As I See It: Workplace Heaven
March 26, 2007 Victor Rozek
I think I may have found it, that mythical and much sought after place where meetings are optional and vacations are mandatory. A place where workers set their own hours and choose their own managers. A place where employees are so trusted they are even allowed to propose their own salaries. Impossible, you say? Quit smoking the ganja, you say? Well, scoffers, I swear to you–it’s true. I’ve blundered onto workplace heaven, and I’m not even dead yet.
Actually, no one needs to die in order to get there, but if you want the non-virtual version, you will have to go to Brazil. It all started almost 30 years ago with a headstrong kid named Ricardo Semler. He had just turned 22 and it was time for him to assume some useful role in society. Semler was obviously bright, having completed law school, but he was also restless and bored and the thought of spending the next 40 years in 9-to-5 drudgery seemed like punishment for the unintended sin of becoming an adult.
His father, however, had other plans. Daddy owned an engineering firm called Semco, and junior was expected to work in it. Which junior did, at least for a short time, most of which was spent arguing with his father. But what Ricardo lacked in experience and achievement, he made up for with bravado and subversive thinking. Willful and determined to do things his way, Ricardo wanted to move the company in a new direction and to scuttle its traditional management style. The clashes with his father were legendary and continued until the young man threatened to leave.
Now, ordinarily, when you have no track record and threaten to quit, no one cares. But Ricardo’s father took an extraordinary leap of faith: he called the kid’s bluff, resigned as chief executive officer, and gave the reins of the company to his combative son. “Better make your mistakes while I’m still alive,” he advised. Not to be outdone, Ricardo also did something extraordinary. On his first day as CEO of Semco, he fired 60 percent of senior management.
Then he started making real changes.
Ricardo Semler had a crazy idea. He wanted to create a democratic workplace, unlike anything that existed before. What he saw were companies mistrustful of their employees and determined to control them. Cameras filmed employees at work, their emails were scrutinized, and the relationship between management and employees was often adversarial. Work was the place where employees didn’t make the rules. Although they were constantly asked to redouble their efforts, they had no input as to the direction their efforts would lead. Power rested firmly at the top of the management pyramid, and talk of employee empowerment was mostly just that–talk.
Semler thought he could do better and he started by questioning just about everything. Why should people come to work when they didn’t want to? Why should they waste hours of time commuting each day? Why should people attend endless meetings when they were clearly bored and considered them a waste of time? Why should they work for managers they did not like or respect? Why couldn’t an employee leave in the middle of the day to watch his child play soccer? Why were there so many silly rules? Additionally, Semler wanted to know what bureaucratic functions could be eliminated? Is an HR department really necessary. Is IT?
But it took a medical epiphany to jumpstart the changes Semler was contemplating. In the 1980s, the Brazilian economy was in trouble. Semler was working 16-hour days trying to keep his company afloat. During a business trip to the United States, he collapsed. Although, as it turned out, he suffered from nothing more threatening than exhaustion, Semler had an awakening. He vowed to create greater balance between his work and his private life, and to extend the same opportunity to his employees. He instituted flextime. He still demanded results, but he no longer cared when people showed up for work. What was the point of having them there, he reasoned, if they really wanted to be somewhere else. He wanted people who were ready to work. If that meant showing up two days a week, that was fine, as long as they were able to do their jobs.
Leadership, he discovered, was not a quality that could be manufactured, nor was it an elite virtue available only to the few. It was resident in everyone. Dominant leaders, he observed, often leave weak companies in their wake since their absence is impossible to fill. Semler was more interested in creating an environment that would continue to function regardless of who stood at the helm. Therefore, his managers are given no special treatment. They are picked from within small working groups and are anonymously evaluated by those groups. People are only allowed to manage as long as their subordinates wish them to remain in management positions.
He discontinued company-mandated training and in its place offered each employee a personal training budget to do with as they pleased. He reasoned that they know best what they need to learn and what interests them. Instead of reading management books, Semler encouraged them to read classic literature.
Semler also did away with senseless rules and bureaucratic functions. No secretaries, no receptionists, no dress code, no mission statement, no five-year plan. No mandatory meetings; people come if the subject of the meeting interests them, and can leave if they become bored. There is no HR department; hiring is conducted by whatever workgroup needs an extra employee. Nor is there an IT department; everyone purchases whatever computer equipment they need, and there is no approval process for reimbursement. Of course, the company has servers and networks, but no one is in charge of them. There is merely an expectation that employees will be computer literate because their jobs demand it. And in spite of its unorthodox approach to IT, one of the things Semco does is produce software.
Semler thought it was hypocritical of companies to preach system security and protect company confidentiality while spying on their employees. So instead of reading his employees’ private emails, he looked for software that would prevent anyone from doing so. He could not find it, and was forced to customize a package.
A little math revealed that Semco’s employees spent over 1 million hours each year commuting. Semler thought this was enormously wasteful, so he decentralized his operation allowing people to work closer to where they lived. What did it matter where they were located, he thought; even if they are in the next cubicle, they send emails to each other. Employees set their own schedules, suggest their own salaries, choose their own managers. Semler did the unimaginable: He trusted people to behave responsibly and believed that whatever decisions they made would not only be in their best interest, but in the best interest of the company.
By letting go of control, Semler stimulated creativity and his company flourished. In a six year period ending in 2003, Semco’s revenues rose from $35 million to $212 million and his employee base grew accordingly from several hundred to over 3,000. His company continues to grow at a staggering rate of 20 to 30 percent annually, with about a 1 percent annual turnover rate.
His success notwithstanding, Semler notes that traditionally managed companies are fearful of abandoning the strict rules and regulations that govern their operations. Most believe their employees would take advantage of a democratic workplace by working as little as possible and earning as much as they can. But in 25 years of conducting this grand experiment, Semler found the opposite to be true: People become more responsible, not less. The effect of all the traditional rules and constraints are that adults end up being treated like adolescents. And when adults are treated like adolescents, he says, they start behaving like adolescents. Regardless, the command-and-control model of management stifles both passion and creativity. Distrust, as Emerson said, is expensive.
Semler cites Microsoft as an example. In an interview with CIO Insight, Semler notes that 20 years ago, Microsoft “came up with a solution that was really groundbreaking,” and a huge paradigm shift occurred based on the work of a handful of people working in an unstructured environment. But, continues Semler, “if you were to draw a graph of innovation and Microsoft’s wherewithal in terms of people, capacity, recruitment, training, and salaries, you would find that the more Microsoft hired the best minds at the highest salaries, and so forth, the less innovation it got. For a user, there are no substantial changes whatsoever between the various versions of Microsoft Windows. . . . it just seems like the color of the icons changes. Does it take 5,000 engineers with postgraduate degrees to change the color of icons?”
Indeed, perhaps a democratic workplace is the antidote not only to the shrinking of employee spirits, but to the resulting phenomenon of diminishing returns. It would appear that the democratic workplace does not abandon results, rather it sheds those things which constrain them. Booker T. Washington said: “Few things help an individual more than to place responsibility upon him, and to let him know that you trust him.”
Semler would add that few things are more helpful to a workplace as well.