Disorganization at Semco: Human Resource Practices as a Strategic

Advantage

Disorganization at Semco:
Human Resource Practices as a Strategic Advantage
Case Study #3
Hector Miramontes
California State University Long Beach
Management 454 - 02

Disorganization at Semco: Human Resource Practices as a Strategic

Advantage
Abstract
The case study Disorganization at Semco: Human Resource Practices as a
Strategic Advantage, discusses the changes Semco has gone through over
the past decades stretching back from 1953 to the present day, and more
specifically the organizational structure changes along with human resources
changes to accommodate those changes in the structure. Also discussed is
how these changes evolved the company from being a marine pump
manufacturer to a now being comprised of industrial mixers,
manufacturing of cooling towers for commercial estates environmental
consulting, e-businesses, and inventory management (2006, p.625). It is
now also known as one of the most innovative democratic workplaces
(2012, p.625).

In Semcos inception, it started off as a very bureaucratic and centralized

company under the leadership of Antonio Curt Semler (Antonio). Semco was
said to have regulations and policies governing every issue and even had
gaurds scouting the shop floor to regulate workers visits and times they
exited the company grounds (1995 p.625). In 1982, Antonio passed down
control of the company to his son, Ricardo Semler (Semler), who immediately
dismissed about 66% of the company employees to run a more lean
company since Semco was running through financial troubles, but he
continued to run it in the same authoritarian and bureaucratic fashion.
Semler continued to do this until one day he fainted on the shop floor, he

Disorganization at Semco: Human Resource Practices as a Strategic

Advantage
then went on toharmonize his office and personal life better by
decentralizing Semco and loosening up the formalities of the company to
become more organic and horizontal in its structure (2012 p.626). Along with
that, he cut the administrative staff by three-fourths, and top
management was no longer entitled to exclusive dinning halls and other
perks that used to come with being a top manager for Semco. Additionally,
he renamed the positions of the top executives such as what would be the
vice president and presidents to Counselors, the other leaders or managers
that would be under them in hierarchy were renamed as Partners, and the
rest of the lower level employees were named Associates (Ibid p.627). The
change in names was crucial to enable more autonomy within the
organization and mainly to stay away from being an authoritarian type of
organization as it once was. Instead of having managers ruling the floor and
telling lower level executives what they want done, now everyone had a say
in what they were going to do, whether it was a project or investment of
some sort. The top managers now would merely influence what may happen
or help in some way but what they say now is not what must happen since
everyone has a single vote in what direction their short-term teams, which
are now what the company is comprised of, would take to accomplish a
profit.

The organizational design went from being very mechanistic with its
authoritarian and bureaucratic structure to a drastically different organic and

Disorganization at Semco: Human Resource Practices as a Strategic

Advantage
decentralized structure once Semler took over. The design is a unique one in
that it consists of a horizontal system, which they refer to as three
concentric circles-a small one in the middle and two relatively bigger ones,
(2012 p.627). Counselors, as mentioned above, are in the middle; Partners
are on the second circle, which is bigger than the middle one; and Associates
are in the biggest and outermost circle along with Coordinators who lead this
circle (Ibid p.627). With that, organizational tiers were cut from 12 to 3,
making this a very horizontal and decentralized structure (2012 p.627). Also,
by giving everyone in the company, including top executives or Counselors
one single vote, and allowing employees to come and leave as they please,
so long as their work gets done, this gave them more empowerment. As
mentioned above, the emphasis on teamwork and project teams, which last
6 months, also added to their now organic design. Since changing their
organizational design and cutting many administrative jobs and enlarging
most of their employees jobs, and also supporting job rotation, this created
efficiencies in that they managed to go lean by cutting any excess waste or
personnel from Semco that werent necessary for their own success.

Semcos policies were to have no written policies and regulations, although

they do have a comic book style manual titled Survival Manual which
shows new hires how to get familiar with their unorthodox organizational
structure (2008 p.628). By using a comic book style for this manual, this
adds to their own ideals of a loose business when compared to its more

Disorganization at Semco: Human Resource Practices as a Strategic

Advantage
formalized counterparts. Their penal rules were also replaced with the
common sense principle to add onto its informal and autonomous style.
Autonomy and self interest has become the driving force behind what runs
Semco, and these policies help support that. The director of human
resources even stated when referring to employee work hours that we
dont know how many hours our employees work as long as youre
getting the job done youre free to manage your own time (2012 p.627).
As mentioned before, Semco breaks up the employees into teams for 6
months, the reason being that their counterparts use teams for one year and
the reason for using 6 months is to stop employees from only doing work in
the latter half of the year. However, the problem with this is now I can only
assume that Semcos employees must only do more work in the latter half of
the six month period, or after three months; but as long as they are still
being more productive then in their authoritative early days then I suppose
its acceptable.

When Semco hit financial troubles due to the Brazilian economy being in
shambles, instead of downsizing and cutting employees to cut costs as most
companies would do, their own employees decided to take a 30 percent
reduction in wages and management also took a 40 percent pay cut, this
lead to a 39 percent profit increase in a time when the company was
looking at no monthly sales (2012 p.632). Additionally, employees were
encouraged to act as entrepreneurs and set up their respective satellite

Disorganization at Semco: Human Resource Practices as a Strategic

Advantage
firms, which would be subcontracted under Semco. This move would allow
the workers to save on commuting times to work, and cut costs per
employee, eventually this lead to 66 percent of new products being
produced through these satellite firms. Since these employees and
executives had the power to instill these new plans and take pay cuts when it
was necessary, this flexibility enabled the company to remain relatively
successful in a time when Brazils economy was in turmoil.

In conclusion, we have a company which started off as a very mechanistic

and formalized, bureaucratic company, and eventually, under new
leadership; became quite the opposite and emerged to be more successful
as an organically structured company. The change was executed to shift the
workload off Semler and make it easier on him. I dont believe however that
this would have been the only way to lessen his workload, had he just made
sure there was a strict division of labor and made sure that everyone of the
top managers did their part in this and followed through with their jobs, I
think that Semler would have been just fine like that. However, I dont
believe it would have worked as well when it came to the economic turmoil
that faced Brazil in the 1990s since remaining mechanistic would have made
them slower to respond to this change. With that, it was a good descision to
become organic for the long term growth of the company, but it wasnt
absolutely necessary at first after Semler fainted and wanted to shift the
workload around.

Disorganization at Semco: Human Resource Practices as a Strategic

Advantage
References:
Disogranization at Semco: Human Resource Practices as a Strategic
Advantage. (2012). Retrieved April 27, 2016, from IBS Center for
Management Research.
Yukl, G. A., & Becker, W. S. (2006). Effective Empowerment in Organizations.
Organization Management Journal, 3(3). Retrieved April 27, 2016.
Ierman, J., & Eiban, T. (2016, February 6). Winning Ideas from Maverick
Managers;Unconventional Leaders Share an Ability to Stun the
Competition with Their Personal Brand of Can-Doism. Retrieved April
27, 2016, from money.cnn.com
Ibid. (n.d.). Retrieved April 27, 2016.
The Journeys of 2nd Tier Leaders over Time. (2008, March 28). Retrieved
April 27, 2016, from integralleader-hipreview.com