HR & Management

The secret behind the success of the world's most unusual firm: (Almost) no rules

7 min read

19 August 2015

Ricardo Semler, the former president of Semco, has revealed how he turned the company into a success by standing the conventional corporate rulebook on its head.

Semler is perhaps the best, low-profile CEO in business today – and Semco is no ordinary company. 

Employees choose their managers, decide how much they are paid, and when they work. Meetings are voluntary, and two seats at board meetings are open to the first members of staff who turn up. Salaries are made public, and so is all the company’s financial information.

It may seem like a recipe for chaos, but in the worst ten-year recession in Brazil’s history revenues grew 600 per cent, profits were up 500 per cent, and productivity rose by 700 per cent.

Essentially, the reason for Semco’s sustainability is the same one that makes conventional managers reject it: no one is in control, including Semler. And he says it all began with the intriguing question: “What if your job didn’t control your life?”

During a 2014 speech, Semler explained that his parents and grandparents had melanoma cancer, and that several members of his family had died from it. The expectation that he may one day be diagnosed with it – and be told by a doctor that he only had a year to live – led him to create what he termed as “terminal days”.

Every Monday and Thursday he would go out and do whatever he would have done had he already received that piece of news. He concluded, however, that in the periods in which people had a lot of money, they had very little time. And then when they finally had time, they had neither the money nor the health. In order to truly enjoy life, something had to change in the business sphere.

Semler started to question business fundamentals, such as whether the company really needed to know what time employees came to work and what time they left. 

“Why are we building a headquarters?” he said. “Is it not an ego issue that we want to look solid, big and important? However, we end up dragging employees two hours across town because of it.”

Read more about how to keep your staff happy:

Semco now has a system whereby no one can become leader of the company if they haven’t been interviewed and approved by their future subordinates. Every six months, everyone gets evaluated, anonymously, as a leader. This determines whether they should continue in that position. If they don’t have a “grade” of 70 per cent, they don’t stay. According to Semler, this is why he hasn’t been CEO for more than ten years.

When the system proved to be a success, the Semco team suggested that employees could set their own salaries. Semler said: “There’s only three things you really need to know: how much people make inside the company, how much people make somewhere else in a similar business and how much we make in general to see whether we can afford it. So let’s give people these three pieces of information. 

“So we started having, in the cafeteria, a computer where you could go in and you could ask what someone spent, how much someone makes, what they make in benefits, what the company makes, what the margins are, and so forth. This was 25 years ago.”

As this information started coming to people, Semler explained that the only question that needed to be addressed was how the company would be taking care of people.

“People are the only thing we have,” he said. “So, for example, let’s agree that you’re going to sell 57 widgets per week. If you sell them by Wednesday, please go to the beach. Don’t create a problem for us, for manufacturing, for application – then we have to buy new companies, we have to buy our competitors, we have to do all kinds of things because you sold too many widgets. So go to the beach and start again on Monday.”

The whole process, he stressed, was in the search for wisdom. And in the process, he wanted people to know everything. This included two seats being open during board meetings, with the same voting rights, for the first people who showed up. He claimed the company had cleaning ladies constantly voting on a board meeting – and that their input had kept Semco honest.

In the end, Semler claimed he had freed himself to do whatever he could on terminal days. 

“We’ve been to Samoa, the Maldives and Mozambique,” he said. “I’ve climbed mountains in the Himalayas. I’ve gone down 60 metres to see hammerhead sharks. I’ve spent 59 days on the back of a camel from Chad to Timbuktu. I’ve gone to the magnetic North Pole on a dog sled. So, we’ve been busy. It’s what I’d like to call my empty bucket list. And I think what this leaves us as a message for all of you, I think is a little bit like this: We’ve all learned how to go out on Sunday night and work from home, but very few of us have learned how to go to the movies on Monday afternoon.” 

Despite his radical ideas having been out for a while, the percentage of businesses that have taken some of them on board is still quite low. Some examples have included Richard Branson giving Virgin employees unlimited holiday, and Netflix offering up unlimited parental leave for a year.

Semler said: “The fact is that it takes a leap of faith about losing control. And almost nobody who is in control is ready to take leaps of faith. It will have to come from kids and other people who are starting companies in a different way.”