The Seven Day Weekend - Ricardo Semler
The Seven Day Weekend Overall Rating 9/10
Idea: Enabling Independent work + Life Musings
Tagline: A take on life from Ricardo
Rereadability: 2/10 -Quotes will bring back the major points - rereading not necessary unless rereading or trying to copy a specific point or piece of Semco companies
Useful ideas:
How long it takes to read all the Quotes:
Part One
In Whack
1) Why are we able to answer emails on Sundays, but unable to go to the Movies on Monday afternoons?
2) Why can't we take the kids to work if we an take work home?
3) Why do we think the opposite of work is leisure, when in fact it is idleness?
Chapter 1
Our architecture is really the sum of all the conventional business practices we avoid. It's easier to say what it's not, rather than what it is. It's our lack of formal structure, the way we give up control so workers can follow their interests and their instincts when choosing jobs or projects. It's our insistence that workers seek personal challenges and satisfaction before trying to meet the company's goals. It's how we encourage employees to ramble through their day or week so they will meander into new ideas and new business opportunities. It's inherent in how we embrace democracy and open communication, and encourage questions and dissent in the workplace. On-the-job democracy isn't just a lofty concept, but a better way to do things. We all demand democracy in every other aspect of our lives and culture. People are considered adults in their private lives, at the bank, at their children's schools, with family and among friends - so why are they suddenly treated like adolescents at work? Why can't workers be involved in choosing their own leaders? Why shouldn't they manage themselves? Why can't they speak up - challenge, question, share information openly? -----> Underlying this concept is the idea that if we are adults everywhere else why shouldn't we be treated as adults at work. Would you make an adult punch a timecard ( a device that records the times automatically because you don't trust the"adult"). Would you check on an adults web work and time used on the computer? Is all this checking up on people not paternalistic and controlling?
If we have a cardinal strategy that forms the bedrock for all these practices, it may be this: Ask Why. Ask it all the time, and always ask it three times in a row. ----> Question, Question, Question
But mostly, it means putting aside all the rote or pat answers that have resulted from what I call "crystallized" thinking, that state of mind where ideas have so hardened into inflexible and unquestioned concepts that they're no longer of any use. Employees must be free to question, to analyze, to investigate, and a company must be flexible enough to listen to the answers. Those habits are the key to longevity, growth, and profit. ---> It is essential in medicine not to have the presumption to think you are right most of the time. We must remain flexible in our thinking and ability to revise and update our styles of thinking.
Rogerio Ottolia came to Semceo because he wanted a free hand to question everything - even though we offered him less money than he was earning at his previous job with a company that specialized in biochemical analysis. We were considering buying that company and one day I had a meeting scheduled with the owner. The man we too busy to see me, so Rogerio stepped in. We hit if off, and though the acquisition never happened, a week later Rogerio and I were negotiating his move to Semco. His boss immediately countered with a raise and a promotion to plant director. ----> Competent people will emerge- Take chances and small chances often pay off in much larger ways - take many small chances and big ones too!
I once had a weekly lunch schedule that would have made any maitre d' smile. Three to five business lunches a week. One sunny day I asked myself why I was going to lunch with a particular executive. Because that way you'll be closer to the person, I thought. Why do I want to be closer to the person when all I want is a professional relationship? Because close personal relationships generate better business. Why? Because people will not see you simply as a business, and may overlook some deficiency in price, quality or delivery because they relate to you as a person. Why, then, shouldn't I use those two hours a day for improving price, quality or delivery so that the personal relationship at lunch is no longer necessary? That's when I stopped going to business lunches. I've kept those dates to three to five per year. My relentless whys freed me from a grinding lunch schedule. --->Instead on focusing on personal relationships to make up for deficiencies in product, focus on product and whether or not relationships are there won't matter.
Sometimes why seems unnecessary. It's obvious companies should grow. Everyone agrees, right? But why?
The "adult" response to the quesion would be career opportunities, global reach, and economies of scale. Again I ask, why? Why are careers better in a company that grows, rather than in one that does not? Why is profit necessary above a small percentage over sales? What happens when there's too much profit? Are there any studies (none that I've seen) demonstrating that companies that grow fare better than ones that don't ? ---> Continual questioning.
I do not remember the last time Semco leaders tried to guess what size the company would grow to be, or how many people we might eventually employ. We don't talk about these things, much less try to quantify them in budgets or business plans. That doesn't mean we don't think about the future. We spend a lot of time in what we call, in portuguese, "ideas that pour from the sky", (known elsewhere as brainstorming sessions.). There we hack the future to death. We ask why repeatedly. We just don't write anything down in black and white with numbers. That's because any written plan is dangerous. People will follow a plan like a Pied Piper - mindlessly, with no thought as to their final destination. We often jot down generic ideas and broad numbers so we can visualize the imensions of a new product or service. Then, we throw those notes away. At the next meeting on the same idea, we'll start over, without the benefit of the original notes. That way we cannot fall into the trap of fixed assumptions. We're obligated to reconsider all the variables ---> Novel idea about not making plans
Satisfying three basic criteria when we consider a new venture. First, we look for complexity, which for us usually means "highly engineered". Everything we do has a high entry barrier of complexity. If a new business isn't hard for us and for others to break into, then we're not interested. Second, we demand that in each of our markets, we are the premium player. We want to offer a high-end product or service. That means we're always more expensive because we provide the premium that stretches what the customer will pay. And third, we want a unique niche in the market, one that makes us a major player in any given industry. To us, this follows naturally from the first two requirements. We want to be only in businesses where our disappearance would cause our disheartened customers to complain loudly. They'd survive but they'd have a substantial difficulty moving on. All of our products and services meet these criteria.---> Three excellent criteria for picking a business
(Speaking about someone who had just had a meeting where papers were under his golf clubs). Danilo needn't be embarrassed, or look over his shoulder. No one at Semco questions his productivity. In fact, we're paying him to ponder the mountains in the middle of the workweek. I know he'll begin asking a lot of whys. He'll come up with better ideas, ramble into new opportunities, be more open to change, be willing to give up control and take on risk. Soon he'll find the balance between his personal aspirations and his professional goals that he lacked in his previous jobs. In the end, everyone at Semco will benefit. That's a pretty good reason to pay him - or anyone - to retreat to the mountains.
Chapter 2 - The traditional weekend ended long ago.
We talk so easily about how much we value our free time - but rarely make it a priority in our lives. Few of us even know what free time is anymore, or how to be genuinely idle. Yet few people if asked on their deathbed about their regrets would respond:"I'm sorry I didn't spend more time at the office". People believe the opposite of work is leisure. But it isn't, it's idleness. Work is activity, so idlesness is inactivity. Any good Greek philosopher can explain that. We no longer grasp the difference between leisure time and being idle. Western society is highly structured. If you go to the beach, you don't spend the day "doing nothing". Within half an hour you're reading, walking, swimming, fretting about your tan or overexposure. Most of us have to keep one eye on our children while slathering on sunscreen and planning dinner. Idleness is really just a change of scenery: There's no true opportunity to sit back, relax and let the mind wander. Even when we set weekend aside to "do the things I want" we often spend most of Saturday and Sunday engaged in chores, personal tasks and other obligations that may not be work but are still often things we don't really want to do.
Technology has encroached so deeply into our lives that I believe we must make deliberate efforts to beat it back. I have an idea for a technology respite at Semco, but no one agrees to let me test it. It makes them nervous, so they're resisting. Two hours of general computer shutdown. Semco unplugged. That's my impish dream. My idea is to have a half-day, every so often, when the company is unplugged. What would people do if the whole system was down on purpose?
Email, the contemporary manifestation of Gutenberg's printing press, permits instant communication across seas, deserts and mountain ranges. But it also changes the profile of our working lives, and we are not propared for that. It makes communication more efficient, but it also changes the profile of our working lives, and we are not prepared for that. It makes communication more efficient, but it also makes it far too easy for anyone to find us. It frees up time - which we immediately fill with more email. With email people are intensely and continuously involved in minutiae, and that creates a new form of information overload. People who still haven't mastered time management now have email added to the demand on their energies. We face a glut of messages every day, but have come to believe we can't live without our electronic mail boxes. Rather than exacerbating that anxiety, unplugging the company for half a day would restore the primitive practice of thinking about what we're doing instead of just yammering non-stop with the world. ----> Focus on Efficacy not Efficiency
No one ever accounts for the excessive specialization, or the diseconomies of scale.
It goes like this: If you plot the curve of human health, you easily see that the climax of physical capabilities is in the 20s and 30s. The downturn is heaviest after 60. On another graph, you can plot financial independence and see the height is usually between 50 and 60. On a third graph, idle time naturally peaks after age 70 ---> Interesting observation that I find to be true.
I have a habit I call e-bike. I need a daily hour of exercise, and an hour or so just to keep up with the Joneses of email. From the 134 emails I receive on average each day, about 40 must be answered. So I retreat to my gym, where I have an exercise bicycle equipped with a sturdy platform for my notebook computer. I plut in and pedal for 60 minutes into the galaxy of e-bike. FItness purists may say I'm not dedicated enough to my exercise, and the people who receive my mails know that my handwriting shakes and that I don't correct typos. But I get off that machine feeling four pounds lighter, half of that from my brain alone. This is one way in which I strive to find a balance between technology, well being, work and personal life.---> Condensing activities and doing activities with no loss of NET time. ---> Regularly scheduling of the ways of living life and scheduling two or more activites to maximise net time.
IN order to spend as much time as possible with his family, he wakes up at 4:30 and goes down to the empty, dark hall, where he works, sketches and thinks until breakfast time. At eight-ish everyone is awake, and he spends quality time with them. He walks and skis and then only returns to work in the mid-afternoon, through to dinnertime. The rest of his time is like that, wherever he is, and he has offices in Valencia and Paris, as well as work in places from New York to Kuala Lumpur. He is extraordinarily productive, there are books filled with his intricate and mind-boggling projects and he is still in his forties. With his example in mind, i took to waking up at 5:30, which has now crept to 6am. By 7:30 I have my email up to date, and have fired away dozens of messages, read the online news of the local newspapers, the financial times, the Wall st. Journal as well as the odd online Sotheby's catalog, wine rarities journal or palm tree society newsletter. After jacuzzi and breakfast, it's still only about 8am. People are stalled on the highways, and I'm ready to think. There will be two, or four, or maybe six important tasks for the day. Some people think there must be many more. But I remind them that those four important tasks a day equal a thousand important things per year, or then thousand tasks by the time your kid is ten years old. Nobody can have that many important tasks to perform. When I finish the ones I set out to do, I'm finished for the day. If I'm done before lunch, lucky me. Since I don't "do" lunch, I usually eat at home. The lunches that I indulge in are no different on weekdays or weekends. The same leisurely pace, the same time for a cigar. After all my leisurely lunch only takes an hour or so and I would use up more than that in traffic having lunch with a business associate. ---> Two beautiful schedules
I rarely did my homework, for that matter, but learned back then that stress is the difference between your expectations and reality.
Books from W. G Sabald or Arundhati
Everyone has exhilarating moments, and accumulating as many as possible should be every collector's dream. Imagine a notebook with a tally of heart-soaring moments, a list that would prove they'd happened and could - if needed- be shown to everyone as evidence of the width and breadth of the experiences.
Part Two
Success and Money are Distant Relatives
1) Why do people have to stick to a career choice they made as an unprepared adolescent?
2) Why doesn't money buy success if almost everyone measures their success in cash?
3) Why do billionaires greedily accumulate money, only to donate it to ethereal concepts such as world peace?
The first principle to accept is that if an employee has no interest in a product or project then that venture will never succeed. None of that is necessary if employees can pursue their self-interest and fultil the company's agenda at the same time. They'll have found the compatibility of purpose that is so critial to gratification, and the results will be twofold: While they're busy satisfying themselves, they'll satisfy the company's objectives, too.
The danger is that people will look at their jobs and themselves and find they have no passion. Or they'll compare themselves to others and come up short. And then they give up before they've even started or find themselves unhappy with a job that previously felt okay. It's like taking a rubber band and stretching it too tight. It'll snap. Instead, companies need to understand that interests tend to be cyclical. At Semco we offer incentives to employees to move around different jobs and departments. It's another means for them to dip into thei reservoir of talent, and to develop independence. If they're moving around following an inner radar, then they won't rely on the company to tell them what to do.
Job rotation exposes workers like Auro to different challenges, but it also limits the kind of tribal alliances that pit workers against each other. When people change jobs, they're forced to work in a new environment and sometimes even cross over to another tribe. Moving around limits tribal affiliations that are detrimental to democracy, communication and innovation.
He was one of six finalists facing one of our quirky all-inclusive interviews, where the candidates come together before an audience of Semco employees. - When a manager needed a new employee, he selected three candidates from the ones presented by the human resources department. After that, a group formed by employees who would work directly with the new hires, interview them and choose one of the three. Just like that, employees started choosing their bosses. If they don't like them later, they are the ones to blame. More than once a director in a hurry found what appeared to be a perfect candidate, and then simply tossed two more names into the ring to complete the requirement for three applicants. Many times, one of the candidates without the required qualifications got hired by the team of employees.
He suggested a "success fee" or a percentage of the money we saved in operating costs. His work demonstrated the wisdom of oursourcing and it was so successful that it was ultimately applied to other parts of our engineering areas- project design, planning, drafting and machinery maintenance were all eventually outsourced.
Traditional companies recruit and hire for a function within the organization, one that is usually described in detail in a job outline and accompanied by a list of academic and career prerequisites. Their first priority is filling those requirements. Our is in hiring people who will find a click between their life purpose and the company's.
The truth is closer to this: Most of the people who look for common office or factory jobs do not have a calling for what the work entails. They just need a job, to keep themselves and their family thriving so they can otherwise pursue their real calling. Is it a waste of time to deal with these people, therefore? Not at all, because they still have a reservoir of talent worth discovering. They just have to be given the opportunity to discover it themselves.
Chapter 2
Too much Talent is as bad as too little
IQ + EQ+ SQ - EGO
Imagine situations where you'd like to see as many talented people as possible working together, for example, when you need that operation. After you've visited the proverbial "second opinion" surgeon, and then a third, try to fultil your wish of having all three join up as a team and operate together. The sum of IQs would be wonderful, but the EQs and EGO's wouldn't let it happen.
I once did a course at Harvard where the professor, Gordon Donaldson, spoke of RLC. He said businessmen and women had to have RLC, which turned out to be Rat-Like-Cunning. But RLC and MBA don't go together.
Everyone at Semco, including the cleaning staff takes part in a monthly meeting that analyzes the company numbers. There they learn what our revenues and payroll are, why we are different from our competitors, why profit is rising or falling. Anyone can enroll in a course in reading balance sheets.
I have my own resolution to study two hours a day. I want to further my own education, but I also mean to do it without rhyme or reason. In some respect, the goal of the Rush Hour MBA is the same. I may study Jupiter today, and the Spanish Inquisition tomorrow. Anyone concerned with structure might say there's no discipline to that. I believe the two hours is my discipline. It won't count for anything because no school could grade my efforts. But after a year in which I may have studied a little biology, a little astronomy, a little history, I'll be better educated and better able to apply my knowledge to what I do everyday.
