, Semco’s earnings were in free-fall. The Brazilian shipping industry was in deep decline, and senior management had voted against diversifying into other businesses. So Ricardo got to work on re-igniting growth and putting the company on a path to profit.

It wasn’t easy. His senior management team insisted that Semco wait for the shipping industry to bounce back, but Ricardo strongly disagreed. So he fired 60% of them in a single afternoon.

They were replaced with hard-hitting, results-focussed leaders. And the company’s portfolio was expanded through numerous strategic acquisitions.

Semco was back in the black. But unfortunately, Ricardo had blacked out.

Doctors diagnosed him with severe stress. Semco’s aggressive turnaround had worked, but it had taken its toll on its young CEO.

And Ricardo’s health wasn’t the only thing to suffer.

With the unrelenting focus on numbers, Semco had become a miserable place to work. Although highly organised, it was hard to get staff to perform to a standard, and nobody came to work with a smile on their face.

That got Ricardo thinking.

Without our people, what are we left with?

Command and control

I can’t remember the last time I was given an employee handbook. But that doesn’t mean that I haven’t worked in plenty of environments with strongly enforced rules.

Rules about how to dress, what time to arrive, what time to leave, what to say, what not to say, how long to take for lunch. The list goes on.

The question is, do these rules make people more productive?

Ricardo Semler asked exactly the same thing.

If he removed the classic corporate structure, and stripped away all of the command-and-control restrictions, would it have a positive impact on morale?

Name your price

Semco’s staff canteen is much like any other.

Fail to look closely enough and you might not spot the computer hidden in the corner. But it’s not the computer itself that separates this canteen from any other, but the information contained on it.

This computer houses all of the salary details for every employee within the company; from the cleaner to Semler himself. It also contains benchmarked, pay details at comparable companies to Semco, as well as full details of how much Semco makes as an organisation.

And it’s all freely available for anyone to look at, at any time.

Why?

Because at Semco, employees set their own compensation.

And it’s not just salaries that Semco’s staff get to decide.

They get to choose their own bosses too.

Semco doesn’t want anyone as a leader, unless they’ve been interviewed and approved by their future subordinates. So, every six months, everyone fills out an anonymous 35-item questionnaire to tell Semco how happy they are with their boss. The results are publicly posted. Anyone falling below an acceptable grade is deemed no longer fit to manage.

Radical workplace initiatives to appeal to Millennials?

Not quite.

Ricardo Semler has been doing this since the 1980’s.

Keep asking why

Einstein once quipped that the definition of insanity is “doing the same thing over and over, and expecting different results.”

How often have you stopped and asked “are we doing this because we truly believe in it, or because it’s the way we’ve always done it?”

Ricardo Semler hasn’t stopped asking “why” for over 30 years.

  • Why do we have a headquarters?
  • Why do we set a yearly budget?
  • Why do we have an organisation chart?
  • Why do we have job titles?
  • Why do we wear suits to work?

And as a result, he’s abolished all of them.

Semler isn’t your average CEO. He doesn’t have an office, a secretary, a company car or even a parking space. He has no interest in seeing people’s expense reports, or knowing how much holiday they are taking. He doesn’t even want to know where they are working.

All meetings at Semco are entirely voluntary. If nobody shows up, it means the topic isn’t something people value. Anyone who does show up is encouraged to leave if they get bored. If no one’s left when it comes to assigning tasks, they simply ask “should we really be doing this?”

Semco’s board has two seats permanently open. The first two employees that show up get to join the board meeting – and their vote counts. These seats have the same voting rights as any other board member.

Semco has had everyone from cleaning staff, to security guards sat at their boardroom table. Semler believes this approach helps keep the company honest.

It’s all about the people

When Ricardo Semler took over the reins at Semco it was losing money, and had just 100 employees.

It now has 3,000 employees, and has had 27% year-on-year growth for over 25 years. In the worst 10-year recession in Brazil’s history, Semco’s revenues grew by 600%, profits rose by 500% and productivity was up 700%.

The company certainly doesn’t struggle with attracting talent. It receives an average of 850 CV’s to every one vacancy. And has just 1% staff turnover.

Ricardo Semler transformed a small family business into a highly profitable manufacturing, services and high-tech powerhouse.

And he did it by focussing on the people.

Recommended watch | Ricardo at TED

Ricardo Semler wants every business to design and organise for wisdom.

In October 2014, he addressed the audience at TEDGlobal with this inspiring talk: