How to be a self-organizing company? Semco's past lives

Semco is probably one of the coolest and most interesting companies on the planet. Like Valve and GitHub we introduced before, Semco has no HR department, employees have no professional titles and managers have no assistants. Employees decide what to do, when to do it and where to do it. They even decide their own salaries. Managers are elected by front-line employees, not appointed by company executives. It is also up to employees to decide what new business the company wants to carry out or what old business it wants to give up. The company shares profits with all employees.

It seems that this result is a disaster for any company, or at least it will make its internal chaos.

But in fact, Semco has achieved steady growth for more than 20 years, with an average annual double-digit growth of 14. Considering the turbulent political situation and the ups and downs of the economic environment in Brazil, this achievement is obviously extremely difficult.

Ricardo semler, the current chairman of Semco, took over the company from his father in the mid-1980s, and helped the company tide over the crisis with a series of reform measures, growing into a world-renowned "democratic" company.

-Semco prequel

Semler's father founded Szemko in 1953, mainly producing marine pumps, and 90% of the company's business comes from Brazil's domestic shipbuilding industry. At that time, Semco was still a very "normal" company, with a family system, strict organizational structure and hierarchy, and clear articles of association stipulated the size of the company in detail.

When semler joined the company at the age of 20, it was during the recession of Brazil's shipbuilding industry from 1975 to 1980, and Szemko's business was seriously affected. He suggested that the company is too dependent on a single industry and should explore other businesses to achieve diversification. His father didn't take his advice. He thinks the company is too rigid, but his father doesn't think so. He thinks that the company is in urgent need of better financial measures, and neither does his father.

Then there was the Great Depression in Brazil in the early 1980s, and Semco was hit hard. Semler, who had no chance to show his fist, told his father to reform or let him leave. His father has finally made an absolutely wise choice, boarded a ship sailing in Europe and handed over the company to semler.

-failed initial reforms

Semler immediately began his reform.

If you think that semler started to make semler what it is today, you are wrong.

In fact, at the beginning, semler's reform measures for the company were very traditional. He first fired 60% of the company's managers, and then began to implement the diversification strategy, planning and implementing it in a different way from the past, formulating standard management manuals and reports, and establishing a matrix organizational structure.

But semler soon discovered that the effect of the reform was not as immediate as he had imagined. Personally, he also fell into a day and night working mode that he could never accept. This dragged down his health, and finally he fainted in his factory. The doctor's diagnosis told him that he must change.

-Dawn: a small-scale attempt at team autonomy

1985, this is the turning point of the story. One of his managers told him that he should try to set up a self-managed production team of 6-8 people, and let them be fully responsible for all aspects of production. They decide their own budgets and goals, and their income is linked to their production costs and output. Semler immediately began to try. As a result of the experiment, the production cost has been reduced, and the productivity and profit have been increased.

Semler likes it, but the workers prefer it. Only the middle management of the company. No. Because their power was diluted, in less than a year, the middle managers of13 left. But this is not important, because under the new organizational system, their importance has been greatly reduced.

Semler then increased the profit distribution within the company and distributed 1/4 of the company's profits to employees. How are these profits distributed among each employee? Semler doesn't have to worry about this anymore. The "Staff Committee" established by employees will work out a distribution plan that everyone thinks is appropriate.

-Economic crisis? Transformation opportunities!

After the initial reform, semler gradually stabilized in the mode of independent management of small teams. Until the arrival of another recession in Brazil. This is the result of President Fernando Collor's restrictions on working capital. Although Collor was impeached only two years after he took office, the economic crisis brought by Brazil's economic recession has put reformist semler in jeopardy.

Constantly cutting costs has been unable to cope with the impact of the deterioration of the external environment. There seems to be no better way to deal with this crisis than to cut the top of Semco. However, Brazilian law stipulates that the company must compensate the laid-off employees for two years as compensation. This is also unbearable for Semco.

At this time, the staff committee found semler again and brought their proposal. Employees are willing to accept salary reduction to help the company tide over the crisis, but there are three conditions: 1) It is necessary to increase the proportion of profits shared by the company to employees until wages are restored; 2) The management of the company must accept a 40% salary reduction; 3) In addition to choosing their own working methods, employees have the right to decide their own expenses. Semler agreed.