For those who want growth at any price, there are mergers and qcquisitions - just another form of keeping score on the big board. Legions of lawyers consultatnts and auditors have made fortunes from mergers and acquisitions. No words ring as musically in their ears as " due dilligence" ; the process of digging ( I like the recent fad for drilling down) into the depths of a company's psyche and ancient filing cabinets, searching for lies, risk and other fodder for the negotiation table. Where does all this frenzy for joining two as one, taking over and buying out originate? What does it say about growth? Mergers are about growth and profit. But many times they are also a solution for bad management. Companies with mistakes to cover up are the first ones in search of a merger. Companies that are doing beautifully are usually only interested in acquisitions.
We frequently pair visionaries like Eugenio with practical managers who can hold the fort, like Yanko. It has always led to great success. One without the other makes for a band of poets, or a stodgy boring outfit. Together, they teach each other something everyday.
Chaper 3
Fortunate 500
That's what the 12 Millioni does. IT gives you access to a large city hours or apartment, a beach house, a mountain cottage, three of your dream cars, and even renting a helicopter - if you absolutely must. Three meals a day, a personal trainer to do away with their side effects, clubs, spas, elegant European travel. Seven or eight servants, dandy schools for the kids, much opera, season tickets galore, and accounts at Donna Karan. That's what Leonardo da Vinci will let you have. And that's why all millionaires are the same after that sum.
Collecting money is like amassing any other item. By definition, no collector can ever be happy. There will always be a piece, a unit, a set that can't be had. On a trip to Bangkok, I met a man who had made his fortune in tomatoes, import and export, and steel. He was proud that the flight over his tomatoe fields took 40 minutes. WE went to dinner. A chain smoker, my host was said to light one match a day when he got out of bed. With every cigarette he would lieght the next. Throughout dinner he did not once put out a cigarette eating with one hand and smoking with the other. As we left the restaurant, his driver appeared out of nowhere in a World War II era Mercedes stretch limo. What a relic, I exclaimed, as he explained offhand that he owned a vertical collection of Mercedes. I knew from wine collecting that vertical meant an example from every production year. As we parted he mentioned that he liked to fly the same airline I was taking to London. But how did he manage a 14 hour flight without smoking, I asked. Oh, I buy first class, he explained. But so did I , and I still couldn't smoke, I retorted. No, sir, he smiled wanly between puffs. You fly first class. I buy first class. He regularly booked all 16 seats in First Class so that he could close the section and smoke to his heart's content. So much for 12 Million and Da Vinci, after all 12 Million doesn't last long when it costs 150,000 $ just to fly from one place to another.
But how else could we have visited six bank presidents in one day in a traffic-jammed city of 17 Million? Surely not without the chopper. But no one delved deeply into the question of what would have happened had we seen two presidents fewer. If we had stopped to question everything we do, we might have had a more nutritious lunch, and more time to think together.
Part Three - Management by (O)Mission
1) Why do we tell our employees that we trust them, then audit and search them when they go home?
2) Why does our customized and carefully crafted credo look like everyone else's
3) Why do we demand and go to war for democracy as nations, yet accept with docility that no one has the right to choose their own boss?
Chapter 1 - Order of the Day : Give up Control, Sir!
The other advantage of an orchestra is that a single person can direct 120 musicians, as opposed to the five to 15, manager to employee ratio in most organizations. Why? Because in a symphony everyone knows what they're doing and they play a common score. Voila' - business gurus fell in love with that metaphor. The mission would be the score. But why? Isn't the mission the goal? And isn't an orchestra's goal to make music for an audience while also seeking personal growth and gratification as musicians? Can you keep a first-rate violinist in an orchestra that plays the same piece over and over like a cruise ship band? The company's reason for existing is no different than that of an orchestra. For one it's the product, for the other, the sheet music. Believe it or not, manufacturing a bus is similar to playing Mozart in the park - both have a purpose, a system and people wo take the product to a waiting public. But the mission varies. At times the mission of an orchestra is to take classical music to the widest audience possible. Witness the Three Tenors - three overweight gentlemen making fools of themselves in kitsch concerts backed by overlarge orchestras and a program of cantina songs. Is this a good way to serve a mission? If your mission is to make opera popular, definitely yes. After all , that is how opera started. The same is true for Shakespeare in the park, or chefs parading their culinary skills on Cable TV, or vinters producing 'second wines' to popularize the beverage. At other times, the mission of the orchestra is to stretch their limits. To make life interesting for the musicians. Or to indulge in a conductor's fantasy. Or to introduce new composers at world premieres. Or to study a piece to death, either as a showcase for its members' virtuosity or to offer something new to the public. So it should be with companies. Organizations must help workers indulge their interests and talents by seeking the same professional growth and satisfaction as musicians.
At semco, we don't require expense accounts because of what they say about character. They're insulting for two reasons - they imply a worker did not really take a taxi for the company, and if she did, that we question her judgement about it. We've learned that peer control is as effective as reporting and auditing. If people know there is no auditing, no official policing, they're more aware of how they behave and what goes on around the, They'll know that trust is in jeopardy if accounting is fraudulent or sloppy; they'll watch for thieves because they know there is no security department filling that role.
When the ISO fad started, Semco was delivering marine pumps via a shipyard to the Shell Company. At a memorable meeting at their Rio de Janeiro headquarters, they asked us to include ISO certification in the bid we were about to win. They knew we would need several months to attain this, at best. So they were willing to let us deliver the first of the three ships without ISO certificates. We asked to think about it. We made a few calls to Sao Paulo, determined what the basic ISO parameters were, and calculated what it would cost us. After 40 min we told the Shell representatives that we would be glad to comply. And that we'd learned that we'd be delivering eight tons of pups and two tons of paper. And that Shell should add 6 percent to the price of the pumps for the cost of the paperwork they now needed and reduce the warranty period from our standard five years to the ISO standard of 12 months. When they came back, they announced they'd pass on the ISO. We never supplied them with certification. They trusted our old way of doing things. ----> Certifications are only as good as the trust you put in them.
Minimum common denominators. Minimum is a critical part of the phrase. Even the smallest common denominator says that we're all there for the same reason. Employees may have their own agenda, their own careers to consider but the common denominator that anchors all of us to the company. So now, whatever the company may do, I have the seeds of sustainability. I have something that will endure through turnover, cannibalizing, and time. And it's not a set of mission statements, credos or values that I have decreed from a mountaintop. It's the philosophy that working together for years has left people with. This naturally evolving, shared culture bonds people at a company, and it's founded on trust. You cannot have integrity, dissent, respect or open communication without trust. You must believe those features are constructive, even when they are sometimes painful. That only works if people trust each other, and trust the company. (And working "trust" into the mission statement won't cut it). A company that lacks integrity will eventually lose its best employees. Some will quit, others will stay and be dumbed down. Anyone who stays will disengage emotionally, and soon will be a candidate for motivational seminars. But a company can't expect integrity from its employees until they see it in the organization. People need to have faith and feel pride in what a company promises to its customers, includes in contracts, or touts in its advertising. If they know there are fasehoods or deceptions involved, their willingness to associaet with the company diminishes. Soon they'll be working there just for the paycheque, and be embarassed to tell anyone. I'm often asked: How do you control a system like this?
I don't. I let the system control itself.
Engineer valdomiro and the other two showed up to solve the faulty pump problem. Valdomiro, feigning mechanical experience, grabbed a wrench and stepped up to the pump. Vicente, some bosses and several workers all backed up swiftly. Valdomiro looked behind his shoulder, snorted and proceeded to wield the wrench. As soon as the tightened the gasked the pump emitted a long groan and exploded. Caustic soda covered the area, workers fled in all directions, and in an instant everything was covered with white foam, as if in a new fallen snow. In a company with set procedures this would never have happened (the very reason Carbocloro emplyees didn't dare manoeuvre the pump). At Semco, our mission is clear (make the customer's pumps work). All avenues are open, even if they lead to dismal failure in front of the customer. We can only do this if we accept that control (over emplyees and how they do their jobs) will hinder our business. Once we let go, the net effect is that companies like Carbocloro remain steadfast customers, even after (or maybe because of the shows we've put on at their plant.
Giving up control also means relinquishing exclusive rights to information. Privileged information is a dangerous source of power in any organization. Information that one person thas the others lack can be terribly important and can give them the upper hand. To annihilate information hoarding and illegitimate power, information must be shared. The argument athat competitors might latch onto sensitive information if it is widely known is nost convincing enough to stop the free flow of information.
At any rate, all our plans are limited to six months into the future. We deliberately give it only a half year because of the assumptions people make, that information is right, so the plan must be right. But factors in the business world change so frequently that any plan is in jeopardy. That makes it ludicrous to have a five-year plan. We don't want to follow a structure that might become nonsense in six months. So we brainstorm three, five or ten years into the future but we only write down the next six months. We need the freedom this process guarantees. (Besides, every one-year plan that I've seen has all the good things pannening in the second half.) We'd rather look ahead just six months- whatever looks bad on that horizon needs immediate action, not rhetoric. That we we combine freedom with strong business sense- and they are not incompatible.
But open communication is important enough that it should be tested, even if there is a price to pay. It's at the heart of a shared culture. The only source of power in an organizationis information and witholding, filtering or retaining information only serves those who want to accumulate power through hoarding. Once an email is not circulated or if it is edited, then illegitimate pockets of power are created. Some people are privy to information that other don't have. Remove those pockets, and a company removes a source of dissatisfaction, bickering and political feuding.
Open communication and truth are not only factors when dealing with employees. They're equally important with clients...... So when the time came to talk price, I pulled out our cost calculation and put it on the table. The president's eyes bulged and everyone leaned forward. This is what we make and how we calculate it, I said in a mellow tone. Look at it, re-calculate it any way you want, take out people, shifts, cameras - anything you feel you know something about. We then proposed a system whereby they could adjust our staff and equipment over time, reimburse us for those costs, and then pay us 50% of the net gains we generated for them in the first three years. With the numbers laid out on the table, they had our fixed management fee and our possible profit right in front of them. It was easy for them to make a decision - and thus we landed our fist big contract.
The property manager there had been known to sexually harass the clearning women. This man was close to some of the bank managers, and they protected him. I asked the director what he'd think if I brought him a newspaper clipping with the headline: "Bank manager Harasses Women - Board aware and silent". He looked stunned, and our directors, now knowing that I was going to bring this up, looked at the ceiling, out the window, at their shoes. After a brief pause, the bank director answered with two words: Fire him. Since then, that bank has asked for our help with delicate issues that require meeting the truth head on.
At Semco, we practice truth with a simple formula : Free sharing of information. We are so committed to it that we don't just tell people they have a right to information. We actively present it to them in emails and democratic meetings. We also encourage people to learn how to use the information at their fingertips.
We tried to emulate the best practices of worker cooperatives and even brought in some salutary Socialist concepts. We were convinced that employees who knew the whole truth could be counted on to stay longer, better understand the vagaries of economics, improve their work life, and thus enrich our financial performance. After all, they had an important profit sharing program to make them part of the gains. Sharing accounting information with workers has benefited them The information enables them to make better decisions about their own salaries and financial planning. Angelo d'Ariano is one who uses this information nearly every day. Angelo is a quality inspector at Semco Processes, and a quarter of his annual income can come from profit sharing. As a result, he knows his unit numbers better tha I do. He follows company results closely. He understands exactly how variable remuneration works, and knows what must happen for him to earn the equivalent to three extra paycheques each year - 45 % of his success depends on the earning of the unit, 35% on the cash flow results and other 20% on goals he sets for himself, like validating processes or qualifying suppliers. When communication is open, Angelo and others like him understand our books and pay close attention to them. They're not just improving their own chances of making more money - they're improving Semco's as well.
Generals can relax while the soldiers and lieutenants draw the map themselves.
Chapter 2 - Do it your way - See if I care
The heirs of Sam Walton, the tenacious founder of Wal-Mart, would do well to remember Sears, Macy's and Woolworth's. They were once similar retail powerhouses. Marks & Spencer was a star of the sales-per-square-foot crowd, and Harrod's a shining temple of commercial expertise. K-Mart invented the hypermarket concept. Yet all of those famous chains have either faltered or been sold since their heyday. Their success couldn't be sustained with rigid structures, slogans or mission statements. Building Wal-Mart required relentless commercial instinct and a penchant for penny-saving tactics. There's no blueprint.
Success in retail owes much to tenacity, yet we are quick to credit values, mission statements and credos for the winners. No one argues with success. But then the company-wide "brainwashing"begins, which is followed by the "this reason for our success- this is how we've always done it' syndrome. That's the biggest mistake successful people and companies make - believing that thatir success immortalizes their way of doing things. Questining that syndrome is viewed as sticking a thorn in the side of success. Any dissent is usually cut away like an unwanted cactus tip.
Chaper 3 - Undressing Chairman Mao
Once upon a time, it was easy to caricature the idiosyncrasies of the "tribes" in the manufacturing industry. People lived up to the cliches - the engineers when around with plastic shirt pocket protectors for their colored pens. Themarketing people wore loud yellow shirts and piped music into their section, while the controllers favored thick glasses and carried oversized brief cases. The owner drove a Mercedes but the janitors owned old Ford Galaxys. And the salesmen sported worn shoes and cars, and looked as if they'd just gotten back from a Willy Loman conference.
Like talent, anthropology in the workplace often goes unnoticed. This may be because tribalism now looks a bit different on its surface - plastic pen protectors are out of style and on Casual Days everyoen looks similar in the parking lot. But tribes often speak a language that outsiders can't understand. Try talking shop with tax attorneys or information technology types. You won't understand them any more than if they were teenage hip-hop rappers. Tribalism satisfies the human need to belong. Tribes have all sorts of rituals designed to exclude outsiders, approve of members, test loyalty and reinforce belonging. We can enhance this integration by mixing people of different backgrounds, experiences and ages in working groups and office set-ups. We've done that at Semco with our offices - our employees work at a different desk every day, sitting next to a different person who might be younger or older and who may have a wildly different background than the person who sat there the day before.
We've done it with our garden meetings, where blue and white-collar workers rub elbows in the same outdoor space. And we've done it with programs that encourage workers to move around the company, seek new challenges and test the limits of their interests and abilities.
As people begin to realize that job rotation is about exploring new worlds, and fighting repetition and boredom, the concept catches on quickly. Once tribe members begin to circulate, any departmental mind-set is quickly undermined, and uniformity is left behind. People don't have to look alike or work alike. Pretty soon, units will include workers who can speak for or defend another unit because they've visited or worked in that other place themselves - and they understand it, even if they are not similar to the others.
I often begin workshops of mind by asking people to explain some of the things they do every day. For example: Why are you all dressed in suits and ties? Most people reply with something like - Because we're a group, or because we look alike this way. So then I ask a second question. Why do you want to look alike ? People then shift in their seats and beging to look uncomfortable. Some smile. a few might reply that uniformity makes for a comfortable shared standard, others might say it projects an image or seriousness and prestige. Each of these replies begs a third why? Why are people comfortable looking like someone else? Or, why do companies want their people to feel comfortable when comfort leads to complacency, or further why do we need to look serious so that people will believe we truly are?
I ask them about their conventions and strategy or brin storming sessions, and I learn that on these occasions they're asked to come in casual dress. So they can be themselves, and think freely. So what are they supposed to be doing the rest of the year?
People shift uncomfortably in their seats as I repeatedly ask why, but gradually they begin to understand the true answer. To coin a phrase - it's a control issue. Uniformity makes it easier to tame people, their ideas and expectations. Anyone who wants control will prescribe conformity. And outward appearance is a fine place to start. School children are a great example Some are obliged to wear uniforms, and those identical jumpers and suit coats are defended by parents who worry about discrimination over clothes and by teachers who think it's easier to control kids who believe they're equal. Mao Tse Tung understood this and dressed millions of Chinese in dull-coloured, plain suits. Any drill sergant sees the advantage too.
[....] Then at 17 they're expected to decide what they want to be in life. How can they know? Yet most people have been asekd since they were 10-years-old what they ywant to be when they grow up.
But the majority of college people haven't pinpointed their calling in life. Yet they're presented with a list of choices: Medicine or Law, art of engineering? They're asked to choose whether they want to spend the next 50 years examining toes or livers, divorcing couples or prosecuting criminals, photographing or painting, building bridges or calculating impellers for pumps. Alas, by the time they finish college and come to work at places like Semco, Ge or Amazon.com, they've been trained to ask why only when solicited, and then only in the strictest sense. They've lost the capacity to question everything from scratch, because they've learned the first and most important lesson in getting along in the system: Don't rock the boat. We wear suits and ties because that's what we do.
First, we create a template for the job. This is a draft list of the qualities we are looking for, and weights that should be attached to each of these. Employees help design the template. They can log onto the company Intranet and suggest what we should seek in financial controller candidates, and then the scoring value to assign to each subject. Basic qualifications, like an international experience or schooling, fluent english, and a firm command of financial technique are not a part of the template.
These are either irrelevant, or they're a prerequisite covered by testing. For example, if english is vital, as it was in this case. the finalists will take a test called Test of English as a Foreign Language - Business Version. It tests the candidate's ability to communicate well for business purposes. An intricate test of financial knowledge gives the candidates two hours to put together a balance sheet, comment on profit and loss statements, and answer questions about tax laws and current issues in finance. As basic abilities, therefore, english or finance skills shouldn't have any weight attached to them. Which meant that an MBA from Wharton would do nothing for an applicant's grading. This is improtant because it prevents placing undue value on experience and schooling. The fact that a candidate has an MBA is worthless to the template. Those skills may open the door for a candidate, but they add little to his qualifications. So we don't review or grade those basic abilities. It may have got him inthe door, but it doesn't give him any better chance of landing the job - even though MBAs would be highly suited to what we're looking for in a controller. The qualities that were listsed on the template for this job included a quick analytical mind, the capacity to integrate easily, an attitude of teamwork, trasnsparency/openness, a lack of a yes-man (yes-person?) attitude, a career or deliberate and solid growth and a sense of humour. Interviewers can rate candidates on a scale of one to 10. Of the 1- possible points, two went to the interveiwer's feeling as to whether this was the right person.
On the controller template, the subjects were integrity, personal presence, the candidate's handling of issues. It also included the english test, the financial and technical test and an assessment of how the candidate might put toegether a budget. It happened that in this case, people wanted to be confident of a candidate's technical competence. After the template is designed, two or three interested Semco workers volunteer to cocordinate the interview process. Someone has to call all the candidates and ask them if they'll come. The date of the collective interview is posted so any employee who is interested can participate. For the first round of controller interviews, 37 Semco employees responded. That high interest was a reflection of the important of this new position.
By the same token, if no one had shown up for the collective interview, they we'd have gotten rid of the conroller's position before it was even filled. No-shows would have meant that no one at the company cared about it. The 20 candidates were reduced to nine. Then, the 37 Semco employees who had expressed interest were handed a copy of the template showing which candidate attributes we were interested in, and the score value assigned to each. They could come to the next round of interviews, ask whatever questions they wanted, in whatever language, in search of answer for the template.
[...] The three finalists were seen one after the other on the same day. Some of the dozen or so Semco employees who showed up had seen them before, but most had not. Each Semco participant then filled out his template response sheet. The resulting scores would define the winner. Their rankings would be unknown to the CFO of Cushman & Wakefield, who would also interview each of the three. If the results differed, the Semco group would reconvene to hear the Cushman & Wakefield CFO's arguments. They could change or stand by their ratings. Whatever they decided it would overrule Cushman & Wekefield's CFO. Incidentally, my vote was subordinate to the semco employees choice, too. My opinion would carry as much weight as that of the CFO of Cushman & Wakefield, but no more.
A sustainable company will put a 57- year old GM alumni in an office with a dot.com kid. They both have significant talents to offer. The office may even have a dot.com kid environment. It will design a workplace that allows the 57-year old to sit, side by side, with dot.com and net generation kids. and where each has equal freedome to pursue their passions. It will not subordinate the 25 year old kid directly to the 57 year old's rules, but rather to his wisdom or experience. In exchange, the elder worker cannot use his maturity to restrain the dot.com kid. If he does that, what's the point of having an entrepreneur in your midst? Everyone recognizes that attracting and investing in talent are touchstones of organizations. But what people consider sufficient effort and enough investment is what separates the men from the boys, the women from the girls.
We were offering him a 10 percent stake in the Semco Johnson Controls business - in line with our philosophy of having a CEO who owns a chunk of the business.
Three days after starting, he asked our computer specialists why Semco employees couldn't work from home as if they were inside the Semco INtranet, thus avaoiding the dial-up into the system through the worldwide web. Our people patiently explained that this required a big investment, and went on to describe the change in server, firewall and on and on. The onlookers pitied the boy Rafael, who sat there desolately looking at his shoes. The meeting ended. Two days later Rafael came back with a solution that involved UNIX and some free software. It wouldn't cost the company a cent, he declared. Companies know very little about free software. But hackers understand it completely. There are no legal or rights issues involved, just a question of knowing where to look and what software to combine. This time, our IT people looked down at their shoes.
Part 4
The Long line of Pied Pipers
1) Why do we have a flock mentality and follow rams that turn out to be wolves?
2) Why do we think we are equipped to choose schools, doctors and mayors, but don't trust our capacity to lead ourselves at work?
3) Why do we continuously look for saviors and heroes to lead us?
Chapter 1 - Let the followers lead -
No management works quite like self-management. And working at Semco means self managing as much as possible. It isn't nearly as frightening as it sounds. In the end, its self-interest at work. It requires conceding that managers don't and can't know the best way to do everything. People who are motivated by self-interest will find solutions that no one else can envision. They see the world in their own unique way - one that others often overlook.
By letting people off the hook of grand policies, procedures and rules, we release them to be accountable only to themselves.
At Semco, our units are no bigger than a few hundred people. The maximum is always whatever number permits people to know each other, understand the whole and undo the need for excessive control. At any rate, they will be organized along the lines of the half dozen to ten people who directly interact.
At Semco-RGIS the groups don't exceed a hundred or so. They're responsible for a geographical area or a customer. That way they concentrate on their world, have a permanent idea of what is needed in their area of expertise, and escape the need for control by thinking small.[...] Rather than seeing 40,000 employees look at 4,000 groups of ten people each. Those ten will always know what's going on within their group, where the problems are, whether the people they work with are doing their jobs on time and in tune. Take the way we do budgets at Semco. Each group of sex to 10 people, once every six months, puts together their numbers. If they need help, they easily get it from the financial types. They organize their work for the next semester. Whether they are biologists at ERM, engineers or plant assembly mechanics in manufacturing, or inventory counters, they know what's going to be needed in the coming months.
Semco does not allow for me to impose my will on the company, even if I wanted to. Sure, I'm the main shareholder, so I always have a loaded gun in a drawer and the right to fire it. Worker self-management can't stop me. Understanding the benefits of our system is my self-restraint. I know that there is only one bullet in that gun, and if I fire it off in a fit of pique, I'll only get one shot. One shot at overriding a popular decision, after which I'll be disarmed. I'll have lost everything I've worked for. People will know that democracy at Semco was fleeting, insincere, unreliable. That's too high a price to pay.
If Semco forced workers to attend meetings, we'd never learn when projects or subjects are of no interest to the company's employees. If no one signs up to take part in a collective interview, then we know that Semco employees didn't think the job we were trying to fill was important or necessary. So we'd eliminate it. But if eight people were compelled by and order to show up, we might never find out that we were hiring and unwanted and unneeded new person. Until it was too late. And what if we attempt a new project, but no one want to work on it? Then that new service or product shouldn't exist. Not until someone really wants to see it happen - then it'll take off in no time. It's that simple. So if people aren't interest in being at a meeting, we don't want them there.
This extends to self-managing the operations. Everyone at the company is invited to participate in preparing the rolling six-month budget. Cynics say that it's impossible to put a budget together with input from dozens of people. The good news is that we don't have dozens of people in every business unit who want to play with Excell tables, HP calculators and spreadsheets galore. So it is conincidentally the financial types who always show up at bdget meetings. The others are comfortable knowing they could have shown up if they'd wanted and that they'll nevertheless see the results, understand and still be able to question them.
During these budge session, each unit plans how many people it will need for the upcoming six months, and they are included in the proposed payroll. There is quite a bit of open debate on these occasions and it is not an easy time if business is down. These usually become non-traditional employees like reps, out-taskers, consultants or part-timers.
There are 11 compensation options: fixed salary, bonuses, profit-sharing, commission, royalties on sales, royalties on profits, commission on gross margin, stock or stock options, IPO or sale (which warrants that an executive cashes-in when a business unit goes public or is sold), self-set annual review/compensation (in which an executive is paid for meeting self-set goals), or added value, a commission on the difference beweteen the current and the future, three year, value of the company.
The options can be combined in different ways. This flexible reward system mirrors our philosophy that people should be innovative in their jobs. They understand that it's in their best interest to choose compensation packages that maximize their own pay and the company's returns.
We offer these variations so we have the flexibility to hire the people we need, even when times are hard, and we tie this to our practice of deciding at each budget-setting session how many employees will be needed in the near future, and what the options are. Since they have a large rold in setting their own salaries, the self-interest of Semco people really shines through. It's self-regulating in a way that most wouldn't expect.
Anyone who requests too large a salary or too big a raise runs the risk of being rejected by their colleagues. So self-interest almost always prevents them from asking for excessive paycheques. we also encourage people to set their own salaries without creating a deficit in their departments. That's why monthly revenue reports, budget costs, salaries (if you don't understand it you can't be part of the rules), profit sharing and transparent numbers (publishing salaries) are so important at Semco. If workers understand the big picture, they'll know how their salaries fit.
Many people at Semco choose to invest part of their salaries in our profit-sharing plans - to believe that our profits will be enough to earn them a greater return on their money than if they simply took it home in a paycheque. Pereira, a mechanical assembly technician at Semco Processes, invested two-thirds of his last few raises in a vaiable mode. If his unit's earning goals are met, Francisco can take home the equivalent of three extra paycheques. On the other hand, he may lose the entire sum of the raises, some 10 percent of his income.
One afternoon, Francisco Alvim burst into a meeting looking for Jose' Alignani. Alvim is in charge of a loading dock at one of Semco's facilities. Every time it rained (like it had that morning), the receiving dock flooded. Francisco was red with outrage. It was a disgrace that a respectable company like Semco didn't have a better loading dock, he nearly shouted. Startled, Alignani heard him out and then said: You're responsible, you should have had that docking area set in concrete long ago. Alvim was speechless. He didn't understand how a low-level employee like himself was supposed to bid for concrete sub-contractors and approve a construction project. He walked away in a daze. Another emplyee from the purchasing department, who'd overheard the conversation, offered to help Alvim put the project together. Within a few days, a winning bid was chosen, the dock was cemented, and the bill sent to Alignani. Alvim learned that when he trusted his own judgement, othere would too - and that he could make decisions without paperwork, internal procedures and layers of managment approvals. He learned one of our unofficial mottoes:"Always beg forgiveness rather than ask permission".
At Semco we identify with Kafka's parable about the man who approached an open door where a vigilant guard stood. He asked the guard many questions. Years passed, and then the man was old and dying he finally asked the guard why he had never been allowed to pass. The guard responded that the door was there exclusively for the man, who could have entered any time he'd asked. Now, said the guard, the door would be permanently closed.
Business Culture is like a long-simmering stew. The right mix of people is essential. As is an understanding that every organization needs its share of indifferent and uninterested workers to balance its leaders, joiners and activists.
Accepting there is no such thing as a "speciality worker" perfectly suited for one company means accepting worker individuality. And once you do that, you set the stage for making the most of that individuality by encouraging workers to tap their inner reservoir and find a balance between their aspirations and the company's. The mix of people can be an upset if a company grows too fast, or aims for skyrocketing results, or merges prematurely with another. The culture of a company will be diluted until it has no flavour of its own. We are wary of this at Semco, too. We've seen enormous growth of 30 to 40% annually for many, many years.
A great deal of employee satisfaction comes from giving individuals some control over the logistics of their job. At Semco we set the stage for that by foregoing formal job descriptions, career plans or organizational charts. WE don't dictate to people what their responsibilities are - we assume that, as adults, they can figure out for themselves what it takes to do their job, and that without guidelines to adhere to, they're more likely to test the boundaries of what they do. That testing often leads to new business practices or new ventures for the company and new challenges for employees.
Without a formal job description, people can wander into neighbouring work activites without hitting a wall.
---> What if this were applied in Medicine? Don't the best hospitals (Mayo, Cleveland Clinic) tweak and change the guidelines to see what the outcomes are and then compare them. What if smaller hospitals stopped following the guidelines and started experimenting and trying out different ways of treatement. Possibly many small studies ongoing
One is for a plan called Up'n Down Pay. It's a program where employees flexibly manage their pay. The idea is that moments in people's lives are very different, one from the other - and that making it possible for them to adapt their pay and work hours accordingly will be a plus. Employees would look to balance the company's present needs with their own, and adjust the pay package accordingly.
If someone is going through a phase in which they would rather work less - and lower their pay accordingly - the company would do its best to adapt. A mother who wants more time for her children would turn to a committee for help in locating another person who would gladly take over 30 % of her job responsibilities (assuming that the person's business unit cannot do without 100% of their time). Both men and women could reduce their work hours and pay to address childcare or parenting needs, for study or simply for a need to step away for a period of time.
Sabbaticals would fall under this program, but would be only one of the variations on the theme. The committee would have a databse of candidates to fill our constant demand for part-time work. Or it could turn to the full 3000 employees and appeal to anyone interested in switching jobs or sharing tasks. This flexibility would make it possible for people with temporary interests - or problems, or sicknesses, or with family issues - to scale back or freshen their minds, knowing that they are not in danger of derailing their career.
We don't come up with these ideas in a vacuum - they're prompted by the seven-day weekend, and by the fact that like it or not, we're facing a new world of "multiple-careers" for most professionals. And they dovetail nicely with our Retire a little concept.
Another plan called Work'n Stop Plan, would complement the first two. Under it, employees could take off longer periods (up to three years) for similar reasons (to realize a dream, study, travel or re-evaluate life). The committee would act almost like an internal head-hunter. If someone in Semco could be found to take a job for six months or a year, the employee who wants a break would be fairly certain he could return. Along with our 11 ways to remunterate people, these programs make it easy to stay at Semco for decades, without forcing difficult choices on people when they yearn to take a break, go back to school, or have a family.
Up'n Down pay and Work'n Stop encompass sabbaticals in a much broader sense and they're open to everyone. But let's take it a step further - a program providing minimal pay for these phases could be set up in advance. Anyone who is interested could set aside a monthly sum for these situations. The company might even keep 30 percent until the person returns to work. ---> Not sure exactly what semler means by this last piece about the 30% - My feeling is a pre-sabbatical 30% pay reduction that goes into an account and funds the sabbatical pay, this makes most sense to me.
Chapter 2
At workshops outside Semco, participants tell me that they'd expect workers to choose leaders who are nice to them, even if those managers are inneffective. They also question whether people won't choose booses who are politically able but technically weak. But I know that people will not follow someone they don't respect for long. Semco's history has proven that many times. Also, our employees participate in profit sharaing, so they know that their livelihood depends on the company doing well. They won't support someone who is a nice but ineffective leader.
Since then I've heard many tales of affairs, drug use and other so-called illicit behaviour inside and outside the company. I'm sure it's only a small part of what really goes on. But I have never again considered taking a position. It's abundantly clear to me that our employees are responsible adults who make their own choices about their lives. That's their business.
I never wanted Semco to be heavily associated with me as an individual, but I knew that if we did well, outsiders as well as employees would credit me with more than my share of the success and less than my share of the blame. The charismatic leader has two options- embrace that image and live the rest of life trying to shore it up, feeding the monster and being a slave to a theatre character and a Jungian persona. Or move away from the company and leave some breathing space between that persona and you. The latter involves physically distancing yourself from the day-to-day company workings and continually decreasing your influence. I choose the second option.
I continuously try to remove obstacles and create mechanisms that will reinforce what contributes to Semco's success - lack of control, freedom, democracy. I work on the mechanisms and not on the final results. ---> Perfecting mechanisms and not results - Don't worry about chopping the logs, worry about building the machine that will chop the logs
We are taught to look for a saviour or father figure in business. Our herd mentality prompts us to line up behind leaders like Lee Iacocca, Jack Welch or Lew Gerstner. People want one person to lead them, and to save them. But two things happen very quickly when a leader becomes a hero. People will delegate upward when they believe the CEO is important. In turn, the CEO begins to believe his own press.
I've found that the time spent on any given item on a board's agenda is inversely proportional to its importance. People can only competently debate issues they understand intimately.
For example, a capital allocation of 150$ Million is usually a one hour item at a board meeting[...]. So deciding to invest 150$ Million is a 60 minute item. Want to see a three hour discussion? Try parking! That is something every board member understands intimately, cares about profoundly, and is willing to fight for. A debate about first-come first-served parking, for example, will guarantee many hours of animated holllering. Once poeple see themselves walking in the rain to the building when a trainee has parekd by the door, you have a hot board item. And they can visualize them. After all, 150$ is just paper, like Monopoly money. No one has ever seen 150$, so no one can relate to it on a human level.
But parking...anyone can picture that, right away!
At Semco we have put together a mixed board. We want our board to make tribal decisions around a fire, not technical ones with more attention to motions and voting procedure. I hold one seat and three are permanently filled with senior executives. Two rotate among senior managers, and two are given over on a first-come first-served basis to any worker in the company.
We don't advocate eliminating leadership. Leadership is important, but it's equally critical to ensure that the leaders are wanted. They have to be legitimate for the situation, but they can't become cult figures.
Executives are famous for declaring the importance of mistakes. They profess generosity toward those who err in the course of taking action. But still, nearly all believe that one mistake is acceptable, two is just stupidity.
At Semco we understand multimple mistakes, even when they're repetitive or come in rapid succession. We're more interested in the process. When those who work above, below and next to the person making the mistakes emerge from the rubble, they'll be wiser and more experienced. They just need the gust to wait it out.
Part Five- Rambling into the future
Alice: Would you tell me, please, which way I ought to go from here?
Cheshire Cat: That depends a good deal on where you want to go.
Alice: I don't much care where -
Cheshire Cat: Then it doesn't matter which way you go.
Alice: - as long as I get somewhere.
Cheshire Cat: Oh, you're sure to do that, if you only walk long enough.
Alice in Wonderland
1) Why do we think that the future "is in God's hands" and then pre-plan every moment of it
2) Why do we think intuition is so valuable and unique - and find no place for it as an official business instrument?
3) Why do we agree that living well is living every moment, without reinforcing past or future - but then spend most of our work lives dealing with historical data and future budgets?
[Reading three books at one time] - When I read like this, I don't necessarily finish all the books - the same way that I'll happily walk out of a movie, concert or theater performance that doesn't grab me. This time I was just indulging my endless curiosity, and constantly shifting my position as an onlooker in the world. It's akin to changing my seat in the auditorium of life, where the stage is in the middle of a round theatre. Sometimes I sit up front, and see all the minute details, sometimes so far up and away that the stage is but a little box and my mind wanders. And sometimes directly on the stage, wondering what I'm doing there.
At home I navigate books and the Internet for one or two hours a day.
Yet most people prefer control, rather than rambling and staring straight into the unknown.
Ten years later, the computer was pondering 150 future moves in a minute's time. By the 1980s, it was 10,000 moves per minute! All the while, man had been represented by the world's best, Gary Kasparov. He resisted bravely. [...] By the late 1990s, Deep Blue was also able to pre-plan and consider 200 million plays before making a move. Kasparov could contemplate two in the same time. Until then, Kasparov had always beat the machine. Only when it was armed with a million moves did the machine finally beat Kasparov. (He asked for a rematch, but IBM declined, and retired Deep Blue instead).
The extraordinary news is not that the machine could out-think man, but that man had beat this Argonaut of mechanics when it was processing several hundred thousands moves a minute in its memory contained all the strategies of the Grand Master games.
Intellect, memory, agility, strategic vision, complex mathematical capacity. None of this justifies the victory of man over the machine for 30 years. Kasparov certainly has all of these, but the machine had more of it. So what explains Kasparov defeating the behemoth of one hundred thousand moves?
In my eyes, Kasparov had only one think that the machine did not. It's the same advantage that the London bookmaker had over theCrazy Supercomputer. Intuition.
And intuition is the fuel of choice for rambling.
Go/No Go meetings - The idea is that if employees are free to pursue any project, they must be able to propose a concept and begin the process of turning it into a business. At Go/No Go, anyone with control over budget, anyone who has an idea or is looking for a new project, and anyone who is just plain interested can show up and participate. There's no studying or setting up commissions. There's a discussion, and at the end of the meeting, a vote - go, or no go. We've had evenings where people in attendance knew that if the vote went against their project, they'd be out of a job.
The fact is that only the very arrogant imagine that decisions have to be made at the top, or close to Numero Uno. Numero Unos are not infallible, or even the best thinkers. And democracy, of course, entitles people to disagree. It means that the intuition of the majority overrides the power of the One. You would argue that thomas Edison's assistants would have killed many of his inventions (and GE along with it), but we don't know how many bad ideas were indeed aborted by assistants, how much of that energy was refocused on something feasible. Or how much support was needed for his inventions to finally succeed. Take Bell Labs - no one has taken out as many patents, developed so many Edison-like inventions from scratch - and yet, a ludicrously small percentage became something useful.
So it is in business - one cannot imagine that every "bright" idea has merit just because it came from the owner or from someone else at the top. When collective work is necessary for a product to succeed, the best approach is to lobby as ferociously as possible for an idea. If no one buys into it, to leave it on the back burner and return to it. In the end, if no one takes a passionate liking to it, it won't become anything.
Sometimes, to execute cutting-edge ideas, you must be open to unorthodox people (kooks). True these are the workings of an eccentric mind. [...] The danger with rambling and engaging kooks to bring dreams to life is the possibility of losing contact with reality. But then, sometimes that is necessary, too.
It takes a bit of both to create the extraordinary. So although I've ceased playing garage doors for people ( a well-known test for audiophiles) I still look for slightly crazy people to mix with our sane ones. Then intuition comes to the fore, and supplants the safe path. Excellence depends on following intuition to strange places.
Unfortunately, intuition can't be bottled. So instead, numbers reign supreme, and they can be very misleading. Zeca and our other financial wizards love to use decision trees. They are fun, I concede, and I like to see the exercise. Basically, you input the variables that affect your situation and confer weight to each. Then you factor the mathematical probability that the event will occur. (Just like my Brazilian friend at Harvard who used charts and graphs to choose the best job offer.).
Here's the decision tree I'd draw up if I wanted to bet 1,000$ on a Formula One driver who is skilled at racing on rain-slicked tracks, but has a cold that week: Chance of driver recovering = medium cycle of a cold virus =7 days. He has had a cold for three days so his chance of getting better in the next two days is 45 %. The weather forecast says there is a 60% cance of rain for the day of the race. Factor in the detail that meteorological forecasts are wrong 25 % of the time. Add the 15 % chance of other developments interfering, such as the driver's recurring asthma. Consider the number of times the driver has won in rainy conditions (58%). Add the chance of mechanical failure (11%) and the chance of human error while changing tires during the race (24%). On the other hand, what is the chance I can afford a 1,000$ loss.
And on and on. All you have to do is input the date into the decision tree and voila! You will of course know as much or as little as the Munich professors did about the foodtabll championship. The tree will include all the right variables and chances, and probably provide the wrong answer.
Another way of goingn it is looking at a picture of the driver in the newspaper, seeing that he's haggard, remembering that his ex-girlfriend lives near the race track, and figuring that he might get distracted by seeing her apartment building in the distance and imagining her there, with someone else.
I wouldn't bed money on that driver that week, no matter what the numbers tell me.
To the dismay of accountants and executives, I've often said that business plans and budgets are nothing more than extrapolations of wishful thinking.[...] With their last two years' numbers, all I have to do is make the revenue and profit projections rise five to 10% per year, every year.
As it happens, erring once only is itself an erroneous concept. let's take tarte tatin as a business case. This French apple tart is the result of a mistake. In the French village of Lamotte-Beuvron the Tatin sisters had a little train station bistro, and made a fair apple tart. One day they forgot to make the pastry, but because they were late, they whipped up a batch and stuck it on top of the apples, threw the lot into the oven, and 15 min later turned the pie upside down. Voila'! Quelle merveille!
We know that countless inventions resulted from mistakes, or because people were looking for one thing and tripped over another. But like Isaac Newton sitting under a tree, or Archimedes sitting in the bath when Eureka arrived, an inventor or innovator must be deeply involved in that subject. Laws of gravity, penicillin and gunpowder don't occur to most of us when we sit in the bath. We're thinking instead of cheques in the mail, how far away the shampoo bottle is, and where we mislaid our eyeglasses.
In the same way, luck does not strike all of us equally. Yet it's a most necessary component of success. To accuse people of being lucky is unfair. Luck is an add-on to effort - it crowns a compultion to succeed. Success has a long-term measurement in the form of sustainability. Luck rarely has such longevity. It's like lightning - it may strike, but then it's fast, furious and rare. What you make of that stroke of luck is a result of the diligence you apply after it strikes.
Intuition, luck, active mistakes, serendipity - there you have four vital business concepts that should be entire disciplines in the MBA curriculum.
That's why I hold such a great admiration for Lewis Carroll's Chesire Cat. Sure, the cat seems "lost. His advice is maddening to those who want to leave a boardroom with the certainty that they know where they are going (though they rarely do). But it is sound technical strategy nevertheless. The cat wants us to accept that it's good that we're not masters of our own destiny - it hones our survival skills and makes us opportunists. His advice won't prevent us from pondering the future (or bainstroming sessions or budget meetings where calculators are endlessly juggled). His kind of rambling is not a cavalier, who-cares approach. It's a keen understanding of human nature.
Informed minds heed the grumbling belly, just as sophisticated plans rely on intuitive hunches.
Chapter 2 - Visiting the Future
No one would ever say that in so many words. But the famous exit strategy went like this: Here's the small boat that we have built so far - in order to make it capable of competing at a world-class level, we need you to give us unlimited amounts of money. We'll soothe your worries by employing an older co-skipper who can show he's bought his wisdom through experience, while the young and ebullient crew will work all night on projects for the boat that you don't really understand. We'll need you to give us your network of contacts too, so we can get more money to buy the fuel to power the boat once it's actually build. On top of your initial investment, we'll call you Angel and you'll help us find friends of yours who will give us the fuel to power the boat.
We'll all agree we're going to an uncharted island in the South Pacific, where low-hanging fruit drips honey, hula dancing rules, and the earth exuces precioius metals that we can find on secret maps we've dreamt of but cannot show you have.
If, by any chance, we manage to get the public at large to buy part of this dream, you will excuse us for jumping overboard and swimming to Bora-Bora while you continue your fine journey.
Organizations must treat mistakes like luck - both are necessary, come at times when they're not expected, and add to existing effort. At Semco, we wander into mistakes with a certain level of comfort. It is very common to hear employees at meetings describe some facet of our business as a big mistake. Because we regularly make mistakes and own up to them, it's all part of learning to use intuition.
Chapter 3 - The Wisdom Revolution - Freedom, Democracy and a new way to live
Many times we begin stretegy meetings by asking ourselves what we would do if we were our competitors. Then we look for a way to do whatever it is to ourselves, first. We try to avoid the fate of Ford, Gillette and the airlines. We can survive by standing still, but we'll never be at the cutting edge of anything. A boat like ours needs someone at the helm wielding a telescope. You can never tell where change may come from.
Today we spend roughtly 25 years getting ready to work, some 35 years working and another 25 years in retirement or negligible work activity. Some two thirds of our life, therefore, in the financial auspices of others (parents, the state, company pension funds).
In my son's new world, he might spend 25 years preparing for work, another 60 working, and the same 25 years in retirement. Mandatory retirement may be pushed to 80! [...]
At 18, a person is only a quarter of the way through their lifetime, and must decide what to do with the remainig three-fourths. That may have been resonable in the 18th or 19th centuries, but it makes little sense today. If the new life expectancies come to pass, a youngster will be deciding at a time in which 85% of his life lies ahead of him. But with 70 years to work fully, why should someone have to choose only one career? Why not be a doctor for 20 years, go back to college for another five, spend 20 years as an architect, and maybe go back to school again to spend the last two decades as a biochemist. Much of the conditioning that makes change so hard for us comes from childhood.
