Book Notes – Maverick!
At the Federation of Industries our poor numbers were merrily displayed to other club members as a proof that this democracy nonsense was no way to run a business. Today, a whopping 85 per cent of these Board members have lost or sold their companies. Think long term.
The same way that an IQ test may tell you about people’s specific abilities in narrowly defined intelligence but tells you nothing about other vital characteristics, so profits are an indicator, but not much else.
Now, control is passé and a badge of incompetence.
Our workers have unlimited access to our books… To show we are serious about this, Semco… developed a course to teach everyone, even messengers and cleaning people, to read balance sheets and cash-flow statements.
At Semco we have stripped away the unnecessary perks and privileges that feed the ego but hurt the balance sheet and distract everyone from the crucial corporate tasks of making, selling, billing and collecting.
I also take at least two months off each year to travel.
My role is that of a catalyst. I try to create an environment in which others make decisions. Success means not making them myself.
In restructuring Semco, we’ve picked the best from many systems. From capitalism we take the ideals of personal freedom, individualism and competition. From the theory, not the practice, of socialism we have learned to control greed and share information and power. The Japanese have taught us the value of flexibility, although we shrink from their family-like ties to the company and their automatic veneration of others. We want people to advance because of competence, not longevity or conformity.
We whittled the bureaucracy from twelve layers of management to three and devised a new structure based on concentric circles to replace the traditional, and confining, corporate pyramid.
We try to maximise the possibilities and minimise the supervision.
Every six months managers are evaluated by those who work under them.
Fit for duty
Have you heard of Einstein’s son? Why is it that the offspring of industrialists are typically regarded as natural entrepreneurs?
I spent most of a year studying the ladder company, and it proved a much better business education than I got in any classroom. I talked to the firm’s creditors. I talked to its suppliers. I milked Price Waterhouse for all the strategic thinking I could get.
Truth was, we lacked almost everything in our sales department. Brasil’s five-year plans, with their long wind-ups, had made us lax. There seemed to be no need to sell anything; we would take orders, that’s all.
It’s so easy to blame the managers when a business does badly, but often they haven’t had the freedom to manage or the motivation to perform as if the business were theirs.
Symptoms of trouble
We were so impressed with our statistical abilities that it took as a while to realise that all those numbers weren’t doing us much good. We thought we were more organised, more professional, more disciplined, more efficient. So, we asked ourselves with a shudder, how come we were constantly late on deliveries?
During this time I often thought of a business parable I had heard. Three stone cutters were asked about their jobs. The first said he was paid to cut stones. The second replied that he used special techniques to shape stones in an exceptional way, and proceeded to demonstrate his skills. The third stone cutter just smiled and said: “I build cathedrals.”
Studying classic business cases, I discovered we were going through the “Bureaucracy Phase” or “Adolescent Phase”… In response Fernando had tried to cut through the malaise by introducing time-tested techniques of discipline and control.
It struck me that time should be measured in years and decades, not minutes and hours.
But sometimes the committee members complained that in our effort to be equitable we dragged out the process, talking too much, agonising too long, and increasing the pain. Perhaps that was an unavoidable price for corporate democracy.
p.80 has a great section on delegating decision making and allowing employees to think for themselves.
It’s only when the bosses give up decision making and let their employees govern themselves that the possibility exists for a business jointly managed by workers and executives.
The strength of these groups was their diversity. They included factory workers, engineers, office clerks, sales reps and executives. They didn’t have a formal head; whoever showed the greatest capacity to lead got the job, calling meetings and moderating discussions. In more than one group, a shop-floor worker guided professionals. Instead of a seniority system, or boxes on an organisational chart that guaranteed power, the groups were held together by a natural system of collegial respect. There are similarities between this system and the Japanese approach to organising manufacturing operations, but also important differences. In our groups, younger members didn’t automatically submit to their elders. Moreover, once a team decided an issue, it stayed decided. There was no approval needed to make a change. Then again, there were no special rewards for ideas. It was a spontaneous proces; people participated only if they wanted to.
The trouble with rules
There is always a group of supervisors, department heads, and other professionals in the middle, no longer workers but not yet owners or shareholders. [Middle-managers. Always be a do-er.]
That’s what’s wrong with bosses, I thought to myself. So many of them are better prepared to find error and to criticise than to add to the effort.
A company makes, sells, bills and, God willing, collects. It doesn’t need to know if the taxi ride being claimed by a manager was for business. Or if another manager couldn’t have stayed in a hotel with three rather than four stars. With few exceptions, rules and regulations only serve to:
- Divert attention from a company’s objectives
- Provide a false sense of security for executives
- Create work for bean counters
- Teach men to stone dinosaurs and start fires with sticks [?]
When the bananas ate the Monkeys
We realised that being participative was not enough. We would have to learn to communicate better, because as much as anything people’s perceptions generate strikes.
Too big for our own good
p.110 has some interesting anecdotes on keeping it simple.
As Samsung in Korea and Toyota, Kyocera, Sharp and TDK in Japan, Joao saw other ways in which modern production methods and worker involvement were joined, although their systems depended on such cultural traits as submissiveness and veneration of the company.
Divide and prosper
From all of this I have come to believe that economy of scale is one of the most overrated concepts in business. It exists, of course, but it is overtaken by the diseconomies of scale much sooner than most people realise.
The inmates take over the asylum
Just think how much better job descriptions would be if they included not only what employees do but what they want to do.
Miles of files
My idea was to phase out clerical positions, redistributing their necessary functions among everyone else.
