Thirty-eight years ago Ricardo Semler threw away the workplace rulebook and gave his 3,000 Brazilian employees at Semco, a centrifuge manufacturing company, the freedom to determine their own salaries and decide when to go to the office. He achieved a 40% return on capital, every year, for 25 years. Now, as he prepares to visit South Africa to speak at the Allan Gray Investment Summit next week, we find out what makes him tick, what makes him mad, and what South Africa needs to do to get back on track.
Why do you think, even after the success of Semco, that businesses have only partially adopted your example of corporate democracy or created their own adaptations?
In the last 12 to 18 months we have seen a sharp increase in the number of companies who profess to be running their companies in a Semco-style; this number sits at about 250. This is probably due to the catch-up of flexible workplace rules and times, and a set of principles that were too strange for the business world 40 years ago.
The Semco Survival Manual from 38 years ago saw bosses being approved for their jobs by their subordinates; employees being evaluated anonymously by peers in more junior positions every six months to be reinstated in their jobs; staff working at home with 50 kg telex machines; and, a programme called Semco Woman that recognised inequality in the workforce and allowed women to participate to correct it.
But this concept requires a leap of faith and a loss of control, and both are unwelcome by many companies today: management and shareholders want quarterly results in an effort to feel in control. Unfortunately it is also the reason that big businesses have grown and ultimately have more control, often syphoning cash from the poorest in society. This is a broken system that has helped create the imbalance of wealth in the world.
Semco management style is but a small effort to right these wrongs, with its participative process and substantial sharing of profits, which doubles or trebles employees’ income, compared to other big businesses.
With the presence of millennials in the workplace demanding a change in the way organisations treat and view their employees do you think your ideas are relevant, or out of date, for today?
The Y and Z generations are forcing companies to adapt their management models, but companies mostly adhere in a nominal and tricky fashion, as they did with greenwashing and social responsibility.
Companies think they are modern because their walls are orange, that there are tattooed kids playing Foosball and their dogs are at work. This is all silly, and millennium-washing. The trick is to bring in the older generation, rather than throw them out with the bath water, and getting them to mentor and co-work from a distance (no traffic and long meetings for 67-year-olds who have wisdom to share).
There’s also a super-valuation of millenials, who are largely self-centred, with low levels of company commitment – always ready to shut down their terminal and go off to do something else on a moment’s whim. And, when you look at the success rate of start-ups, which is under 1%, it is a wonder that staid middle-age suits would want to emulate them.
What are your thoughts on blockchain technology and its potential to decentralise / disrupt institutions, as in the case of cryptocurrency, but also in the way that we share information?
Blockchain speaks to the disintermediation that has syphoned off profits and agility, and created silos of hugely profitable oligopolies. The robber barons of the other century were Vanderbilt, Rockefeller, Carnegie and JP Morgan, because they “owned” the new businesses of the day: railroads, steel, banking, electricity. What differentiates their monopolies and dirty tactics from the Facebooks, Googles and Apples of today? Blockchain is humanity’s antidote to greedy bankers, software players and providers, lawyers and doctors.
Please explain your personal philosophy on wealth creation. You once said in a TedTalk that “if you need to give back, it means you took too much.” What do you think people / investors’ outlook should be on wealth creation?
It is perfectly possible to “share as you go” and take what you really need, and not more. We’ve been doing this for 40 years. Could I have eight times more cash in the bank? Maybe, but what for? I’ve dedicated 50% of all my net income in 40 years to profit-sharing and investment in a new education concept. Could I have a yacht in Monte Carlo? Where the heck did the idea come from that helicopters and yachts are the be-all and end-all?
Not everyone can be a maverick. What do you think investors can learn from you and your success with Semco to create their own wealth?
From the start, divide the ideas, the work, the profits, and don’t let your ego get the better of you, especially when the really important issues of life are at play, like love (spouses, your kids), passage of time and commitment. Creating wealth in groups is a much smarter path. And remembering that a 60% success rate is enough, and involves 40% of failures. Pelé scored 1,000 goals but must have missed the net 48,000 times.
Tell us about your experience establishing the Lumiar School? How does your school, which focuses on student autonomy, differ to the changes that have been made to the schooling curriculum of Scandinavian countries, namely Finland?
We have been talking to Finland about adopting the Lumiar concept as their next cycle at least in some schools, as we have done in the Netherlands, UK and in the US.
Lumiar is striving to be the new reference for schooling that takes over from the obsolete system we have in place, and that doesn’t merit marginal betterments. Lumiar is based on competencies alone, and subject matters are merged into cohesive issues about the world, about the future, about the things we know nothing about (are we alone in the universe, do we want to be cloned, what is love, how do we deal with death).
The kids in a Lumiar school spend the first hour seeing the moment’s news and learning from that, every day. They do as well as classical schools in tests, without ever having seen the subject matter, done homework or taken tests.
The reason to play in this field is because we saw at the company, kids coming to us at 22 and asking us to tell them what they would be in five or 10 years’ time, and asking where they should sit and what they should wear. So some 15 years ago we decided to help fix this at an elementary level, namely with two-year olds.
People have described you as a nonconformist, is there anything that you regret or could have done better about the way you have run your business?
There’s no end to the things that I could have done better, but the main retroactive fix that I would have enjoyed is giving up more power to the lower ranks. In the end, there was always too much hierarchy. That said, it has been 18 years since we’ve had a shareholder’s meeting at Semco, and it is growing by a combined 41% per year, independent of how well or bad the economy is doing.
Your views on the South African situation – the good, the bad, and the ugly?
The good is the drive, the grit, the capacity to reinvent as it goes. The bad is the same as Brazil’s: too much space for corruption, too many bumps in the road, and a strong abandonment of the classes that have no voice. The ugly is also similar to Brazil’s: the gang-like greed in power, the lack of real democracy in the workings behind the scenes. But, like Brazil, South Africa is a leader of the future. On we go!
To learn more about the Allan Gray Investment Summit, visit www.investmentsummit.co.za