Idea: Enabling Independent work + Life Musings
Tagline: A take on life from Ricardo
Rereadability: 2/10 -Quotes will bring back the major points - rereading not necessary unless rereading or trying to copy a specific point or piece of Semco companies
Useful ideas:
How long it takes to read all the Quotes:
Part One
In Whack
1) Why are we able to answer emails on Sundays, but unable to go to the Movies on Monday afternoons?
2) Why can't we take the kids to work if we an take work home?
3) Why do we think the opposite of work is leisure, when in fact it is idleness?
Chapter 1
Our architecture is really the sum of all the conventional business practices we avoid. It's easier to say what it's not, rather than what it is. It's our lack of formal structure, the way we give up control so workers can follow their interests and their instincts when choosing jobs or projects. It's our insistence that workers seek personal challenges and satisfaction before trying to meet the company's goals. It's how we encourage employees to ramble through their day or week so they will meander into new ideas and new business opportunities. It's inherent in how we embrace democracy and open communication, and encourage questions and dissent in the workplace. On-the-job democracy isn't just a lofty concept, but a better way to do things. We all demand democracy in every other aspect of our lives and culture. People are considered adults in their private lives, at the bank, at their children's schools, with family and among friends - so why are they suddenly treated like adolescents at work? Why can't workers be involved in choosing their own leaders? Why shouldn't they manage themselves? Why can't they speak up - challenge, question, share information openly? -----> Underlying this concept is the idea that if we are adults everywhere else why shouldn't we be treated as adults at work. Would you make an adult punch a timecard ( a device that records the times automatically because you don't trust the"adult"). Would you check on an adults web work and time used on the computer? Is all this checking up on people not paternalistic and controlling?
If we have a cardinal strategy that forms the bedrock for all these practices, it may be this: Ask Why. Ask it all the time, and always ask it three times in a row. ----> Question, Question, Question
But mostly, it means putting aside all the rote or pat answers that have resulted from what I call "crystallized" thinking, that state of mind where ideas have so hardened into inflexible and unquestioned concepts that they're no longer of any use. Employees must be free to question, to analyze, to investigate, and a company must be flexible enough to listen to the answers. Those habits are the key to longevity, growth, and profit. ---> It is essential in medicine not to have the presumption to think you are right most of the time. We must remain flexible in our thinking and ability to revise and update our styles of thinking.
Rogerio Ottolia came to Semceo because he wanted a free hand to question everything - even though we offered him less money than he was earning at his previous job with a company that specialized in biochemical analysis. We were considering buying that company and one day I had a meeting scheduled with the owner. The man we too busy to see me, so Rogerio stepped in. We hit if off, and though the acquisition never happened, a week later Rogerio and I were negotiating his move to Semco. His boss immediately countered with a raise and a promotion to plant director. ----> Competent people will emerge- Take chances and small chances often pay off in much larger ways - take many small chances and big ones too!
I once had a weekly lunch schedule that would have made any maitre d' smile. Three to five business lunches a week. One sunny day I asked myself why I was going to lunch with a particular executive. Because that way you'll be closer to the person, I thought. Why do I want to be closer to the person when all I want is a professional relationship? Because close personal relationships generate better business. Why? Because people will not see you simply as a business, and may overlook some deficiency in price, quality or delivery because they relate to you as a person. Why, then, shouldn't I use those two hours a day for improving price, quality or delivery so that the personal relationship at lunch is no longer necessary? That's when I stopped going to business lunches. I've kept those dates to three to five per year. My relentless whys freed me from a grinding lunch schedule. --->Instead on focusing on personal relationships to make up for deficiencies in product, focus on product and whether or not relationships are there won't matter.
Sometimes why seems unnecessary. It's obvious companies should grow. Everyone agrees, right? But why?
The "adult" response to the quesion would be career opportunities, global reach, and economies of scale. Again I ask, why? Why are careers better in a company that grows, rather than in one that does not? Why is profit necessary above a small percentage over sales? What happens when there's too much profit? Are there any studies (none that I've seen) demonstrating that companies that grow fare better than ones that don't ? ---> Continual questioning.
I do not remember the last time Semco leaders tried to guess what size the company would grow to be, or how many people we might eventually employ. We don't talk about these things, much less try to quantify them in budgets or business plans. That doesn't mean we don't think about the future. We spend a lot of time in what we call, in portuguese, "ideas that pour from the sky", (known elsewhere as brainstorming sessions.). There we hack the future to death. We ask why repeatedly. We just don't write anything down in black and white with numbers. That's because any written plan is dangerous. People will follow a plan like a Pied Piper - mindlessly, with no thought as to their final destination. We often jot down generic ideas and broad numbers so we can visualize the imensions of a new product or service. Then, we throw those notes away. At the next meeting on the same idea, we'll start over, without the benefit of the original notes. That way we cannot fall into the trap of fixed assumptions. We're obligated to reconsider all the variables ---> Novel idea about not making plans
Satisfying three basic criteria when we consider a new venture. First, we look for complexity, which for us usually means "highly engineered". Everything we do has a high entry barrier of complexity. If a new business isn't hard for us and for others to break into, then we're not interested. Second, we demand that in each of our markets, we are the premium player. We want to offer a high-end product or service. That means we're always more expensive because we provide the premium that stretches what the customer will pay. And third, we want a unique niche in the market, one that makes us a major player in any given industry. To us, this follows naturally from the first two requirements. We want to be only in businesses where our disappearance would cause our disheartened customers to complain loudly. They'd survive but they'd have a substantial difficulty moving on. All of our products and services meet these criteria.---> Three excellent criteria for picking a business
(Speaking about someone who had just had a meeting where papers were under his golf clubs). Danilo needn't be embarrassed, or look over his shoulder. No one at Semco questions his productivity. In fact, we're paying him to ponder the mountains in the middle of the workweek. I know he'll begin asking a lot of whys. He'll come up with better ideas, ramble into new opportunities, be more open to change, be willing to give up control and take on risk. Soon he'll find the balance between his personal aspirations and his professional goals that he lacked in his previous jobs. In the end, everyone at Semco will benefit. That's a pretty good reason to pay him - or anyone - to retreat to the mountains.
Chapter 2 - The traditional weekend ended long ago.
We talk so easily about how much we value our free time - but rarely make it a priority in our lives. Few of us even know what free time is anymore, or how to be genuinely idle. Yet few people if asked on their deathbed about their regrets would respond:"I'm sorry I didn't spend more time at the office". People believe the opposite of work is leisure. But it isn't, it's idleness. Work is activity, so idlesness is inactivity. Any good Greek philosopher can explain that. We no longer grasp the difference between leisure time and being idle. Western society is highly structured. If you go to the beach, you don't spend the day "doing nothing". Within half an hour you're reading, walking, swimming, fretting about your tan or overexposure. Most of us have to keep one eye on our children while slathering on sunscreen and planning dinner. Idleness is really just a change of scenery: There's no true opportunity to sit back, relax and let the mind wander. Even when we set weekend aside to "do the things I want" we often spend most of Saturday and Sunday engaged in chores, personal tasks and other obligations that may not be work but are still often things we don't really want to do.
Technology has encroached so deeply into our lives that I believe we must make deliberate efforts to beat it back. I have an idea for a technology respite at Semco, but no one agrees to let me test it. It makes them nervous, so they're resisting. Two hours of general computer shutdown. Semco unplugged. That's my impish dream. My idea is to have a half-day, every so often, when the company is unplugged. What would people do if the whole system was down on purpose?
Email, the contemporary manifestation of Gutenberg's printing press, permits instant communication across seas, deserts and mountain ranges. But it also changes the profile of our working lives, and we are not propared for that. It makes communication more efficient, but it also changes the profile of our working lives, and we are not prepared for that. It makes communication more efficient, but it also makes it far too easy for anyone to find us. It frees up time - which we immediately fill with more email. With email people are intensely and continuously involved in minutiae, and that creates a new form of information overload. People who still haven't mastered time management now have email added to the demand on their energies. We face a glut of messages every day, but have come to believe we can't live without our electronic mail boxes. Rather than exacerbating that anxiety, unplugging the company for half a day would restore the primitive practice of thinking about what we're doing instead of just yammering non-stop with the world. ----> Focus on Efficacy not Efficiency
No one ever accounts for the excessive specialization, or the diseconomies of scale.
It goes like this: If you plot the curve of human health, you easily see that the climax of physical capabilities is in the 20s and 30s. The downturn is heaviest after 60. On another graph, you can plot financial independence and see the height is usually between 50 and 60. On a third graph, idle time naturally peaks after age 70 ---> Interesting observation that I find to be true.
I have a habit I call e-bike. I need a daily hour of exercise, and an hour or so just to keep up with the Joneses of email. From the 134 emails I receive on average each day, about 40 must be answered. So I retreat to my gym, where I have an exercise bicycle equipped with a sturdy platform for my notebook computer. I plut in and pedal for 60 minutes into the galaxy of e-bike. FItness purists may say I'm not dedicated enough to my exercise, and the people who receive my mails know that my handwriting shakes and that I don't correct typos. But I get off that machine feeling four pounds lighter, half of that from my brain alone. This is one way in which I strive to find a balance between technology, well being, work and personal life.---> Condensing activities and doing activities with no loss of NET time. ---> Regularly scheduling of the ways of living life and scheduling two or more activites to maximise net time.
IN order to spend as much time as possible with his family, he wakes up at 4:30 and goes down to the empty, dark hall, where he works, sketches and thinks until breakfast time. At eight-ish everyone is awake, and he spends quality time with them. He walks and skis and then only returns to work in the mid-afternoon, through to dinnertime. The rest of his time is like that, wherever he is, and he has offices in Valencia and Paris, as well as work in places from New York to Kuala Lumpur. He is extraordinarily productive, there are books filled with his intricate and mind-boggling projects and he is still in his forties. With his example in mind, i took to waking up at 5:30, which has now crept to 6am. By 7:30 I have my email up to date, and have fired away dozens of messages, read the online news of the local newspapers, the financial times, the Wall st. Journal as well as the odd online Sotheby's catalog, wine rarities journal or palm tree society newsletter. After jacuzzi and breakfast, it's still only about 8am. People are stalled on the highways, and I'm ready to think. There will be two, or four, or maybe six important tasks for the day. Some people think there must be many more. But I remind them that those four important tasks a day equal a thousand important things per year, or then thousand tasks by the time your kid is ten years old. Nobody can have that many important tasks to perform. When I finish the ones I set out to do, I'm finished for the day. If I'm done before lunch, lucky me. Since I don't "do" lunch, I usually eat at home. The lunches that I indulge in are no different on weekdays or weekends. The same leisurely pace, the same time for a cigar. After all my leisurely lunch only takes an hour or so and I would use up more than that in traffic having lunch with a business associate. ---> Two beautiful schedules
I rarely did my homework, for that matter, but learned back then that stress is the difference between your expectations and reality.
Books from W. G Sabald or Arundhati
Everyone has exhilarating moments, and accumulating as many as possible should be every collector's dream. Imagine a notebook with a tally of heart-soaring moments, a list that would prove they'd happened and could - if needed- be shown to everyone as evidence of the width and breadth of the experiences.
Part Two
Success and Money are Distant Relatives
1) Why do people have to stick to a career choice they made as an unprepared adolescent?
2) Why doesn't money buy success if almost everyone measures their success in cash?
3) Why do billionaires greedily accumulate money, only to donate it to ethereal concepts such as world peace?
The first principle to accept is that if an employee has no interest in a product or project then that venture will never succeed. None of that is necessary if employees can pursue their self-interest and fultil the company's agenda at the same time. They'll have found the compatibility of purpose that is so critial to gratification, and the results will be twofold: While they're busy satisfying themselves, they'll satisfy the company's objectives, too.
The danger is that people will look at their jobs and themselves and find they have no passion. Or they'll compare themselves to others and come up short. And then they give up before they've even started or find themselves unhappy with a job that previously felt okay. It's like taking a rubber band and stretching it too tight. It'll snap. Instead, companies need to understand that interests tend to be cyclical. At Semco we offer incentives to employees to move around different jobs and departments. It's another means for them to dip into thei reservoir of talent, and to develop independence. If they're moving around following an inner radar, then they won't rely on the company to tell them what to do.
Job rotation exposes workers like Auro to different challenges, but it also limits the kind of tribal alliances that pit workers against each other. When people change jobs, they're forced to work in a new environment and sometimes even cross over to another tribe. Moving around limits tribal affiliations that are detrimental to democracy, communication and innovation.
He was one of six finalists facing one of our quirky all-inclusive interviews, where the candidates come together before an audience of Semco employees. - When a manager needed a new employee, he selected three candidates from the ones presented by the human resources department. After that, a group formed by employees who would work directly with the new hires, interview them and choose one of the three. Just like that, employees started choosing their bosses. If they don't like them later, they are the ones to blame. More than once a director in a hurry found what appeared to be a perfect candidate, and then simply tossed two more names into the ring to complete the requirement for three applicants. Many times, one of the candidates without the required qualifications got hired by the team of employees.
He suggested a "success fee" or a percentage of the money we saved in operating costs. His work demonstrated the wisdom of oursourcing and it was so successful that it was ultimately applied to other parts of our engineering areas- project design, planning, drafting and machinery maintenance were all eventually outsourced.
Traditional companies recruit and hire for a function within the organization, one that is usually described in detail in a job outline and accompanied by a list of academic and career prerequisites. Their first priority is filling those requirements. Our is in hiring people who will find a click between their life purpose and the company's.
The truth is closer to this: Most of the people who look for common office or factory jobs do not have a calling for what the work entails. They just need a job, to keep themselves and their family thriving so they can otherwise pursue their real calling. Is it a waste of time to deal with these people, therefore? Not at all, because they still have a reservoir of talent worth discovering. They just have to be given the opportunity to discover it themselves.
Chapter 2
Too much Talent is as bad as too little
IQ + EQ+ SQ - EGO
Imagine situations where you'd like to see as many talented people as possible working together, for example, when you need that operation. After you've visited the proverbial "second opinion" surgeon, and then a third, try to fultil your wish of having all three join up as a team and operate together. The sum of IQs would be wonderful, but the EQs and EGO's wouldn't let it happen.
I once did a course at Harvard where the professor, Gordon Donaldson, spoke of RLC. He said businessmen and women had to have RLC, which turned out to be Rat-Like-Cunning. But RLC and MBA don't go together.
Everyone at Semco, including the cleaning staff takes part in a monthly meeting that analyzes the company numbers. There they learn what our revenues and payroll are, why we are different from our competitors, why profit is rising or falling. Anyone can enroll in a course in reading balance sheets.
I have my own resolution to study two hours a day. I want to further my own education, but I also mean to do it without rhyme or reason. In some respect, the goal of the Rush Hour MBA is the same. I may study Jupiter today, and the Spanish Inquisition tomorrow. Anyone concerned with structure might say there's no discipline to that. I believe the two hours is my discipline. It won't count for anything because no school could grade my efforts. But after a year in which I may have studied a little biology, a little astronomy, a little history, I'll be better educated and better able to apply my knowledge to what I do everyday.
