When Ricardo Semler took over Brazil-based Semco, he decided to lead his father’s company with a revolutionary idea: Treat people like adults and trust that they’ll make good decisions for the business.
So how did it turn out?
Twenty-three year old Jose Carlos Reis de Magalhaes (or “Zeca” as he’s known to his friends and colleagues) did all the right things—graduating from a top Brazilian business school and joining a venerable investment bank. But when he quit to join a new high-tech ventures unit at Semco shortly thereafter, his bosses were apoplectic.
Why give up the status, money, and prestige to work for what amounted to a startup?
Zeca’s no slacker either, regularly working twelve-hour days. The key is that he chooses which twelve hours to work.
Ricardo Semler, the eponymous “Sem” in Semco, tells this anecdote in his book The Seven-Day Weekend to illustrate the benefits of flexible work environments:
Shortly after he started at Semco, the Brazilian tennis champion Gustavo Kuerten played in the Roland Garros finals—France’s Wimbledon—where Kuerten was twice champion. An avid tennis fan, Zeca thought nothing of taking off whole days during the tournament. He didn’t philosophize over whether it was right or wrong, and he didn’t ask permission. The matches were played in the middle of the day, so Zeca simply made it clear he’d be home watching TV and would work at night instead, maybe. He didn’t miss a match, and his work didn’t suffer either.
Semco is known for giving its employees incredible amounts of autonomy, mastery, and purpose. Zeca and others take advantage of what Semco offers to increase their personal agility. They mold their work lives to match their personal lives, and are therefore happier and stay longer with the company.
But is Semco some tiny startup that it can give its employees this level of freedom? No. As it turns out, Semco made annual revenues of $212 million as of 2003. And it’s been growing at 40% every year since 1982.
What business is Semco in? Whatever business its employees decide it’s in. Semco’s employees use three criteria for deciding which industries to go into.
The Three Semco Criteria for Business
Semco’s businesses vary across a wide range of industries. So much so that you might wonder how it’s all the same company.
Semler’s father founded the company as a high-tech industrial mixer business. That unit still exists at Semco.
In the meantime, they’ve also expanded into industrial cooling towers, real estate, facility management, environmental consulting, HR outsourcing, and a host of other businesses. All told, Semco has ten or so distinct business units doing almost completely different things.
So how does Semco decide what ventures to get into?
- Complexity. Semco looks for “highly engineered” fields that have inherently high barriers to entry. Complexity keeps competitors out or behind, but it also means these fields are initially difficult to break through for Semco itself.
- Premium. Semco wants to offer the high-end product or service for the category so they can charge a premium price. Competing on price is a difficult game to play and prone to negative self-reinforcing loops.
- Uniqueness. Semco wants a unique offering in the industry. In Semler’s words, “We want to be only in businesses where our disappearance would cause our disheartened customers to complain loudly.”
What unites these disparate business units into one company is Semco’s culture. And culture is what The Seven-Day Weekend is all about.
Ricardo Semler: The Seven-Day Weekend Culture
1. Giving Up Control
One of the recurring themes of this book is the need—the absolute necessity—to give up control in order to cope with changes that are transforming the way we live and work. As counterintuitive as that sounds, it does not contradict the experience and values at the core of free market, democratic capitalism … Isn’t that what entrepreneurs do? They’re flexible, intuitive, nondogmatic; they take risks, make money, and have fun.
But many entrepreneurs—be they leaders of great or small enterprises—can’t bring themselves to let go.
Harsh controls are not only ineffective, they’re also largely an illusion.
Semco relies on its tough-minded employees to steer the company in new directions. Agile values self-organizing teams that are empowered to manage and direct their own work.
Semco implicitly understands the power of emergent strategy in a world that is changing rapidly. Its agility keeps it ahead of its more rigid, traditional competitors.
2. Trusting in Adults
Semco employees enjoy an incredible range of freedom when it comes to their work schedules. Much to the chagrin of critics and journalists, Semco has been doing it for twenty years without any major problems.
What’s the secret? Trusting adults to act like adults.
Do we really believe that responsible adults, whether interested or not, committed to the company or service or not, would simply fail to show up after promising to do so; that a journalist who understands the urgency of deadlines will go to the movies while the presses are standing still, waiting for his article to be submitted; that the woman who studied anesthetics for years will simply roll over in bed, thinking that the patient should have taken more care with his cholesterol?
… Come on. What a disheartening view of humankind.
Sadly, many companies in the U.S. are backsliding on the promise of trust. As companies ban remote work left and right, the signal they are sending to their employees is that they don’t trust them to behave like adults.
3. The Structure of Non-Structure
Semco has no official structure. It has no organizational chart. There’s no business plan or company strategy, no two-year or five-year plan, no goal or mission statement, no long-term budget. The company often does not have a fixed CEO. There are no vice presidents or chief officers for information technology or operations. There are no standards or practices. There’s no human resources department. There are no career plans, no job descriptions or employee contracts. No one approves reports or expense accounts. Supervision or monitoring of workers is rare indeed.
Semler is careful to note later that what he means by this passage is that none of these structures are imposed from the top down. The small teams that make up the company are free to come up with their own methods of self-organizing.
In fact, it would probably go against the spirit of Semco to expressly prohibit these forms of management. That the employees don’t tend to choose them when given the choice says a lot about traditional management.
Flexible Time, Flexible Pay
In addition to Semco’s emphasis on employee freedom and satisfaction, the company has also tried a number of innovative approaches to salary and compensation:
- Up ‘n’ Down Pay. Employees manage their pay and work hours according to their needs and the company’s needs. For instance, a new mother looking to cut back her workload could take less pay temporarily while another member of the team picks up the slack (and gets a pay bump accordingly).
- Retire-a-Little. Semco employees have the option of spacing their retirement out over the course of their career, while they’re still healthy enough for travel. This is similar to Tim Ferriss’s mini-retirement concept. Employees can “buyback” 10% of their time, or an afternoon a week, by foregoing some of their paycheck. They can then “redeem” those afternoons by working a set amount of time for proportional pay post-retirement. That keeps Semco employees active and engaged even after they “retire.”
Semler covers many other pay concepts in the book. But it’s clear that the overall strategy is to accommodate the changing needs of personnel at the company. If you need more time right now, you can take less pay without worrying about losing your job.
That flexibility leads to employees that are incredibly loyal to Semco. Turnover is practically nonexistent. Job-hopping within the company is encouraged. Compare that with 80% of Americans who are disengaged or actively disengaged at work.
And the arrangement benefits Semco as well. Semco saves money by not having to constantly hire, train, and re-train people to replace departing team members.
Corporatism Is the New Communism
I’ll leave you with this last eye-opening thought from Ricardo Semler:
Lenin’s and Stalin’s form of communism is gone, yet its trappings have been expropriated by mega-corporations. We have companies featuring central planning by troikas, mission statements crafted by apparatchiks, five-year plans, no right to choose leaders in companies, no democracy in the workplace, a clear distinction between intelligentsia and peasants (top CEOs make 152 times the median salary and enjoy company dachas, jets, and limos), and state monitoring …
Global companies don’t practice democracy.