Toward a Humane and Democratic Workplace: The Semco Story

In a quest to challenge myself to give up more personal control and power, I came upon Maverick! The Success Story Behind the World’s Most Unusual Workplace, a book written by Ricardo Semler. Management trends emerge and evolve for many reasons, and I’m most interested in those trends that help to elevate other people and move away from traditional hierarchies.

Maverick, more story than management manual, tells the story of one of the most unusual companies in the world. You see, Semler’s company, Semco, is a democracy.

Semco’s Democratic Workplace:

• Workers set their own salaries.
• Workers decide their own hours.
• There’s no uniform or dress code, even on the factory floor.
• Workers pick their bosses, and rate them.
• There are no policy manuals.
• The financial books are totally open.
• There are no assistants or secretaries. There are few clerks, because they did away with most administrative work and bureaucratic record keeping.
• The deepest chain of command in the company– from President of the Board to worker on the factory floor– is only 4 levels deep.
• Even though it is an industrial conglomerate, there are no assembly lines.

 

Can these ideas work at any type of company? It’s definitely possible to try some of the techniques and apply them in a way that makes sense for your company.

Semler published Maverick in 1993, but it’s still packed with amazing advice that is applicable today. A few bits feel quaint by modern standards, particularly for me as the modern tech worker (I don’t think I’ve ever seen a punch clock). But most of the advice, and all of the core concepts, are timeless. I heartily recommend it to anyone who wants to make their work place more energetic, effective, fair, and, most of all, humane.

Here’s why this book and the themes of a democratic workplace really inspired me.

The problem with executive control

Not surprisingly, it’s a health scare that pushed Semler into a new way of thinking.

At the end of Act One, we understand the inciting event: After taking over Semco from his father, Semler and his doctors believe he’s developed a severe neurological malady. He’s losing consciousness at inopportune moments. Sometimes he can’t sleep, and sometimes he sleeps for days. He’s plagued by severe migraine-like headaches.

He visits a doctor who finally cracks the code: “You have nothing whatsoever, Ricardo… But you are suffering from an advanced case of stress. The most advanced case I have ever seen in a person of twenty-five.”

Shifting control to the workforce

Bit by bit, Semler realized that the problem came from control. So much of modern work is about control, but control is killing us. The Harvard Business Review tells you that you need better systems. Consultants say you need Kanban. TPS. Kaizen. Quality Circles. Six Sigma. LEAN Six Sigma.

These systems exist to control what workers do. But what happens when the system fails? When it doesn’t go far enough? The system has to get bigger. You get a new system, or another system. And all the while, the intellectual muscles that workers use to make intelligent, adult, human decisions wither! Isn’t it better to exercise those muscles? Let your workers’ good collective judgment be your guide.

There’s no money in that for consultants, I guess.

In some ways, it is downright anarchistic.

The initial changes were small and seem especially trivial in the time since the book was written. For instance, Semco initially provided a single time clock that was carefully monitored to prevent cheating. A simple shift that made room for both productivity and trust was to move the clocks close to where people worked (and to put up signs that said “people don’t clock in for other people”). They stopped frisking employees as they left the factory– and put up signs at the gate that said “please check your pockets for anything that doesn’t belong to you.”

But for Semler, giving up control meant going a lot further than this. He had to really give up control. He needed to learn to put extreme trust in the people around him.

Over the next twenty years, Semco rolled out many more radical changes that originate in this simple core idea.

• They formed “factory committees” to represent the interests of the workers to management.
• Then, they opened the financial books to the workers– and taught them to read financial statements.
• They burned the policy manuals.
• They shredded any unimportant files (which is almost all of them) and stopped filing almost anything new.
• They formed a women’s committee to specifically address the concerns of women in the company.
• They had employees review their bosses twice a year. Then, they had employees pick their own bosses.
• They limited the hierarchy of the company to no more than 4 layers: Associate, Coordinator, Partners, and Counselors.
• They let employees set their own schedules. Then their own salaries.
• They allowed employees to start their own companies– leasing equipment from Semco, and selling the products back.

The workforce learns, and the company grows stronger.

Semler viewed Semco as a “modern scientific company”, and it embraced every management system that it could find. They found that these processes didn’t create improvement, but rather fed time into the system so that the system could give him (and all of the middle management of Semco) control.