For those who want growth at any price, there are mergers and qcquisitions - just another form of keeping score on the big board. Legions of lawyers consultatnts and auditors have made fortunes from mergers and acquisitions. No words ring as musically in their ears as " due dilligence" ; the process of digging ( I like the recent fad for drilling down) into the depths of a company's psyche and ancient filing cabinets, searching for lies, risk and other fodder for the negotiation table. Where does all this frenzy for joining two as one, taking over and buying out originate? What does it say about growth? Mergers are about growth and profit. But many times they are also a solution for bad management. Companies with mistakes to cover up are the first ones in search of a merger. Companies that are doing beautifully are usually only interested in acquisitions.
We frequently pair visionaries like Eugenio with practical managers who can hold the fort, like Yanko. It has always led to great success. One without the other makes for a band of poets, or a stodgy boring outfit. Together, they teach each other something everyday.
Chaper 3
Fortunate 500
That's what the 12 Millioni does. IT gives you access to a large city hours or apartment, a beach house, a mountain cottage, three of your dream cars, and even renting a helicopter - if you absolutely must. Three meals a day, a personal trainer to do away with their side effects, clubs, spas, elegant European travel. Seven or eight servants, dandy schools for the kids, much opera, season tickets galore, and accounts at Donna Karan. That's what Leonardo da Vinci will let you have. And that's why all millionaires are the same after that sum.
Collecting money is like amassing any other item. By definition, no collector can ever be happy. There will always be a piece, a unit, a set that can't be had. On a trip to Bangkok, I met a man who had made his fortune in tomatoes, import and export, and steel. He was proud that the flight over his tomatoe fields took 40 minutes. WE went to dinner. A chain smoker, my host was said to light one match a day when he got out of bed. With every cigarette he would lieght the next. Throughout dinner he did not once put out a cigarette eating with one hand and smoking with the other. As we left the restaurant, his driver appeared out of nowhere in a World War II era Mercedes stretch limo. What a relic, I exclaimed, as he explained offhand that he owned a vertical collection of Mercedes. I knew from wine collecting that vertical meant an example from every production year. As we parted he mentioned that he liked to fly the same airline I was taking to London. But how did he manage a 14 hour flight without smoking, I asked. Oh, I buy first class, he explained. But so did I , and I still couldn't smoke, I retorted. No, sir, he smiled wanly between puffs. You fly first class. I buy first class. He regularly booked all 16 seats in First Class so that he could close the section and smoke to his heart's content. So much for 12 Million and Da Vinci, after all 12 Million doesn't last long when it costs 150,000 $ just to fly from one place to another.
But how else could we have visited six bank presidents in one day in a traffic-jammed city of 17 Million? Surely not without the chopper. But no one delved deeply into the question of what would have happened had we seen two presidents fewer. If we had stopped to question everything we do, we might have had a more nutritious lunch, and more time to think together.
Part Three - Management by (O)Mission
1) Why do we tell our employees that we trust them, then audit and search them when they go home?
2) Why does our customized and carefully crafted credo look like everyone else's
3) Why do we demand and go to war for democracy as nations, yet accept with docility that no one has the right to choose their own boss?
Chapter 1 - Order of the Day : Give up Control, Sir!
The other advantage of an orchestra is that a single person can direct 120 musicians, as opposed to the five to 15, manager to employee ratio in most organizations. Why? Because in a symphony everyone knows what they're doing and they play a common score. Voila' - business gurus fell in love with that metaphor. The mission would be the score. But why? Isn't the mission the goal? And isn't an orchestra's goal to make music for an audience while also seeking personal growth and gratification as musicians? Can you keep a first-rate violinist in an orchestra that plays the same piece over and over like a cruise ship band? The company's reason for existing is no different than that of an orchestra. For one it's the product, for the other, the sheet music. Believe it or not, manufacturing a bus is similar to playing Mozart in the park - both have a purpose, a system and people wo take the product to a waiting public. But the mission varies. At times the mission of an orchestra is to take classical music to the widest audience possible. Witness the Three Tenors - three overweight gentlemen making fools of themselves in kitsch concerts backed by overlarge orchestras and a program of cantina songs. Is this a good way to serve a mission? If your mission is to make opera popular, definitely yes. After all , that is how opera started. The same is true for Shakespeare in the park, or chefs parading their culinary skills on Cable TV, or vinters producing 'second wines' to popularize the beverage. At other times, the mission of the orchestra is to stretch their limits. To make life interesting for the musicians. Or to indulge in a conductor's fantasy. Or to introduce new composers at world premieres. Or to study a piece to death, either as a showcase for its members' virtuosity or to offer something new to the public. So it should be with companies. Organizations must help workers indulge their interests and talents by seeking the same professional growth and satisfaction as musicians.
At semco, we don't require expense accounts because of what they say about character. They're insulting for two reasons - they imply a worker did not really take a taxi for the company, and if she did, that we question her judgement about it. We've learned that peer control is as effective as reporting and auditing. If people know there is no auditing, no official policing, they're more aware of how they behave and what goes on around the, They'll know that trust is in jeopardy if accounting is fraudulent or sloppy; they'll watch for thieves because they know there is no security department filling that role.
When the ISO fad started, Semco was delivering marine pumps via a shipyard to the Shell Company. At a memorable meeting at their Rio de Janeiro headquarters, they asked us to include ISO certification in the bid we were about to win. They knew we would need several months to attain this, at best. So they were willing to let us deliver the first of the three ships without ISO certificates. We asked to think about it. We made a few calls to Sao Paulo, determined what the basic ISO parameters were, and calculated what it would cost us. After 40 min we told the Shell representatives that we would be glad to comply. And that we'd learned that we'd be delivering eight tons of pups and two tons of paper. And that Shell should add 6 percent to the price of the pumps for the cost of the paperwork they now needed and reduce the warranty period from our standard five years to the ISO standard of 12 months. When they came back, they announced they'd pass on the ISO. We never supplied them with certification. They trusted our old way of doing things. ----> Certifications are only as good as the trust you put in them.
Minimum common denominators. Minimum is a critical part of the phrase. Even the smallest common denominator says that we're all there for the same reason. Employees may have their own agenda, their own careers to consider but the common denominator that anchors all of us to the company. So now, whatever the company may do, I have the seeds of sustainability. I have something that will endure through turnover, cannibalizing, and time. And it's not a set of mission statements, credos or values that I have decreed from a mountaintop. It's the philosophy that working together for years has left people with. This naturally evolving, shared culture bonds people at a company, and it's founded on trust. You cannot have integrity, dissent, respect or open communication without trust. You must believe those features are constructive, even when they are sometimes painful. That only works if people trust each other, and trust the company. (And working "trust" into the mission statement won't cut it). A company that lacks integrity will eventually lose its best employees. Some will quit, others will stay and be dumbed down. Anyone who stays will disengage emotionally, and soon will be a candidate for motivational seminars. But a company can't expect integrity from its employees until they see it in the organization. People need to have faith and feel pride in what a company promises to its customers, includes in contracts, or touts in its advertising. If they know there are fasehoods or deceptions involved, their willingness to associaet with the company diminishes. Soon they'll be working there just for the paycheque, and be embarassed to tell anyone. I'm often asked: How do you control a system like this?
I don't. I let the system control itself.
Engineer valdomiro and the other two showed up to solve the faulty pump problem. Valdomiro, feigning mechanical experience, grabbed a wrench and stepped up to the pump. Vicente, some bosses and several workers all backed up swiftly. Valdomiro looked behind his shoulder, snorted and proceeded to wield the wrench. As soon as the tightened the gasked the pump emitted a long groan and exploded. Caustic soda covered the area, workers fled in all directions, and in an instant everything was covered with white foam, as if in a new fallen snow. In a company with set procedures this would never have happened (the very reason Carbocloro emplyees didn't dare manoeuvre the pump). At Semco, our mission is clear (make the customer's pumps work). All avenues are open, even if they lead to dismal failure in front of the customer. We can only do this if we accept that control (over emplyees and how they do their jobs) will hinder our business. Once we let go, the net effect is that companies like Carbocloro remain steadfast customers, even after (or maybe because of the shows we've put on at their plant.
Giving up control also means relinquishing exclusive rights to information. Privileged information is a dangerous source of power in any organization. Information that one person thas the others lack can be terribly important and can give them the upper hand. To annihilate information hoarding and illegitimate power, information must be shared. The argument athat competitors might latch onto sensitive information if it is widely known is nost convincing enough to stop the free flow of information.
At any rate, all our plans are limited to six months into the future. We deliberately give it only a half year because of the assumptions people make, that information is right, so the plan must be right. But factors in the business world change so frequently that any plan is in jeopardy. That makes it ludicrous to have a five-year plan. We don't want to follow a structure that might become nonsense in six months. So we brainstorm three, five or ten years into the future but we only write down the next six months. We need the freedom this process guarantees. (Besides, every one-year plan that I've seen has all the good things pannening in the second half.) We'd rather look ahead just six months- whatever looks bad on that horizon needs immediate action, not rhetoric. That we we combine freedom with strong business sense- and they are not incompatible.
But open communication is important enough that it should be tested, even if there is a price to pay. It's at the heart of a shared culture. The only source of power in an organizationis information and witholding, filtering or retaining information only serves those who want to accumulate power through hoarding. Once an email is not circulated or if it is edited, then illegitimate pockets of power are created. Some people are privy to information that other don't have. Remove those pockets, and a company removes a source of dissatisfaction, bickering and political feuding.
Open communication and truth are not only factors when dealing with employees. They're equally important with clients...... So when the time came to talk price, I pulled out our cost calculation and put it on the table. The president's eyes bulged and everyone leaned forward. This is what we make and how we calculate it, I said in a mellow tone. Look at it, re-calculate it any way you want, take out people, shifts, cameras - anything you feel you know something about. We then proposed a system whereby they could adjust our staff and equipment over time, reimburse us for those costs, and then pay us 50% of the net gains we generated for them in the first three years. With the numbers laid out on the table, they had our fixed management fee and our possible profit right in front of them. It was easy for them to make a decision - and thus we landed our fist big contract.
The property manager there had been known to sexually harass the clearning women. This man was close to some of the bank managers, and they protected him. I asked the director what he'd think if I brought him a newspaper clipping with the headline: "Bank manager Harasses Women - Board aware and silent". He looked stunned, and our directors, now knowing that I was going to bring this up, looked at the ceiling, out the window, at their shoes. After a brief pause, the bank director answered with two words: Fire him. Since then, that bank has asked for our help with delicate issues that require meeting the truth head on.
At Semco, we practice truth with a simple formula : Free sharing of information. We are so committed to it that we don't just tell people they have a right to information. We actively present it to them in emails and democratic meetings. We also encourage people to learn how to use the information at their fingertips.
We tried to emulate the best practices of worker cooperatives and even brought in some salutary Socialist concepts. We were convinced that employees who knew the whole truth could be counted on to stay longer, better understand the vagaries of economics, improve their work life, and thus enrich our financial performance. After all, they had an important profit sharing program to make them part of the gains. Sharing accounting information with workers has benefited them The information enables them to make better decisions about their own salaries and financial planning. Angelo d'Ariano is one who uses this information nearly every day. Angelo is a quality inspector at Semco Processes, and a quarter of his annual income can come from profit sharing. As a result, he knows his unit numbers better tha I do. He follows company results closely. He understands exactly how variable remuneration works, and knows what must happen for him to earn the equivalent to three extra paycheques each year - 45 % of his success depends on the earning of the unit, 35% on the cash flow results and other 20% on goals he sets for himself, like validating processes or qualifying suppliers. When communication is open, Angelo and others like him understand our books and pay close attention to them. They're not just improving their own chances of making more money - they're improving Semco's as well.
Generals can relax while the soldiers and lieutenants draw the map themselves.
Chapter 2 - Do it your way - See if I care
The heirs of Sam Walton, the tenacious founder of Wal-Mart, would do well to remember Sears, Macy's and Woolworth's. They were once similar retail powerhouses. Marks & Spencer was a star of the sales-per-square-foot crowd, and Harrod's a shining temple of commercial expertise. K-Mart invented the hypermarket concept. Yet all of those famous chains have either faltered or been sold since their heyday. Their success couldn't be sustained with rigid structures, slogans or mission statements. Building Wal-Mart required relentless commercial instinct and a penchant for penny-saving tactics. There's no blueprint.
Success in retail owes much to tenacity, yet we are quick to credit values, mission statements and credos for the winners. No one argues with success. But then the company-wide "brainwashing"begins, which is followed by the "this reason for our success- this is how we've always done it' syndrome. That's the biggest mistake successful people and companies make - believing that thatir success immortalizes their way of doing things. Questining that syndrome is viewed as sticking a thorn in the side of success. Any dissent is usually cut away like an unwanted cactus tip.
Chaper 3 - Undressing Chairman Mao
Once upon a time, it was easy to caricature the idiosyncrasies of the "tribes" in the manufacturing industry. People lived up to the cliches - the engineers when around with plastic shirt pocket protectors for their colored pens. Themarketing people wore loud yellow shirts and piped music into their section, while the controllers favored thick glasses and carried oversized brief cases. The owner drove a Mercedes but the janitors owned old Ford Galaxys. And the salesmen sported worn shoes and cars, and looked as if they'd just gotten back from a Willy Loman conference.
Like talent, anthropology in the workplace often goes unnoticed. This may be because tribalism now looks a bit different on its surface - plastic pen protectors are out of style and on Casual Days everyoen looks similar in the parking lot. But tribes often speak a language that outsiders can't understand. Try talking shop with tax attorneys or information technology types. You won't understand them any more than if they were teenage hip-hop rappers. Tribalism satisfies the human need to belong. Tribes have all sorts of rituals designed to exclude outsiders, approve of members, test loyalty and reinforce belonging. We can enhance this integration by mixing people of different backgrounds, experiences and ages in working groups and office set-ups. We've done that at Semco with our offices - our employees work at a different desk every day, sitting next to a different person who might be younger or older and who may have a wildly different background than the person who sat there the day before.
We've done it with our garden meetings, where blue and white-collar workers rub elbows in the same outdoor space. And we've done it with programs that encourage workers to move around the company, seek new challenges and test the limits of their interests and abilities.
As people begin to realize that job rotation is about exploring new worlds, and fighting repetition and boredom, the concept catches on quickly. Once tribe members begin to circulate, any departmental mind-set is quickly undermined, and uniformity is left behind. People don't have to look alike or work alike. Pretty soon, units will include workers who can speak for or defend another unit because they've visited or worked in that other place themselves - and they understand it, even if they are not similar to the others.
I often begin workshops of mind by asking people to explain some of the things they do every day. For example: Why are you all dressed in suits and ties? Most people reply with something like - Because we're a group, or because we look alike this way. So then I ask a second question. Why do you want to look alike ? People then shift in their seats and beging to look uncomfortable. Some smile. a few might reply that uniformity makes for a comfortable shared standard, others might say it projects an image or seriousness and prestige. Each of these replies begs a third why? Why are people comfortable looking like someone else? Or, why do companies want their people to feel comfortable when comfort leads to complacency, or further why do we need to look serious so that people will believe we truly are?
