Ricardo Semler’s Leadership at Semco Partners

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Table of Contents

Introduction
Semler’s background
Semco’s change
Generalizability
Conclusion

Introduction

For the past several decades, the world of industrialisation and globalisation has progressed extensively with dynamic organisational leadership and behavioural traits proving a hotly contested matter in the management literature. Organisational planners and policy makers have continuously noted issues related to organisational performance. In whatever circumstances leadership and management form an imperative background into understanding several aspects related to organisational governance and relative organisational development. Since the replacement of agrarian epoch by the technologically advance industrial regime numerous decades ago, the attention of scientists, philosophers and researchers has shifted dramatically from unknown convoluted leadership systems of confined traditions to dynamic transformational leadership and management strategies. This study analyses the case of Ricardo Semler and Semco companies to provide insight into this leadership-problem.

Semler’s background

Could the father, Antonio Semler, have changed the organization, why or why not?

The case of Ricardo Semler and Semco companies reflects typically on the transformational leadership from the traditional Brazilian company’s organisational leadership structure that involved pyramidal headship. In the 1950s, a young Australian man, Antonio Curt Semler fall into the attractions of the Brazilian rapidly expanding economy, and migrated from Australia to Sao Paulo in Brazil to venture in businesses. Antonio Curt Semler was an engineer by profession and his interest in developing the career grew exponentially into business related to this field. Having a well-built management experience obtained from considerable time running a plant in Argentina, Antonio founded Semler & Company and began manufacturing centrifuges. Antonio adopted the autocratic and tyrannical leadership system that was common in several Brazilian organisations in that era. The company grew exponentially for a period of one decade and become a market leader at Sao Paulo in Brazil, principally because of the acquisition of worthwhile business indentures involving the provision of marine pumps to the Brazilian military. Since all things went well, the father became arrogant and found no reason to employ new management techniques apart from the common paternalistic leadership that existed during that moment.

Are external factors the only reason to change an organization’s structure?

Semler & Company reached its peak as Antonio extended the company’s operations by investing extensively in providing the marine pumps to the government. Overwhelmingly, Semler & Company in the end became a successful company. Antonio’s son named Ricardo Semler studied overseas but after graduating with an MBA, he joined his dad back in Brazil and joined the company. Initially, Ricardo’s father continuously practised management style based on historical Latin American system that entailed paternalistic and pyramidal autocratic leadership that kept the company at stake. At the advent of his power, Brazil was undergoing serious economic crisis. Economic condition was the main external factor that affected the organisation and Ricardo considered it in his restructuring idea. Ricardo noticed the father’s mistakes, weighted the situation in the external environment (economic crisis) and the internal environment, and decided to introduce an organisational philosophy of democratic management that involved interactive leadership between management and workers with pillars that involved more employee orientation and motivation to enhance corporate growth.

What was the economy of Brazil like from the early 1980s until 1998?

Semler & Company under the management of Ricardo gradually underwent management and economic transformation for over a decade. The Brazilian economy during the decade of 1980 to1990 was undergoing economic recession with several Multinational and Small business enterprises suffering from downturns, which was the moment when Semler transformed to Semco as the entire Brazilian government was suffering from the economic crunch. During this period, most Brazilian organisations and companies suffered from high retrenchments, currency devaluations, hyperinflation, and virtual termination of the entire industrial production. Ricardo constantly considered both internal organisational factors including management as core to productivity as well as external factors including the Brazilian economic condition to restructure Semler & Company. Through tactful management skills, Ricardo managed to overcome internal and external challenges and brought Semler to economic triumph the moment when the Brazilian government was in constant economic recession. The younger Semler continuously realised his father’s management issues and quickly solved them.

Semco’s transformation came during a dramatic economic crisis in the Brazilian economy. Could it have come if things were going well?

The answer is no. The economic crises that hit hard the entire business panorama in Brazil might have triggered numerous changes in the organisational leadership and behaviour of companies including Semler. During the moment of economic crises between 1980 and 1990, Brazil survived through erratic economy that augmented the cases of unemployment, hyperinflation, and general cessation of industrial production. This aspect indicated that organisations resorted to retrenchment programs to reduce the workforce to enable them accommodate few expenses and avoid financial downbeats. It was during this moment that Semler became more reliant on sales from shipbuilding products as their existed no product diversification under Antonio’s regime. By the company depending on a single product, chances of collapse became eminent due to the prevailing economic situation. The prevailing economic crisis in Brazil triggered Ricardo’s interest to restructure the organisation management as well as the company’s production system. With the democratic leadership changes and production diversification, Ricardo managed to retain workforce and enhance production and sales.

