Ricardo Semler and Semco S.A.

Introduction

In 1982 at the age of 24, Ricardo Semler took control of Semler & Company, a business founded and, until then, managed by his father. At that time, this Brazilian company’s organisational structure, like many historical Latin American enterprises, was a paternalistic, pyramidal hierarchy led by an autocratic leader with a rule for every contingency. Upon taking office, the younger Semler began dramatic organizational restructuring. Among other things, he immediately renamed the company Semco, eliminated all secretarial positions, and implemented an aggressive product diversification strategy.
Most observers predicted that these actions would destroy the company.
Semler’s changes, however, did not bring about the demise of the struggling industrial equipment manufacturer. Rather, they created a remarkably flexible organization whose sales grew from $35 million in 1990 to $100 million in 1996. Semco became one of the most sought-after employers in Brazil, manufacturing over two thousand different products, including marine pumps, commercial dishwashers, digital scanners, filters, and mixing equipment, and diversified into banking and environmental services.
Over 150 Fortune 500 companies visited Semco in an attempt to discover the secret of its success. Ricardo Semler’s accomplishments were all the more remarkable when considered against the backdrop of the erratic economy that all of Brazil operated under as the country weathered four currency devaluations, record unemployment, hyperinflation, and a virtual cessation of all industrial production.

Background

Attracted by Brazil’s rapidly expanding economy, Austrian-born engineer Antonio Curt
Semler moved to Sao Paulo in 1953 after years of managing a plant for DuPont in Argentina. There he founded Semler & Company and began manufacturing centrifuges. Within a decade, the company became a market leader, primarily due to the acquisition of lucrative contracts that provided marine pumps to the military. Antonio Semler quickly focused the resources of the company on providing these pumps to the government. Semler & Company eventually grew into one of the major suppliers of the National Shipbuilding Plan supported by several Brazilian governments.

After graduating from Harvard at the age 20, one of the school’s youngest-ever MBA graduates, Ricardo Semler returned to Sao Paulo to work for his father. From his arrival, it was clear that Ricardo’s organizational philosophy clashed with that held by his father. The elder Semler firmly believed in autocratic, paternalistic control, as well as the inextricable connection between personal and business matters. Ricardo advocated a more participatory management style, as well as a strict separation of work and personal life. During the years that followed, these differences in philosophy were a constant source of conflict. Both father and son began to realize that any eventual transfer of power would not represent a continuation of the status quo.

The Brazilian recession of the early 1980s hit Semler & Company particularly hard.
At that time, the company derived 90% of its sales from shipbuilding products. The younger Semler was convinced that the future success of the company hinged upon diversification into other product lines, but no one, least of all his father, was willing to listen. Because of Ricardo Semler’s dissatisfaction with both the management of the firm and its strategic direction, he threatened to leave during his third year. Faced with this possibility, Antonio Semler retired as CEO and transferred majority ownership to his son. Ricardo Semler was finally in a position to implement his own managerial and strategic philosophy.

The Semco Era

The key to management is to get rid of the managers.
The key to getting work done on time is to stop wearing a watch.
The best way to invest corporate profits is to give them to the employees.
The purpose of work is not to