I ask them about their conventions and strategy or brin storming sessions, and I learn that on these occasions they're asked to come in casual dress. So they can be themselves, and think freely. So what are they supposed to be doing the rest of the year?
People shift uncomfortably in their seats as I repeatedly ask why, but gradually they begin to understand the true answer. To coin a phrase - it's a control issue. Uniformity makes it easier to tame people, their ideas and expectations. Anyone who wants control will prescribe conformity. And outward appearance is a fine place to start. School children are a great example Some are obliged to wear uniforms, and those identical jumpers and suit coats are defended by parents who worry about discrimination over clothes and by teachers who think it's easier to control kids who believe they're equal. Mao Tse Tung understood this and dressed millions of Chinese in dull-coloured, plain suits. Any drill sergant sees the advantage too.
[....] Then at 17 they're expected to decide what they want to be in life. How can they know? Yet most people have been asekd since they were 10-years-old what they ywant to be when they grow up.
But the majority of college people haven't pinpointed their calling in life. Yet they're presented with a list of choices: Medicine or Law, art of engineering? They're asked to choose whether they want to spend the next 50 years examining toes or livers, divorcing couples or prosecuting criminals, photographing or painting, building bridges or calculating impellers for pumps. Alas, by the time they finish college and come to work at places like Semco, Ge or Amazon.com, they've been trained to ask why only when solicited, and then only in the strictest sense. They've lost the capacity to question everything from scratch, because they've learned the first and most important lesson in getting along in the system: Don't rock the boat. We wear suits and ties because that's what we do.
First, we create a template for the job. This is a draft list of the qualities we are looking for, and weights that should be attached to each of these. Employees help design the template. They can log onto the company Intranet and suggest what we should seek in financial controller candidates, and then the scoring value to assign to each subject. Basic qualifications, like an international experience or schooling, fluent english, and a firm command of financial technique are not a part of the template.
These are either irrelevant, or they're a prerequisite covered by testing. For example, if english is vital, as it was in this case. the finalists will take a test called Test of English as a Foreign Language - Business Version. It tests the candidate's ability to communicate well for business purposes. An intricate test of financial knowledge gives the candidates two hours to put together a balance sheet, comment on profit and loss statements, and answer questions about tax laws and current issues in finance. As basic abilities, therefore, english or finance skills shouldn't have any weight attached to them. Which meant that an MBA from Wharton would do nothing for an applicant's grading. This is improtant because it prevents placing undue value on experience and schooling. The fact that a candidate has an MBA is worthless to the template. Those skills may open the door for a candidate, but they add little to his qualifications. So we don't review or grade those basic abilities. It may have got him inthe door, but it doesn't give him any better chance of landing the job - even though MBAs would be highly suited to what we're looking for in a controller. The qualities that were listsed on the template for this job included a quick analytical mind, the capacity to integrate easily, an attitude of teamwork, trasnsparency/openness, a lack of a yes-man (yes-person?) attitude, a career or deliberate and solid growth and a sense of humour. Interviewers can rate candidates on a scale of one to 10. Of the 1- possible points, two went to the interveiwer's feeling as to whether this was the right person.
On the controller template, the subjects were integrity, personal presence, the candidate's handling of issues. It also included the english test, the financial and technical test and an assessment of how the candidate might put toegether a budget. It happened that in this case, people wanted to be confident of a candidate's technical competence. After the template is designed, two or three interested Semco workers volunteer to cocordinate the interview process. Someone has to call all the candidates and ask them if they'll come. The date of the collective interview is posted so any employee who is interested can participate. For the first round of controller interviews, 37 Semco employees responded. That high interest was a reflection of the important of this new position.
By the same token, if no one had shown up for the collective interview, they we'd have gotten rid of the conroller's position before it was even filled. No-shows would have meant that no one at the company cared about it. The 20 candidates were reduced to nine. Then, the 37 Semco employees who had expressed interest were handed a copy of the template showing which candidate attributes we were interested in, and the score value assigned to each. They could come to the next round of interviews, ask whatever questions they wanted, in whatever language, in search of answer for the template.
[...] The three finalists were seen one after the other on the same day. Some of the dozen or so Semco employees who showed up had seen them before, but most had not. Each Semco participant then filled out his template response sheet. The resulting scores would define the winner. Their rankings would be unknown to the CFO of Cushman & Wakefield, who would also interview each of the three. If the results differed, the Semco group would reconvene to hear the Cushman & Wakefield CFO's arguments. They could change or stand by their ratings. Whatever they decided it would overrule Cushman & Wekefield's CFO. Incidentally, my vote was subordinate to the semco employees choice, too. My opinion would carry as much weight as that of the CFO of Cushman & Wakefield, but no more.
A sustainable company will put a 57- year old GM alumni in an office with a dot.com kid. They both have significant talents to offer. The office may even have a dot.com kid environment. It will design a workplace that allows the 57-year old to sit, side by side, with dot.com and net generation kids. and where each has equal freedome to pursue their passions. It will not subordinate the 25 year old kid directly to the 57 year old's rules, but rather to his wisdom or experience. In exchange, the elder worker cannot use his maturity to restrain the dot.com kid. If he does that, what's the point of having an entrepreneur in your midst? Everyone recognizes that attracting and investing in talent are touchstones of organizations. But what people consider sufficient effort and enough investment is what separates the men from the boys, the women from the girls.
We were offering him a 10 percent stake in the Semco Johnson Controls business - in line with our philosophy of having a CEO who owns a chunk of the business.
Three days after starting, he asked our computer specialists why Semco employees couldn't work from home as if they were inside the Semco INtranet, thus avaoiding the dial-up into the system through the worldwide web. Our people patiently explained that this required a big investment, and went on to describe the change in server, firewall and on and on. The onlookers pitied the boy Rafael, who sat there desolately looking at his shoes. The meeting ended. Two days later Rafael came back with a solution that involved UNIX and some free software. It wouldn't cost the company a cent, he declared. Companies know very little about free software. But hackers understand it completely. There are no legal or rights issues involved, just a question of knowing where to look and what software to combine. This time, our IT people looked down at their shoes.
Part 4
The Long line of Pied Pipers
1) Why do we have a flock mentality and follow rams that turn out to be wolves?
2) Why do we think we are equipped to choose schools, doctors and mayors, but don't trust our capacity to lead ourselves at work?
3) Why do we continuously look for saviors and heroes to lead us?
Chapter 1 - Let the followers lead -
No management works quite like self-management. And working at Semco means self managing as much as possible. It isn't nearly as frightening as it sounds. In the end, its self-interest at work. It requires conceding that managers don't and can't know the best way to do everything. People who are motivated by self-interest will find solutions that no one else can envision. They see the world in their own unique way - one that others often overlook.
By letting people off the hook of grand policies, procedures and rules, we release them to be accountable only to themselves.
At Semco, our units are no bigger than a few hundred people. The maximum is always whatever number permits people to know each other, understand the whole and undo the need for excessive control. At any rate, they will be organized along the lines of the half dozen to ten people who directly interact.
At Semco-RGIS the groups don't exceed a hundred or so. They're responsible for a geographical area or a customer. That way they concentrate on their world, have a permanent idea of what is needed in their area of expertise, and escape the need for control by thinking small.[...] Rather than seeing 40,000 employees look at 4,000 groups of ten people each. Those ten will always know what's going on within their group, where the problems are, whether the people they work with are doing their jobs on time and in tune. Take the way we do budgets at Semco. Each group of sex to 10 people, once every six months, puts together their numbers. If they need help, they easily get it from the financial types. They organize their work for the next semester. Whether they are biologists at ERM, engineers or plant assembly mechanics in manufacturing, or inventory counters, they know what's going to be needed in the coming months.
Semco does not allow for me to impose my will on the company, even if I wanted to. Sure, I'm the main shareholder, so I always have a loaded gun in a drawer and the right to fire it. Worker self-management can't stop me. Understanding the benefits of our system is my self-restraint. I know that there is only one bullet in that gun, and if I fire it off in a fit of pique, I'll only get one shot. One shot at overriding a popular decision, after which I'll be disarmed. I'll have lost everything I've worked for. People will know that democracy at Semco was fleeting, insincere, unreliable. That's too high a price to pay.
If Semco forced workers to attend meetings, we'd never learn when projects or subjects are of no interest to the company's employees. If no one signs up to take part in a collective interview, then we know that Semco employees didn't think the job we were trying to fill was important or necessary. So we'd eliminate it. But if eight people were compelled by and order to show up, we might never find out that we were hiring and unwanted and unneeded new person. Until it was too late. And what if we attempt a new project, but no one want to work on it? Then that new service or product shouldn't exist. Not until someone really wants to see it happen - then it'll take off in no time. It's that simple. So if people aren't interest in being at a meeting, we don't want them there.
This extends to self-managing the operations. Everyone at the company is invited to participate in preparing the rolling six-month budget. Cynics say that it's impossible to put a budget together with input from dozens of people. The good news is that we don't have dozens of people in every business unit who want to play with Excell tables, HP calculators and spreadsheets galore. So it is conincidentally the financial types who always show up at bdget meetings. The others are comfortable knowing they could have shown up if they'd wanted and that they'll nevertheless see the results, understand and still be able to question them.
During these budge session, each unit plans how many people it will need for the upcoming six months, and they are included in the proposed payroll. There is quite a bit of open debate on these occasions and it is not an easy time if business is down. These usually become non-traditional employees like reps, out-taskers, consultants or part-timers.
There are 11 compensation options: fixed salary, bonuses, profit-sharing, commission, royalties on sales, royalties on profits, commission on gross margin, stock or stock options, IPO or sale (which warrants that an executive cashes-in when a business unit goes public or is sold), self-set annual review/compensation (in which an executive is paid for meeting self-set goals), or added value, a commission on the difference beweteen the current and the future, three year, value of the company.
The options can be combined in different ways. This flexible reward system mirrors our philosophy that people should be innovative in their jobs. They understand that it's in their best interest to choose compensation packages that maximize their own pay and the company's returns.
We offer these variations so we have the flexibility to hire the people we need, even when times are hard, and we tie this to our practice of deciding at each budget-setting session how many employees will be needed in the near future, and what the options are. Since they have a large rold in setting their own salaries, the self-interest of Semco people really shines through. It's self-regulating in a way that most wouldn't expect.
Anyone who requests too large a salary or too big a raise runs the risk of being rejected by their colleagues. So self-interest almost always prevents them from asking for excessive paycheques. we also encourage people to set their own salaries without creating a deficit in their departments. That's why monthly revenue reports, budget costs, salaries (if you don't understand it you can't be part of the rules), profit sharing and transparent numbers (publishing salaries) are so important at Semco. If workers understand the big picture, they'll know how their salaries fit.
Many people at Semco choose to invest part of their salaries in our profit-sharing plans - to believe that our profits will be enough to earn them a greater return on their money than if they simply took it home in a paycheque. Pereira, a mechanical assembly technician at Semco Processes, invested two-thirds of his last few raises in a vaiable mode. If his unit's earning goals are met, Francisco can take home the equivalent of three extra paycheques. On the other hand, he may lose the entire sum of the raises, some 10 percent of his income.
One afternoon, Francisco Alvim burst into a meeting looking for Jose' Alignani. Alvim is in charge of a loading dock at one of Semco's facilities. Every time it rained (like it had that morning), the receiving dock flooded. Francisco was red with outrage. It was a disgrace that a respectable company like Semco didn't have a better loading dock, he nearly shouted. Startled, Alignani heard him out and then said: You're responsible, you should have had that docking area set in concrete long ago. Alvim was speechless. He didn't understand how a low-level employee like himself was supposed to bid for concrete sub-contractors and approve a construction project. He walked away in a daze. Another emplyee from the purchasing department, who'd overheard the conversation, offered to help Alvim put the project together. Within a few days, a winning bid was chosen, the dock was cemented, and the bill sent to Alignani. Alvim learned that when he trusted his own judgement, othere would too - and that he could make decisions without paperwork, internal procedures and layers of managment approvals. He learned one of our unofficial mottoes:"Always beg forgiveness rather than ask permission".
At Semco we identify with Kafka's parable about the man who approached an open door where a vigilant guard stood. He asked the guard many questions. Years passed, and then the man was old and dying he finally asked the guard why he had never been allowed to pass. The guard responded that the door was there exclusively for the man, who could have entered any time he'd asked. Now, said the guard, the door would be permanently closed.
Business Culture is like a long-simmering stew. The right mix of people is essential. As is an understanding that every organization needs its share of indifferent and uninterested workers to balance its leaders, joiners and activists.
Accepting there is no such thing as a "speciality worker" perfectly suited for one company means accepting worker individuality. And once you do that, you set the stage for making the most of that individuality by encouraging workers to tap their inner reservoir and find a balance between their aspirations and the company's. The mix of people can be an upset if a company grows too fast, or aims for skyrocketing results, or merges prematurely with another. The culture of a company will be diluted until it has no flavour of its own. We are wary of this at Semco, too. We've seen enormous growth of 30 to 40% annually for many, many years.
A great deal of employee satisfaction comes from giving individuals some control over the logistics of their job. At Semco we set the stage for that by foregoing formal job descriptions, career plans or organizational charts. WE don't dictate to people what their responsibilities are - we assume that, as adults, they can figure out for themselves what it takes to do their job, and that without guidelines to adhere to, they're more likely to test the boundaries of what they do. That testing often leads to new business practices or new ventures for the company and new challenges for employees.
Without a formal job description, people can wander into neighbouring work activites without hitting a wall.
---> What if this were applied in Medicine? Don't the best hospitals (Mayo, Cleveland Clinic) tweak and change the guidelines to see what the outcomes are and then compare them. What if smaller hospitals stopped following the guidelines and started experimenting and trying out different ways of treatement. Possibly many small studies ongoing
One is for a plan called Up'n Down Pay. It's a program where employees flexibly manage their pay. The idea is that moments in people's lives are very different, one from the other - and that making it possible for them to adapt their pay and work hours accordingly will be a plus. Employees would look to balance the company's present needs with their own, and adjust the pay package accordingly.
If someone is going through a phase in which they would rather work less - and lower their pay accordingly - the company would do its best to adapt. A mother who wants more time for her children would turn to a committee for help in locating another person who would gladly take over 30 % of her job responsibilities (assuming that the person's business unit cannot do without 100% of their time). Both men and women could reduce their work hours and pay to address childcare or parenting needs, for study or simply for a need to step away for a period of time.
Sabbaticals would fall under this program, but would be only one of the variations on the theme. The committee would have a databse of candidates to fill our constant demand for part-time work. Or it could turn to the full 3000 employees and appeal to anyone interested in switching jobs or sharing tasks. This flexibility would make it possible for people with temporary interests - or problems, or sicknesses, or with family issues - to scale back or freshen their minds, knowing that they are not in danger of derailing their career.