Semco’s change

Were Semco’s changes too drastic? Were they even necessary?

Based on the prevailing conditions that were constantly hampering the economic growth of Semler, the younger Semler found it necessary to undertake restricting of the organisation to restore its initial position. Ricardo undertook numerous developmental changes including changing the initial name of the company, changed the administrative structure including eliminating all the previous secretarial positions and implementing an antagonistic product diversification approach that marked the whole change of the entire organisation. Despite the fact, that Ricardo’s changes actually brought significant management and economic development changes across the organisation, the changes seemed drastic but necessary. For the democratic management changes to become more effective, it was necessary for Ricardo to change the initial name of the organisation, as well as replace the administrative workforce to fit the new profile that required administrator with typically different management perspectives. During the father’s regime, Semler served under authoritarian governance style that could not fit automatically with the changes that Ricardo introduced in the management.

Why were administrative and secretarial positions eliminated?

The main concept behind the re-structuring of Semler by the young Ricardo was to introduce a new management scheme. Ricardo renamed the company Semco. Changing an organisational name in any case, allows the management to have time to develop new strategies to incorporate in the initial business and inculcates confidence to customers that indeed it is a fresh beginning. Allowance of the initial workforce to commence with their operations in the offices, especially the administrative unit would hamper Ricardo’s efforts to instil the required changes in the organisation. The only everlasting solution to the management structure in Semler would be introducing policies that directly influence the form of leadership that existed in the company. Beginning from the image reformation, workforce restructuring and management streamlining, the organisation became more business influential and appealing to customers and workers worse motivation seemed affected by the previous tyrannical strategies. Semler & Company just as other organisations at Sao Paulo in Brazil were at that juncture suffering from economic crunches and consequently could lead to collapse.

What outcome would you have predicted had the company not changed its structure?

With the prevailing economic conditions in Brazil and business unrest across this country, Semler was nearing total collapse if Ricardo failed to embed the desirable changes in Semler’s leadership system, organisational structure and the production paradigm. The three organisational aspects are inseparable with each of the factors depending on the wake or fall of another. Organisational management must be available to provide directions and policies to govern corporate growth, administrative unit is necessary to oversee the progress and the production finally depends on the two aspects that control inputs and market strategies. During the moment of national or global economic crunch, manager must remain firm and implement policies that maintain or restore organisational performance through critical analyses of both internal and external environments. Change in the organisation structure reduced the growing economic tension, enhanced customers confidence as product diversification acted as a competitive advantage. The outcome of the status quo could possibly be the collapse of Semler.

How far should corporate democracy be carried?

Corporate democracy is the form of organisational leadership that involves commercial management aspects that allow civilised and efficient business environment to both internal stakeholders to external business partners. Corporate democracy carries democratic principles stretching from international governance to external business corporation that allows interactive business involvement consequently extending to commercial growth. Ricardo’s participatory leadership allowed extensive business interactions with potential business investors that enabled Semco Company to strive throughout the decade with economic crisis. Ricardo allowed far-reaching corporate governance that involves internal employee participation and external investor’s involvement to strive throughout the era of Brazilian economic recession that marred development. Corporate democratic governance paved way for investors and workers to understand the management pressure in Semler during the beginning of 19^th century and enabled them to contribute comprehensively to commercial growth of Semler.

Semler took a great risk by encouraging a democratic system of profit sharing, hiring/firing, and salary stipulations. Why did his system work?

During the beginning of 19^th century at the full implementation of the policies of democratic leadership system, the government of Brazil imposed laws requiring two-year severance pay for companies practising retrenchment programs to employee. In this same period, the prevailing Brazilian laws of that moment forced companies to file bankruptcy as President Collor and his administration imposed restrictions on access to liquidity. Ricardo’s profit sharing technique as a component in corporate democratic governance in 1990s provided a significant management as the organisation could no longer manage the salaries and remunerations expenses. In this sense, Semco managed to survive through cost cutting. Through the profit sharing technique, workers salaries were capable of growing in double or triple times. Through such democratic profit sharing approach, Semco overcome the harsh economic situations, since it was capable of hiring and retaining workers at desirable pay during the moment of crisis. Through democratically selected committee and proper disbursement of profit sharing funds, payment complaints reduced and the company grew exponentially in spite the economic crisis.

