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Daft 13e Int Case Notes 1

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INTEGRATIVE CASE 1.0
DISORGANIZATION AT SEMCO:
HUMAN RESOURCE PRACTICES AS
A STRATEGIC ADVANTAGE
OVERVIEW
Semco was originally founded as a maker of marine pumps in Sao Paulo, Brazil, in 1953.
For decades, under the leadership of founder Antonio Curt Semler, Semco operated in a
traditional hierarchical fashion with strict rules and policies and tight bureaucratic control.
However, after Ricardo Semler took the helm, he envisioned a very different type of
workplace, one that is operated by self-managed teams in a decentralized design. Every
six months, the organization reinvents itself, with one of six rotating CEOs taking the lead
and a multitude of teams reorganizing based on current performance and future
opportunities. Since that time, and led primarily by the employees of Semco rather than
top leadership, Semco has grown into a highly successful, diversified organization with
many related and unrelated business interests. The organization loses very few
employees through attrition, yet it receives thousands of applications from job candidates
eager to work in a respected and respectful organization. In general, the elimination of
bureaucracy has allowed this organization to become extremely agile and adaptive in an
ever-changing business environment.
DISCUSSION QUESTIONS TO ASSIGN
1. How would you describe Semco’s organization design before and after the
changes implemented by Ricardo Semler?
2. In what ways is Semco’s design similar to and different from the holacracy
structure described in Chapter 3?
3. Describe the rather unusual Human Resource policies now in effect at Semco.
4. How did Semco handle downsizing during a weak economy? How did that
approach benefit the company?
DISCUSSION
1. How would you describe Semco’s organization design before and after the
changes implemented by Ricardo Semler?
In the early days, Semco was a classic hierarchical structure with centralized
control. In fact, Semco’s management maintained a very tight control over
employees in the organization. Employees worked extremely hard and lived in fear
of losing their jobs for failing to comply with all of the policies or to exceed high
expectations. Semler himself adopted this mindset until stress started causing
health issues, which prompted him to re-evaluate this management approach for
himself and for all Semco employees.

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Fairly rapidly, he led the organization to the ultimate in a decentralized design that
functions autonomously. Employees work in self-managed teams, and their
individual performance and contribution to the overarching goals of the
organization determine whether they remain with the company and advance in
terms of salary and other forms of compensation. Horizontal communication
linkages are strong, and decision-making authority resides in the hands of all
employees. Transparency is an important value within the organization, and all
employees are given access to all financial documents, including salary and
compensation information. Semco appears to have a very motivated workforce
that finds fulfillment in work well done. As one employee reported, there is
reciprocity: Semco respects its employees and treats them like adults who are
capable of doing the right thing for the organization, and in return, satisfied
employees work hard and make good decisions that benefit the organization.
2. In what ways is Semco’s design similar to and different from the holacracy
structure described in Chapter 3?
Semco’s design is very similar to the holacracy structure described in Chapter 3.
Teams scattered in diverse locations around Sao Paulo form the fundamental
building blocks of the organization, and these teams design and govern
themselves. Teams evolve and disband organically, and teams at Semco have
been instrumental in expanding the company into new businesses as well as
exiting businesses that are not performing well and contributing to the overall
health of the organization. One unique aspect of Semco’s teams is that they are
re-evaluated on a more regimented schedule every six months, as opposed to
evolving on an ongoing basis. As in most holacracies, roles within the teams are
negotiated among team members, and each employee’s contribution to the team
(particularly those who serve as team leaders) is evaluated by the employee’s
peers. If a team member is not contributing, he or she may not be invited to
participate in another team in the next six-month session, which is a motivating
factor for individual performance. Another unique aspect of Semco’s structure is
the executive team made up of six individuals who take turns serving as CEO.
3. Describe the rather unusual Human Resource policies now in effect at
Semco.
Two of the major HR issues discussed in the case are working hours and
compensation. Many of Semco’s employees are allowed to work as many hours
as they wish from whatever location they wish. Their performance is judged solely
on how well they deliver on desired outcomes for the organization. Even in the
manufacturing arm of the organization, workers jointly determine when they will
work together to produce the company’s various products. Semco employees also
determine their own salaries and other forms of compensation, as well as other
benefits. If an employee feels he or she deserves a raise, he or she gets one.
However, there is an element of peer pressure at work within Semco, or what

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INTEGRATIVE CASE 1.0 DISORGANIZATION AT SEMCO: HUMAN RESOURCE PRACTICES AS A STRATEGIC ADVANTAGE OVERVIEW Semco was originally founded as a maker of marine pumps in Sao Paulo, Brazil, in 1953. For decades, under the leadership of founder Antonio Curt Semler, Semco operated in a traditional hierarchical fashion with strict rules and policies and tight bureaucratic control. However, after Ricardo Semler took the helm, he envisioned a very different type of workplace, one that is operated by self-managed teams in a decentralized design. Every six months, the organization reinvents itself, with one of six rotating CEOs taking the lead and a multitude of teams reorganizing based on current performance and future opportunities. Since that time, and led primarily by the employees of Semco rather than top leadership, Semco has grown into a highly successful, diversified organization with many r ...
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