Disorganization at Semco: Human Resource Practices as a Strategic Advantage

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Single-Minded Focus on Performance The Semco employees who contributed little did not remain unscathed. To remain in the organization, an individual had to be required by any of the teams for the subsequent 6 months, which could not be achieved by indulging in politics. Semler explained, "It's as free market as we can make it. People bring their talents and we rely on their self-interest to use the company to develop themselves in any way they see fit. In return, they must have the self-discipline to perform." It was not lost on some observers that the freedom given to employees to determine their respective work hours ultimately enhanced the organizational productivity. Semler elaborated, "...if you wake up in a bad mood on Monday morning, you don't have to come to work...

According to observers, Semco's robustness was in full display during the 1990s when the Brazilian economy was in the doldrums. At a time when Brazil’s gross industrial product declined by 14 percent, 11 percent, and 9 percent in 1990, 1991, and 1992, respectively, when the country's capital equipment production contracted to the 1977 position, and when 28 percent of its capital equipment producers went bust, Semco managed to maintain its revenue and profit momentum. This was made possible by certain radical shifts implemented by Semco, and, more importantly, its employees. In 1990, Semco too had frequently been staring at nil monthly sales and employee retrenchment had become imminent. At that stage, Semco’s workers took the initiative and proposed to take a 30% reduction in wages, subject to their slice of profits being enhanced to 39%, management pay being reduced by 40%, and their being entitled to vet every expense...

Semco was a privately held company which did not disclose its financials. Its turnover had increased from US$4 million in 1982 to more than US$1 billion by 2007. And, according to Semler, Semco was clocking average yearly revenue and bottom-line growth of 40%. Semco's success could also be gauged from the fact that an investment of US$100,000 in 1985 would have yielded an additional US$5.3 million by 2005. Its employee strength had increased from 90 in 1982 to 5000 by 2007. And, according to experts, the fact that repeat clients accounted for nearly four fifths of Semco's yearly turnover of 2003 indicated the company’s client retention abilities...

Though Semco's radical management practices had indicated that they could result in profitable and sustainable growth, experts were skeptical about the extent to which these tenets could result in similar successes in other companies, genuine though their efforts might be. Their skepticism had its roots in the deliberate strategy chosen by Semco of being present only in businesses which entailed significant levels of engineering/ complexity. This ensured that the barriers to entry for other aspirants in terms of technological competence required were high; of being only a premium player in each of its product/ service segments; and, of carving out a distinct niche in each product/ service segment which ensured that Semco was a prominent player in the concerned industry...

Exhibit I: Recruitment Procedure Followed at Semco
Exhibit II: Semco's Compensation Options
Exhibit III: Annual Revenues of Semco (US$ million)
Exhibit IV: Some of the Innovative Employee Programs at Semco

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