Of course, having enlisted talented individuals, there is no guarantee of business success. As Philip Sadler says: Talent is one thing, achievement is another.'
Developing trust
The second vital ingredient to managing people successfully is trust. You have to trust them to do any job they undertake to the best of their ability and in a way that is satisfactory to what the company wants to achieve and how it should behave. When Ricardo Semler took over the Brazilian company. Semco, from his father he spent the first day firing 60 per cent of the company's top management. Almost without thinking, he had set in motion a revolution from which the rest of the business world is now anxious to learn.
Today, Semco is a unique success story. It has managed to buck Brazilian commercial chaos, hyper-inflation and recession to increase productivity nearly seven-fold and profits five-fold.
Walking through the door, visiting executives immediately notice that there is no receptionist. Everyone at Semco is expected to meet their own visitors. There are no secretaries, nor are there any personal assistants. Managers do their own photocopying, send their own faxes and make their own coffee. Semco has no dress code so some people wear jackets and ties, others jeans. But the Semco revolution goes far beyond this. 'A few years ago, when we wanted to relocate a factory, we closed down for a day and everyone piled into buses to inspect three possible sites.' recalls Ricardo Semler. Their choice hardly thrilled the managers, since it was next to a company that was frequently on strike. But we moved in anyway.'
Semco takes workplace democracy to previously unimagined frontiers. Everyone at the company has access to the books; managers set their own salaries; shop floor workers set their own productivity targets and schedules; workers make decisions once the preserve of managers; even the distribution of the profit-sharing scheme is determined by employees.
'We've taken a company that was moribund and made it thrive, chiefly by refusing to squander our greatest resource, our people,' says Semler. He does not regard the transformation of Semco as a lesson to be emulated by other companies.
Instead, he believes it simply points to the need for companies and organizations to re-invent themselves for the 1990s. There are some companies which are prepared to change the way they work. They realize that nothing can be based on what used to be, that there is a better way. But, 99 per cent of companies are not ready, caught in an industrial Jurassic Park.'
The plea for businesses to become more democratic and humane is a familiar one. The trouble, Semler candidly admits, is that listening to people, accepting their decisions and inculcating people with the need for democracy is far from easy. The era of using people as production tools is coming to an end,' he argues. 'Participation is infinitely more complex to practice than conventional unilateralism, but it is something which companies can no longer ignore or pay lip-service to.'
There is still a substantial amount of skepticism about Semco's approach and achievement which Semler has recorded in an international bestseller entitled Maverick! Former BTR chairman Sir Owen Green commented after a public debate that Semler was 'not maverick; he's an eccentric'.
The mistake people make, says Semler, Is assuming that Semco is some kind of role model. This is just one more version of how companies can organize themselves and succeed. Democracy alone will not solve all business problems. In fact, as we constantly see, nothing prevents autocratic companies from making money.
It is little wonder that traditionalists among the management fraternity find Semler's message unpalatable. Managers are constantly appraised by Semco workers rather than a coterie of fellow executives, and they have to become used to the idea of accepting that their decisions are not sacrosanct. Semler seems to be adept at biting his tongue when decisions don't go his way and admits 'there are a lot of people at Semco whose styles I don't actually like. I wouldn't have recruited them but quite clearly they do their jobs effectively - otherwise people wouldn't support them.'
As part of Semco's revolution, Semler has to a large extent become redundant. The chief executive's job rotates between five people. Diminished power is clearly not something which fills him with sadness, instead it is confirmation that the Semco approach works. 'I haven't hired or fired anyone for eight years or signed a company check. From an operational side I am no longer necessary, though I still draw a salary because there are many other ways of contributing to the company's success,' he says. Indeed, Semler believes that what many consider the core activity of management - decision-making - should not be their function at all. 'It's only when bosses give up decision-making and let their employees govern themselves that the possibility exists for a business jointly managed by workers and executives. That is true participative management.'
Semler's book is already a massive bestseller in South America. Interestingly, it has also found a receptive audience in Japan - so much so that Semler's advance was the largest ever paid for a business book in Japan. More than 6,500 readers have written to him to find out more. But the skeptics remain, and Semler admits that it is too early to make cut and dried judgments about Semco's apparent revolution. 'Really the work is only 30 per cent completed,' he estimates. 'In the long-term, success will come when the system forgets me and becomes self-perpetuating.'
The lesson from Semco is that trust can boost your performance. It makes commercial sense. But how can you build up such trust?
- Give people the power to use their intelligence and expertise. Allow them to solve problems and set high standards for the business and themselves.
- Allow and encourage people to make mistakes. If people know they won't be shouted at and sacked on the spot for making an error in good faith, then they will take on extra responsibilities and, when they do make a mistake, they will admit it and learn from it.
- Share information. You don't have to tell every person you employ every single financial detail. But by sharing information with employees, customers and suppliers you can help to build closer bonds and relationships. It is one thing sharing the good news when profits are up, quite another sharing bad news as profits plummet.
- Keep it small. The world's biggest companies are now in contortions as they try to break businesses down into smaller units. They realize that the days of 10,000 people working away in a huge factory are past. The new emphasis is on vibrant, relatively small business units where people work in teams, aren't weighed down with bureaucracy or hierarchy and can make things happen.
- Listen to what people say Ricardo Semler disagrees with many of the company's decisions, but goes along with them because they have consensus. Many other managers pay lip-service to asking employees what they think. If what the employees say doesn't fit in with their thinking they ignore it. If you are to build trust, you have to listen and act.
- Share your success. In good times it pays to spread the bounty. It may be your business but you depend on the people who work for you.
- Eliminate pointless administration and hierarchies. Time and energy is wasted on administration which doesn't help anyone - let alone customers - and on shoring up power bases. You might like a nice spot in the car park while the others fight over a couple of spaces round the corner, but what does that say about your priorities?