We don't come up with these ideas in a vacuum - they're prompted by the seven-day weekend, and by the fact that like it or not, we're facing a new world of "multiple-careers" for most professionals. And they dovetail nicely with our Retire a little concept.
Another plan called Work'n Stop Plan, would complement the first two. Under it, employees could take off longer periods (up to three years) for similar reasons (to realize a dream, study, travel or re-evaluate life). The committee would act almost like an internal head-hunter. If someone in Semco could be found to take a job for six months or a year, the employee who wants a break would be fairly certain he could return. Along with our 11 ways to remunterate people, these programs make it easy to stay at Semco for decades, without forcing difficult choices on people when they yearn to take a break, go back to school, or have a family.
Up'n Down pay and Work'n Stop encompass sabbaticals in a much broader sense and they're open to everyone. But let's take it a step further - a program providing minimal pay for these phases could be set up in advance. Anyone who is interested could set aside a monthly sum for these situations. The company might even keep 30 percent until the person returns to work. ---> Not sure exactly what semler means by this last piece about the 30% - My feeling is a pre-sabbatical 30% pay reduction that goes into an account and funds the sabbatical pay, this makes most sense to me.
Chapter 2
At workshops outside Semco, participants tell me that they'd expect workers to choose leaders who are nice to them, even if those managers are inneffective. They also question whether people won't choose booses who are politically able but technically weak. But I know that people will not follow someone they don't respect for long. Semco's history has proven that many times. Also, our employees participate in profit sharaing, so they know that their livelihood depends on the company doing well. They won't support someone who is a nice but ineffective leader.
Since then I've heard many tales of affairs, drug use and other so-called illicit behaviour inside and outside the company. I'm sure it's only a small part of what really goes on. But I have never again considered taking a position. It's abundantly clear to me that our employees are responsible adults who make their own choices about their lives. That's their business.
I never wanted Semco to be heavily associated with me as an individual, but I knew that if we did well, outsiders as well as employees would credit me with more than my share of the success and less than my share of the blame. The charismatic leader has two options- embrace that image and live the rest of life trying to shore it up, feeding the monster and being a slave to a theatre character and a Jungian persona. Or move away from the company and leave some breathing space between that persona and you. The latter involves physically distancing yourself from the day-to-day company workings and continually decreasing your influence. I choose the second option.
I continuously try to remove obstacles and create mechanisms that will reinforce what contributes to Semco's success - lack of control, freedom, democracy. I work on the mechanisms and not on the final results. ---> Perfecting mechanisms and not results - Don't worry about chopping the logs, worry about building the machine that will chop the logs
We are taught to look for a saviour or father figure in business. Our herd mentality prompts us to line up behind leaders like Lee Iacocca, Jack Welch or Lew Gerstner. People want one person to lead them, and to save them. But two things happen very quickly when a leader becomes a hero. People will delegate upward when they believe the CEO is important. In turn, the CEO begins to believe his own press.
I've found that the time spent on any given item on a board's agenda is inversely proportional to its importance. People can only competently debate issues they understand intimately.
For example, a capital allocation of 150$ Million is usually a one hour item at a board meeting[...]. So deciding to invest 150$ Million is a 60 minute item. Want to see a three hour discussion? Try parking! That is something every board member understands intimately, cares about profoundly, and is willing to fight for. A debate about first-come first-served parking, for example, will guarantee many hours of animated holllering. Once poeple see themselves walking in the rain to the building when a trainee has parekd by the door, you have a hot board item. And they can visualize them. After all, 150$ is just paper, like Monopoly money. No one has ever seen 150$, so no one can relate to it on a human level.
But parking...anyone can picture that, right away!
At Semco we have put together a mixed board. We want our board to make tribal decisions around a fire, not technical ones with more attention to motions and voting procedure. I hold one seat and three are permanently filled with senior executives. Two rotate among senior managers, and two are given over on a first-come first-served basis to any worker in the company.
We don't advocate eliminating leadership. Leadership is important, but it's equally critical to ensure that the leaders are wanted. They have to be legitimate for the situation, but they can't become cult figures.
Executives are famous for declaring the importance of mistakes. They profess generosity toward those who err in the course of taking action. But still, nearly all believe that one mistake is acceptable, two is just stupidity.
At Semco we understand multimple mistakes, even when they're repetitive or come in rapid succession. We're more interested in the process. When those who work above, below and next to the person making the mistakes emerge from the rubble, they'll be wiser and more experienced. They just need the gust to wait it out.
Part Five- Rambling into the future
Alice: Would you tell me, please, which way I ought to go from here?
Cheshire Cat: That depends a good deal on where you want to go.
Alice: I don't much care where -
Cheshire Cat: Then it doesn't matter which way you go.
Alice: - as long as I get somewhere.
Cheshire Cat: Oh, you're sure to do that, if you only walk long enough.
Alice in Wonderland
1) Why do we think that the future "is in God's hands" and then pre-plan every moment of it
2) Why do we think intuition is so valuable and unique - and find no place for it as an official business instrument?
3) Why do we agree that living well is living every moment, without reinforcing past or future - but then spend most of our work lives dealing with historical data and future budgets?
[Reading three books at one time] - When I read like this, I don't necessarily finish all the books - the same way that I'll happily walk out of a movie, concert or theater performance that doesn't grab me. This time I was just indulging my endless curiosity, and constantly shifting my position as an onlooker in the world. It's akin to changing my seat in the auditorium of life, where the stage is in the middle of a round theatre. Sometimes I sit up front, and see all the minute details, sometimes so far up and away that the stage is but a little box and my mind wanders. And sometimes directly on the stage, wondering what I'm doing there.
At home I navigate books and the Internet for one or two hours a day.
Yet most people prefer control, rather than rambling and staring straight into the unknown.
Ten years later, the computer was pondering 150 future moves in a minute's time. By the 1980s, it was 10,000 moves per minute! All the while, man had been represented by the world's best, Gary Kasparov. He resisted bravely. [...] By the late 1990s, Deep Blue was also able to pre-plan and consider 200 million plays before making a move. Kasparov could contemplate two in the same time. Until then, Kasparov had always beat the machine. Only when it was armed with a million moves did the machine finally beat Kasparov. (He asked for a rematch, but IBM declined, and retired Deep Blue instead).
The extraordinary news is not that the machine could out-think man, but that man had beat this Argonaut of mechanics when it was processing several hundred thousands moves a minute in its memory contained all the strategies of the Grand Master games.
Intellect, memory, agility, strategic vision, complex mathematical capacity. None of this justifies the victory of man over the machine for 30 years. Kasparov certainly has all of these, but the machine had more of it. So what explains Kasparov defeating the behemoth of one hundred thousand moves?
In my eyes, Kasparov had only one think that the machine did not. It's the same advantage that the London bookmaker had over theCrazy Supercomputer. Intuition.
And intuition is the fuel of choice for rambling.
Go/No Go meetings - The idea is that if employees are free to pursue any project, they must be able to propose a concept and begin the process of turning it into a business. At Go/No Go, anyone with control over budget, anyone who has an idea or is looking for a new project, and anyone who is just plain interested can show up and participate. There's no studying or setting up commissions. There's a discussion, and at the end of the meeting, a vote - go, or no go. We've had evenings where people in attendance knew that if the vote went against their project, they'd be out of a job.
The fact is that only the very arrogant imagine that decisions have to be made at the top, or close to Numero Uno. Numero Unos are not infallible, or even the best thinkers. And democracy, of course, entitles people to disagree. It means that the intuition of the majority overrides the power of the One. You would argue that thomas Edison's assistants would have killed many of his inventions (and GE along with it), but we don't know how many bad ideas were indeed aborted by assistants, how much of that energy was refocused on something feasible. Or how much support was needed for his inventions to finally succeed. Take Bell Labs - no one has taken out as many patents, developed so many Edison-like inventions from scratch - and yet, a ludicrously small percentage became something useful.
So it is in business - one cannot imagine that every "bright" idea has merit just because it came from the owner or from someone else at the top. When collective work is necessary for a product to succeed, the best approach is to lobby as ferociously as possible for an idea. If no one buys into it, to leave it on the back burner and return to it. In the end, if no one takes a passionate liking to it, it won't become anything.
Sometimes, to execute cutting-edge ideas, you must be open to unorthodox people (kooks). True these are the workings of an eccentric mind. [...] The danger with rambling and engaging kooks to bring dreams to life is the possibility of losing contact with reality. But then, sometimes that is necessary, too.
It takes a bit of both to create the extraordinary. So although I've ceased playing garage doors for people ( a well-known test for audiophiles) I still look for slightly crazy people to mix with our sane ones. Then intuition comes to the fore, and supplants the safe path. Excellence depends on following intuition to strange places.
Unfortunately, intuition can't be bottled. So instead, numbers reign supreme, and they can be very misleading. Zeca and our other financial wizards love to use decision trees. They are fun, I concede, and I like to see the exercise. Basically, you input the variables that affect your situation and confer weight to each. Then you factor the mathematical probability that the event will occur. (Just like my Brazilian friend at Harvard who used charts and graphs to choose the best job offer.).
Here's the decision tree I'd draw up if I wanted to bet 1,000$ on a Formula One driver who is skilled at racing on rain-slicked tracks, but has a cold that week: Chance of driver recovering = medium cycle of a cold virus =7 days. He has had a cold for three days so his chance of getting better in the next two days is 45 %. The weather forecast says there is a 60% cance of rain for the day of the race. Factor in the detail that meteorological forecasts are wrong 25 % of the time. Add the 15 % chance of other developments interfering, such as the driver's recurring asthma. Consider the number of times the driver has won in rainy conditions (58%). Add the chance of mechanical failure (11%) and the chance of human error while changing tires during the race (24%). On the other hand, what is the chance I can afford a 1,000$ loss.
And on and on. All you have to do is input the date into the decision tree and voila! You will of course know as much or as little as the Munich professors did about the foodtabll championship. The tree will include all the right variables and chances, and probably provide the wrong answer.
Another way of goingn it is looking at a picture of the driver in the newspaper, seeing that he's haggard, remembering that his ex-girlfriend lives near the race track, and figuring that he might get distracted by seeing her apartment building in the distance and imagining her there, with someone else.
I wouldn't bed money on that driver that week, no matter what the numbers tell me.
To the dismay of accountants and executives, I've often said that business plans and budgets are nothing more than extrapolations of wishful thinking.[...] With their last two years' numbers, all I have to do is make the revenue and profit projections rise five to 10% per year, every year.
As it happens, erring once only is itself an erroneous concept. let's take tarte tatin as a business case. This French apple tart is the result of a mistake. In the French village of Lamotte-Beuvron the Tatin sisters had a little train station bistro, and made a fair apple tart. One day they forgot to make the pastry, but because they were late, they whipped up a batch and stuck it on top of the apples, threw the lot into the oven, and 15 min later turned the pie upside down. Voila'! Quelle merveille!
We know that countless inventions resulted from mistakes, or because people were looking for one thing and tripped over another. But like Isaac Newton sitting under a tree, or Archimedes sitting in the bath when Eureka arrived, an inventor or innovator must be deeply involved in that subject. Laws of gravity, penicillin and gunpowder don't occur to most of us when we sit in the bath. We're thinking instead of cheques in the mail, how far away the shampoo bottle is, and where we mislaid our eyeglasses.
In the same way, luck does not strike all of us equally. Yet it's a most necessary component of success. To accuse people of being lucky is unfair. Luck is an add-on to effort - it crowns a compultion to succeed. Success has a long-term measurement in the form of sustainability. Luck rarely has such longevity. It's like lightning - it may strike, but then it's fast, furious and rare. What you make of that stroke of luck is a result of the diligence you apply after it strikes.
Intuition, luck, active mistakes, serendipity - there you have four vital business concepts that should be entire disciplines in the MBA curriculum.
That's why I hold such a great admiration for Lewis Carroll's Chesire Cat. Sure, the cat seems "lost. His advice is maddening to those who want to leave a boardroom with the certainty that they know where they are going (though they rarely do). But it is sound technical strategy nevertheless. The cat wants us to accept that it's good that we're not masters of our own destiny - it hones our survival skills and makes us opportunists. His advice won't prevent us from pondering the future (or bainstroming sessions or budget meetings where calculators are endlessly juggled). His kind of rambling is not a cavalier, who-cares approach. It's a keen understanding of human nature.
Informed minds heed the grumbling belly, just as sophisticated plans rely on intuitive hunches.
Chapter 2 - Visiting the Future
No one would ever say that in so many words. But the famous exit strategy went like this: Here's the small boat that we have built so far - in order to make it capable of competing at a world-class level, we need you to give us unlimited amounts of money. We'll soothe your worries by employing an older co-skipper who can show he's bought his wisdom through experience, while the young and ebullient crew will work all night on projects for the boat that you don't really understand. We'll need you to give us your network of contacts too, so we can get more money to buy the fuel to power the boat once it's actually build. On top of your initial investment, we'll call you Angel and you'll help us find friends of yours who will give us the fuel to power the boat.
We'll all agree we're going to an uncharted island in the South Pacific, where low-hanging fruit drips honey, hula dancing rules, and the earth exuces precioius metals that we can find on secret maps we've dreamt of but cannot show you have.
If, by any chance, we manage to get the public at large to buy part of this dream, you will excuse us for jumping overboard and swimming to Bora-Bora while you continue your fine journey.
Organizations must treat mistakes like luck - both are necessary, come at times when they're not expected, and add to existing effort. At Semco, we wander into mistakes with a certain level of comfort. It is very common to hear employees at meetings describe some facet of our business as a big mistake. Because we regularly make mistakes and own up to them, it's all part of learning to use intuition.
Chapter 3 - The Wisdom Revolution - Freedom, Democracy and a new way to live
Many times we begin stretegy meetings by asking ourselves what we would do if we were our competitors. Then we look for a way to do whatever it is to ourselves, first. We try to avoid the fate of Ford, Gillette and the airlines. We can survive by standing still, but we'll never be at the cutting edge of anything. A boat like ours needs someone at the helm wielding a telescope. You can never tell where change may come from.
Today we spend roughtly 25 years getting ready to work, some 35 years working and another 25 years in retirement or negligible work activity. Some two thirds of our life, therefore, in the financial auspices of others (parents, the state, company pension funds).
In my son's new world, he might spend 25 years preparing for work, another 60 working, and the same 25 years in retirement. Mandatory retirement may be pushed to 80! [...]
At 18, a person is only a quarter of the way through their lifetime, and must decide what to do with the remainig three-fourths. That may have been resonable in the 18th or 19th centuries, but it makes little sense today. If the new life expectancies come to pass, a youngster will be deciding at a time in which 85% of his life lies ahead of him. But with 70 years to work fully, why should someone have to choose only one career? Why not be a doctor for 20 years, go back to college for another five, spend 20 years as an architect, and maybe go back to school again to spend the last two decades as a biochemist. Much of the conditioning that makes change so hard for us comes from childhood.