Essay on Disorganization at Semco: Human Resources Practices as a Strategic Advantage

In the year 1953, Antonio Curt Semler established Semco in Sao Paulo, Brazil. Semco was a popular marine pump manufacturer with high supply to Brazil’s shipbuilding industry. Since the beginning, the organizational structure in the company was a hierarchy based where the employees of the company were governed by a set of regulations and policies due to fear of the overriding maxim of the company. Ricardo Semler took over the company in the year 1982 when the company was facing a financial crisis. Initially, Semler was more focused on improving the financial condition of Semco and fired 66% of the company executives. Semler continued with the existing organizational structure that needs managers on top of employees to push them for long hours. The long hours to reach the targets have increased the stress level and ruined the management-employee relation This stressful situation continues until the stress took a toll on Semler during one of his routine factory visits as he fainted on the shop floor due to stress. Learning from this incident, Semler changes his entire organizational structure to have a better work-life balance, for every employee in the Semco including Semler himself. The Semco moved towards disorganization structure from hierarchy structure. The Semco removed the unnecessary processes such as sign-ins and sign-outs, security checks along with the job roles such as receptionist and personal assistant. The Semco started encouraging its employees to do their work such as receiving a guest, making coffee, calling, and faxing on their own. The privileges given to top management were removed following allowing work from home for their employees. The organization eventually moved towards a democratic company where the decision-making is in the hands of employees rather than a bunch of people at the top. In brief, management structure transformed from top-down to a horizontal structure, where each employee is actively participating in decision making, creating new business ideas and proposals, taking responsibilities, working flexibly to achieve targets set by them only (Draft).

The organizational structure within Semco has transformed from bureaucratic and authoritarian to decentralized and organic structure (Draft). This unique structure can be classified into the horizontal organizational design. This organizational design consists of three concentric circles, two bigger circles surrounding a small one in the center. The small circle has 6 candidates, including Semler to vice president, called ‘Counselors’. The leaders from each business division are accommodated in the second circle called ‘Partners’. Every employee of the Semco is accommodated in the outermost circle and called as ‘Associates’. Organizational levels were reduced to 3 from 12 with this decentralized and horizontal organizational design (Maresco, and York). Every person in these three levels has the right of one vote including Semler which benefited from gaining the trust of everyone in the organization. The new organizational design has increased empowerment amongst employees as Semco allows flexible time to everyone as long as work is completed. The teams and projects in Semco are evaluated on a half-yearly basis. Semco has reduced the administrative portfolios by enlarging the scope of existing employees. This is supported by job rotation, resulting in improved efficiency (Draft).

There are no written human resource policies and a set of regulations in the Semco. However, Semco has a “Survival Manual” which resembles the comic book, help a new employee to get familiar with the organization. The comic-book style manual shows the idea of disorganization of the business which is completely different from the conventional organization. The non-written human resource policies of Semco are based on the principles of common sense rather than a strict penal code which is an add-on to its autonomous style of working. The primary driving force of employees within Semco is their self-interest and autonomy, and the policies of human resources support the same. According to Clovis Bojikian, director of human resources, “Human resources within Semco doesn’t know the number of hours employees are working as long as the job is getting done, they are free to manage their time” (Draft).

The Semco experienced financial trouble due to the economic crisis in Brazil at the beginning of 1990. Instead of reducing the employees, the employees of Semco took the initiative to take a 30% reduction in wages whereas management took a 40% reduction in wages. The reduction in wages improved the profit of Semco by 39% (Draft). Improvement of this profit was observed during the months when there is ‘No Sale’. The Semco encouraged its employees to take up entrepreneurship to start their satellite firms that will supply the products and assemblies to Semco under the subcontract. This move by Semco reduced the cost per employee as well as saved employees traveling time to work. 66% of the new products were manufactured through these vendors. During the worst period of Brazil’s economy, Semco remain relatively flexible and successful due to the power its employees and executive had through which they decided to take a reduction in wages and promote entrepreneurship amongst its employees (Draft).

The case study provides the eventful scenario of Semco and its journey from the strict hierarchical organizational structure to disorganization and autonomous organizational structure. The new structure seems unorthodox, however, it offers tremendous benefits, such as employee involvement in decision making, high efficiency of the workforce, rapid decision making and, a low attrition rate. The success of this organizational structure can be observed through its flexibility and employee involvement during the economic crisis in Brazil.

Work cited

Daft, Richard L. Organization Theory & Design. 12th ed., Cengage Learning, 2015, pp. 625-634.

Maresco, Peter, and Christopher York. “Ricardo Semler: Creating Organizational Change Through Employee Empowered Leadership”. Semcostyle.Org, 2005, https://semcostyle.org/articles/2005/01/ricardo-semler-creating-organizational-change-through-employee-empowered-leadership. Accessed 3 Nov 2018.