Rather than working furiously all night micromanaging every decision, he moved to put extreme trust in the people around him.

Did theft and clock cheating increase or decrease? Semler declares that he doesn’t care. It’s more important to work for a company that treats adults like adults, and expects them behave properly without nagging, poking, or prodding.

At first, the factory committees focused on salaries, but in time they grew to be more concerned with the health and efficiency of the company. Armed with total knowledge of the company’s numbers, workers from the factory floor up pushed to make smarter, safer decisions. When the company did radically cut back on administrative work, almost every former assistant, clerk, and accountant found work– many in the factory, in engineering, or in sales. When the Brazilian economy tanked, the workers of Semco factories took over auxiliary jobs from outsourced contractors– doing the cleaning, landscaping, and serving each other meals in the cafeteria.

And they did this because they had come to see their workplace as a community. Some factories even elected “mayors” to coordinate these functions.

The democratic workplace improves productivity.

If you have to approve everything, you may decrease the probability of a mistake (may— as managers, we often overestimate how well positioned we are to decide relative to the people who are hands-on). However, since you miss 100% of the shots you don’t take, it is better to let go, and let the work grow beyond you. If you approve 20 contracts, and close 19 of those deals (95%), this is not better than having your team send 40 contracts, and close 30 of them (75%, but more deals). Don’t create these bottlenecks of approval.

Democratic workplaces help to address these goals. Consider the gaps we see in our economy around who becomes managers more often than not and who doesn’t. If you put more power in the hands of people who aren’t in management, you can help reduce that power differential. If you open the financial books of the company, you expose pay gaps. If you assign empowering positions and responsibilities at random, you can reduce the impact of your own even subconscious biases about who is more capable.

Power > Pecking Order

In business, people tell you that you need to set rigorous policies. You must keep records. You must have a clearly defined pecking order and someone up the chain must stamp approval on every decision. Conventional wisdom tells you that you must have a large pool of professional middle managers directing all the work or it won’t get done.

Semco’s way sounds foolhardy. But it works for them. The results were impressive.

At Revelry, we’ve been on a bit of a similar journey here. And I’m a bit of a control freak by default. But I’ve increased my conviction that giving up control is the right way to go. We run our engineering meeting democratically, I’ve been utilizing a form of demarchy/sortition to choose assignments, and we’ve made dozens of improvements to our technology and our process that came directly from these practices.

We’ve also seen people on our team collaborate, learn, and grow in ways that they were not before.

We work with humans. Let’s be humane.

Maverick is a far more interesting read than the average business book. I heartily recommend it to anyone who wants to make their work place more energetic, effective, fair, and most of all, humane.

For one thing, your people are responsible adults, and they are honest. Your employees have plenty of opportunities to shoplift from stores, or cheat on their taxes, but they probably don’t. Why would you think that changes when they show up for work?

It’s not very effective to micromanage decisions, and more effective to spend energy in hiring people who you think will represent you well. Develop good judgment in them by affording plenty of practice making decisions.

Will it work for you?

The limiting factor is buy-in– from the owners, from the managers, and even from the rank-and-file employees themselves. With enough buy-in, I think almost any of these measures are attainable eventually. They won’t happen in a day though. This is a building process.

For instance, you have to open up the financial books to employees before they can make financial decisions like setting their own salaries. That said, you shouldn’t try to follow this as a checklist. There’s a chapter in the book (“Will It Travel”) that expands on this idea. You should do what is right for your company and your employees. You’ll have different wants and needs, and that should guide what you do.

And you should experiment.

Start with some of the broadly applicable items as an easy place to start. Employees reviewing their managers costs very little, is very low risk, and gives you a lot of great information. Even if you are just one manager in the middle of a bigger company, you can ask your team to rate you. It is even pretty easy to invite your employees to help you to interview managers who will supervise them, and then listen to their feedback on who they want to see in leadership. Letting employees have representatives to management and a standing venue to represent their interests (whether you call it a factory committee or not) is another good first step.

To be clear: Even in a democratic workplace, you have to set certain unbreakable ground rules. Those ground rules (and their execution) must make everyone safe, comfortable, and elevated at work. “We are going to have a diverse workplace, and we aren’t going to marginalize anyone” is an unbreakable rule.

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