Another significant approach that Ricardo employed during the economic crisis moment in Brazil included hiring and firing technique. Through corporate governance, the managers no longer had power and the company entrusted power to the workers through employees who decided on how to hire or fire the workforce. Through democratic voting, employees did not hesitate working hard. The company undertook democratic voting as the workforce rated managers on hundred percent scale where managers who did not perform as to the company’s expectation were liable to public shame. Any manager scoring less than seventy-five received public shame as the results of the vetting appeared on public boards of Semco Company. Through this, the manager’s performance and that of the employees steadily increased with every individual concerned with maintaining their job positioning. Ricardo also encouraged a democratic hiring process where new workers must attain three years prior working experience and above fifty of age. Through this, the pressure on recruitment reduced and the company maintained the existing workforce.

What view did Ricardo Semler have with respect to mistakes?

Ricardo had quite amazing view over the aspect of mistakes. As an aggressive manager driven by a passion to change forms of leadership in the organisations, Ricardo considered mistakes as natural. According to Ricardo, weak leadership entwined with hunger for power seems to be the probable cause of everlasting mistakes in organisations. The worst thing about management of people is to exercise excessive pressure on numerous people trying to control them not understanding that they are also controlling their own destiny. Ricardo believed that entrusting power on individuals gives them a sense of greater accountability and responsibility and no single person has control over the destiny of organisations. Ricardo’s belief rested upon the correctness of mistakes of the past to provide a brighter future of any professional oriented individual. Ricardo Semler believed that mistakes occur when an organisation or individuals lack a common goal or a suitable vision or even enthusiasm to drive them towards achievement.

During the first days of his management, Ricardo noticed that Semler was in the verge of collapse and therefore decided to work extremely hard to achieve the organisational productivity. According to the report, during the first year of his management at Semler & Company, the young Semler invested greater physical energy to save the awkward business from collapsing, only to realise that the effort had little progressive impact. Ricardo spent several hours working putting the workers into working shifts with an objective of restoring the company’s initial image. Ricardo Semler noticed that his efforts had no strategic vision, ‘a sense of lifelessness’ and lack of enthusiasm and depression in Semco. He resorted to change the form of his perception towards management and noticed that severe efforts triggered by lack of unity seem to be a senseless idea, which was the first and maybe the final mistake that Ricardo made as he gradually noticed that an organisation only strives through a common objective, mission, and a dream as well.

Generalizability

Can such participatory management work around the globe, why or why not?

The idea behind democratic leadership style since its development decades ago has elicited different reactions among leaders in different organisations. Participatory leadership is generally applicable across the world with several factors attributing to its consumption or its assumption. Across the world, democracy has been a constant cry for several countries with leaders having quite different perceptions over this form of management. The application of democratic leadership style has however depended upon several internal and external organisational aspects. Participatory leadership, despite being the most contemporary leadership scheme on constant use in the current world, remains a globally debated issue with its application differing from one organisation or country to another depending on the prevailing circumstances in the internal and external environments. However, the participatory leadership in the case of Semco Company sounds unique and unrealistic but applicable under enthusiastic democrats. Contrary to the Semco’s case, very few portions of democracy are being applicable in the real world of business and governance.

The current democratic processes in the management of business across the real world seem much differential from the case of Semco. The participatory leadership style will manage to work in some parts the globe, but clearly, chances of this approach manoeuvring across the world are minimal. In the contemporary world, the current structural difference across the world rests economic power with the world divided two portions: the developed and the developing world. The participatory management practiced across the world differs from one business to another depending on the organisational present situation and other external issues. Such participatory leadership is capable of working more in developed nations where organisational economic competence is diverse and stable. Contrary to developing nations where little investment and competition exists, democratic leadership is likely not to apply in the sense that investors use the advantage of the poor economic status of such nations to manipulate human resource. Cases of dictatorial or even autocratic management styles have been constant in poor developing nations.

Can it work in the UAE/GCC countries, why or why not?

