Management: Give 'em an inch and gain by miles: Allowing staff greater freedom transformed the fortunes of Semco

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The Independent Online
WHEN Ricardo Semler took over at the helm of Semco 15 years ago, it was 'a one-product company with a handful of customers' and sales of about pounds 3m a year. Now turnover is more than six times that figure, in line with the expansion of the product range and the growth of the workforce.

But that is not the only change at Semco, the Brazilian manufacturer of industrial equipment. Over the years, Mr Semler, still only in his mid- thirties, has transformed the way in which it is run. In the quest for greater employee democracy, he and his colleagues have thrown out so many of the rules of business organisation that companies regarded as innovators in management systems have flocked to his office in Sao Paulo to see how it is done.

When Maverick], Mr Semler's book about his experiences, is published worldwide in September, their numbers are likely to swell. The author is reluctant to view it as a model, but the book has certainly struck a chord. After a modest initial response, it has become Brazil's biggest-selling non-fiction book ever. Charles Handy, the British management guru, has said it 'revived my faith in human beings and my hope for businesses everywhere'.

At Semco, there are no official starting and finishing times, few job titles and no dress code. Mr Semler is not even the outright boss, but one of six people who share the chief executive position - and 'make it a much more collegiate thing', he says.

This is all part of an effort to get away from the traditional command and control attitudes in business. 'We're not running a boarding school. We don't care about when you come into work. We don't care about the days you work.'

It seems a very carefree arrangement, but he insists it is not abused; if you treat people as responsible adults, they will behave that way.

Nothing demonstrates this more than what may be the company's most radical innovation: allowing many workers to set their own salaries.

The thinking behind this is that the business does not know enough to decide how much individuals should be paid. It can find out what similar organisations are paying and it knows about internal parity. But just as important, in Mr Semler's view, are people's own expectations and lifestyles, and the point they believe they have reached on their career paths. Only individuals can know these things, so why not give them the other information and let them set their own salaries? Undervaluing is much more common than taking advantage of the company by demanding too much, Mr Semler insists.

Sharing information with the workforce provides an escape from the old confrontational view that workers must get as much as they can while the business is doing well because they know they will suffer in a downturn. Instead, profit- related pay is taken to an extreme, with profits distribution capable of doubling many salaries. As a result, the company is not left bearing uncomfortably high base salaries when times are hard, and the workers realise that the bonus 'reflects what it really is - a temporary situation'. Staff turnover is less than 1 per cent.

Mr Semler admits the transformation has not been without pain and that there have been false starts and changes of direction. 'It took us 10 years to transform the car park to a first-come, first-served system,' he said.

He also emphasises that Semco is a serious business, making commercial dishwashers, pumps and other pieces of equipment used around the world. 'If the things we make don't work, we have big problems,' he says, suggesting that if change could work at Semco, it could anywhere.

(Photograph omitted)