As a result, in Semco's factory, employees began to undertake a number of job responsibilities, using their professional functions and years of experience accumulated in front-line work to establish a new production process that can save time and cost. In one of the factories, they divided themselves into three production units, each with about 150 people. Each production unit is fully responsible for the whole product life cycle, from production and sales to logistics and financial management.

The new Semco was announced. With the wisdom and strength of the people, Semco has once again weathered the storm.

Since then, the whole company has implemented self-management. Each team actively explored in their respective business fields, which promoted the continuous evolution of the internal organizational form of Semco. The team began to recruit its own new employees and began to vote for the right team manager. There are no longer various rules and regulations manuals in the company. Instead, everyone has the same values and thinking, and everyone finds "rules and regulations" to help their team operate effectively.

However, there is still an important change that has not been completed. With it, Semco is what we see today.

-Your business is up to you, and so is your salary

In the late 1980s, a group of engineers were authorized to set up the "Technology Innovation Action Team". These engineers, together with some workers, exercise complete autonomy-they can decide what business they want to do according to their own wishes, as long as it is based on Semco's corporate culture. Their income comes from the commission of the team's income. Every six months, the board of directors will evaluate them and judge whether the business they choose can be promoted for a long time.

This is almost the epitome of a complete Semco company system today, which started with a small backbone team. At present, we advocate the Minimum Available Product (MVP) for business exploration in lean entrepreneurship, which Semco did more than 20 years ago.

At present, Semco has no management level, so-called organization chart or even matrix organization. The whole company is effectively composed of a series of autonomous and democratic business units.

From a certain point of view, the organizational form of Semco constitutes a series of concentric circles. The center of the whole company is an advisory committee, including semler himself. There are six people in this Committee, who take turns to be the CEO of the company for a term of six months. Their work is mainly to formulate the basic rules of the company's operation, the company's long-term strategy, be responsible for the overall financial situation, and guide and motivate people on the second floor of the concentric circle. Semco calls them partners. They are 6-7 managers in various departments of Semco. The rest of us are called partners.

Each partner sets his own salary, and the salary of the company is open to everyone, including semler himself. All meetings are also open, and any partner has the right to attend. The company's financial information is completely transparent and can be seen by anyone. Semco also provides corresponding training to help partners read financial reports. With this information, it is easy for everyone to know which things they do have good benefits and which should be transferred or stopped.

-Retrospection and inspiration

What is interesting about Semco lies not only in its organizational structure itself, but also in how it gradually evolved into what it is today. This may be more valuable to the helmsman of many of our companies today.

First of all, it took Semco more than 20 years to adjust its organizational form, and all the measures and practices were not planned by SEMCO. On the contrary, those important changes come from the active response to the harsh external environment, such as semler's own health problems or Brazil's domestic economic crisis.

It is these "noises" from the outside world that force Semco to deal with them. In the end, Semco was broken into parts, and the small team with internal autonomy constantly adjusted its posture according to the external environment to meet the challenge. It is this process that helps Semco establish a bottom-up effective organizational model, so Semco has excellent anti-vulnerability.

Secondly, most of the important reform ideas did not come from semler himself. Semler admitted that the person who knows the situation best is not the person sitting in the office. Give front-line employees power and they can make the most favorable decisions. Semler's uniqueness is largely due to his willingness to decentralize. He is willing to accept and support those practices that seem to dilute his power, as long as it may be beneficial to the company's business.

Finally, many of Semco's reform measures were trial and error on a small scale before being gradually extended to the whole company. What we are seeing now are all successful measures that have been tried and tested. It is conceivable that in such a thorough transformation process, many ideas must be tried and error before they can be given up. External pressure is an opportunity for reform and the best experimental soil, which can get real feedback quickly and help Semco improve or give up as soon as possible. It takes a little exploratory thinking and methods to find out the really suitable ones from the dazzling array of reform suggestions.

When asked how to control such an unusual company, semler's answer is always: I don't control it, I just let it run by itself.

The guidelines for decentralized management in semler are:

-Give up your shiny title

-has been in a state of entrepreneurship

-Don't mind too much.

-Good people will find their place. You just need to set them free.

-Quick and transparent decision-making.

-Diversified internal partners

From the initial revenue of $30 million to the current revenue of $240 million, Semco has never chosen to go public. Only in this way can today's Semco continue to write a new chapter with its unique and proud attitude.