Countries in the UAE and the GCC have continuously complained on the forms of leadership practiced by their leaders with the global industrial segment depending expansively on the presence of the UAE/GCC countries playing a significant role. Democracy in an organisation as postulated before typically depends on both internal and external environments. External business environment includes the corporate business societies, communities around the company, consumers, suppliers and several other stakeholders. The form of leadership in most of the global oil producing countries has consistently involved tyrannical means of administration with each leader feeling unsecured by the presence of the other. Stretching from the government that forms the external environment, the most commonly practiced forms of leadership seem to be despotic. This condition is likely to influence the form of leadership across organisations operating in the UAE and GCC. Terrorism and war activities have consistently been hampering the practising of democracy in the UAE and GCC.

Democracy cannot be successful if the environment does not support and oil-producing countries may continue suffering from the same if perception on natural resources does not reflect a sense of national development. Cases of autocratic leadership have existed in prominent GCC countries including Bahrain, Oman, Saudi Arabia, Qatar, and even Kuwait. According to prior studies undertaken to examine political and economic issues affecting the GCC and the UAE countries and issues surrounding political wrangles, almost all GCC countries employ monarchy leadership in some way. However, a slight degree of democracy seems to be popping up among some GCC countries for instance the national assembly in Kuwait, the chamber of deputies or council of representatives in Bahrain and even the Federal National Council in the UAE. However, it is only through the augmenting international urge to change leadership in such counties that substantial changes have emerged in recent decades.

Can one model work in all industries, across all sizes of companies?

Management is a diverse field with numerous challenges and confrontations depending on factors mentioned herein. Despite the fact that democratic leadership remains, the most anticipated and preferred leadership scheme, authoritarian and laissez faire administrative approaches are applicable as well depending on the prevailing conditions and certain external and internal forces. All forms of leadership or management strategies and styles vary depending on the kind of leaders, based on an individual’s natural personality. Theory might stress on certain leadership techniques omitting other important strategies that are imperative for organisational management, but practically all forms of leadership styles suite different personalities, different environments and different condition as well. Nonetheless, a blend of several leadership approaches may prove necessary and imperative to strive towards the desired corporate growth or even meet certain organisational demands including productivity, employee discipline, or even stiff market forces. Given several factors that determine changes in the application of certain leadership models, the diversity of administrative approaches varies.

What environmental factors are necessary for the participatory management structure to work?

As described earlier participatory leadership greatly depends on the prevailing circumstances within and without the organisation. Participatory leadership principally means a democratic inclusion of dynamic management aspects for the betterment of the organisation a sense where each single factor contributes to triumph or malfunction. The surrounding environment involves the adjacent community where the organisation is serving. The external business community forms an integral part of participatory leadership where their views play an imperative role. Precisely, for leadership to become a democratic process, the community surrounding the company or organisation form part of stakeholders. Once should acknowledge that all stakeholders are equally significant in the holistic development of an organisation. Socioeconomic factors like peace, security, and economic pressure are significant environmental factors that influence the success of implementation of participatory leadership within the business. Apart from the typical existence of human factor in the composition of the external environment influencing the participatory leadership, other business related factors form significant business environment.

The most influential and contemporary environmental factors that influence the strategies and success of participatory leadership styles is the consumer world. Consumer world forms the customer related participation issues and market pressure factors that have great influence on the development of the organisations. One of the most sensitive and respect business factor that forms the external environment is the consumer world where the relationship between the customer and the service or goods provider matters. It is through constant pressure from customers that force the organisation to change the forms of leadership strategies to meet the consumer needs. As demonstrated in the case of Semco, the consumer world that determines organisational profitability and growth makes it possible for participatory leadership to work with an elaborate interaction between workers and customers determining the production outcome. Through market pressure, leaders receive the situation with positivity and finds possible means of winning the market culture that in most cases calls for participative leadership to enable effective and informed decision making in organisations.

Conclusion

A business flickering in profits and enjoying market dominance seems to trigger greater public reputation than business deemed quaint and unattractive. During Antonio’s management epoch, and at the advent of the Semler Company, the government tenders and contracts enable the growth of the Semler Company, while management issues seemed unimportant. The rapidly expanding economy of Brazilian comforted everything in Semler and other organisations including the employee’s livelihood. However, the economic stress that blunted Brazilian economic stability was the beginning of problems that called for sobriety in organisational management. Ricardo’s shift from authoritarian governance to participatory democratic leadership seemed influential on the entire organisational development. Destroying statues quos is necessary for any change to remain effective in an organisation. Based on the results of this analysis, it is important for managers to remain flexible and creative in their leadership style to control business nature.

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