We think three times before filing anything. Read it, understand it, act on it, and throw it away – that’s our motto now.
If you really want someone to evaluate a project’s chances, only give them a single page to do it – and make them write a headline that gets to the point, as in a newspaper. There’s no mistaking the conclusion of a memo that begins, ‘New Toaster Will Sell 20,000 Units for $2 Million Profit.’ And so Semco’s Headline Memo was born. The crucial information is at the top of the page. If you want to know more, read a paragraph or two. BUt there are no second pages. All of our memos, minutes, letters, reports, even market surveys, are restricted to a single page.
We felt that a minimum of two years and a maximum of five years in a job were ample. Anyone who wanted to stay put longer could, provided he could continually create new challenges for himself. Otherwise, it was find a partner and dance… It discourages empire-buildingf, because people can’t very well sustain an empire if they pack up and move every few years.
Because of this pressure, we are great believers in professional recycling, a.k.a. sabbaticals. We call it our Hepatitis Leave. When people tell us they don’t have time to think, we ask them to consider what would happen if they suddenly contracted hepatitis and were forced to spend three months recuperating in bed. Then we tell them to go ahead and do it.
Minding our own business
The love and caring we offer comes from our people, not our policies.
Hiring and firing the boss
Under a programme we call ‘The Family Siverware’ an employee who meets 70 per cent of the requirements for a job will be chosen instead of an outsider… we are willing to bet that someone who meets 70 per cent of the requirements will quickly develop into a 100 percenter on the job.
Rounding the pyramid
No one can get me to decide a thing; my goal is to get people to decide things for themselves.
In our new arrangement, the marketing department was no longer headed by an individual. It had become a team.
Given the typical exective’s respect for hierarchies, how is it possible for anyone five rungs from the factory floor to know what’s going on there? He can’t so he distracts everyone around him with memos, phone calls, and meetings trying to find out.
This was a great chapter on a flatter organisation structure. Good that there are hard rules to ensure it persists, e.g. “Associate cannot report to an associate”, and that there’s a “maximum number of coordinators”.
Name your price
They let staff “gamble” their salary based on profit. They earn less in bad times but more in good times, or can opt for a medium steady salary. It also “lowers their profile in case cost-cutters are called out”. Sounds a bit unfair to older staff who have family commitments and can’t afford the gamble.
Thinking for a living
Their idea was to take a small group raised in Semco’s culture and familiar with its people and products – them, naturally – and set them free. Removed from day-to-day activities, they would no longer worry about production problems, billing, inventory, machines that didn’t work, or subordinates who wanted a raise. They would have all their time free to think.
So, she thought, let’s take some of that money and give it to the government (which doesn’t have enough, right?). On a sunny spring day in 1990 she went on television to declare a bank holiday and sieze 80 per cent of the cash in the country. The govenment laid hold of savings accounts, cheque accounts, certificates of deposit, company funds, the works. Every Brazilian, no matter what his assets, was left with $800 or 20 per cent of his holdings, whichever was less. If someone had, say, $1,000 in a cheque account, he now could spend $200. The lady said she’d give the money back, corrected for inflation by an official index, in 12 monthly instalments, starting in a year and a half.
T know many people feel we at Semco talk too much before making decisions. They assume a company our size should turn on a sizpence. I admit it: we can take longer to make a decision than General Motors, which is 10,000 times bigger. But if we debate a decision forever, once we make up our minds we usually implement it much faster, since everyone is totally committed to it.
p.248 nice “workshop” format.
A company in which there was such fluid movement on to and off the payroll that it wasn’t always clear who as an employee and who wasn’t.
Who needs a No. 1?
Every siz months, once Consellor takes a turn as acting cheif executive, co-ordinating the activities of the Partners and their business units, representing the company in legal matters, and sometimes meeting with customers who insist on speaking to the top dog. This system avoids the excessively collective thinking that characterises government agencies.
Most people live either in their memories of the past or their hopes for the future. Few live in the present.
Will it travel?
‘I know what you think of the Federation,’ Mindlin said. ‘But no one will listen to you while you’re on the outside.’ – Boyd had the same opinion.
Small companies are emulating large ones on the assumption that they must have something right to get that big.
Transporting Asian values to, say, Smyrna, Tennessee, is like wearing a kimono to a Tupperware party. Nothing is less Western than the notion of total loyalty to a company. – RE: Lean, Kanban, etc
Technology is transformed overnight; mentality takes generations to alter.
It took us a while to see it clearly, but at Semco we now focus on innovations that will enable us to work better together, rather than simply trying to acquire the next generation of plasma welding computers or CAD/CAM machining centres.
No company can be successful, in the long run anyway, if profits are its principal goal.
Income, though vital, isn’t a satisfying end in itself.
If money isn’t all it’s made out to be, information is, I believe, a most under-valued commodity. There is power in knowing something someone else doesn’t, which explains why executives are so often loath to share information with employees. You don’t believe me? Try this test at your next meeting. When some important item comes up, say that it’s better not to discuss it now because a related issue was decided that same morning that will change things considerably. Then, after a few moments of apprehensive silence, say that you just can’t discuss it now.
To survive in modern times, a company must have an organisational structure that accepts change as its basic premise, lets tribal customs thrive, and fosters a power that is derived from respect, not rules. In other words, the successful companies will be the ones that put quality of life first. DO this and the rest – quality of product, productivity of workers, profits for all – will follow.
Ask yourself: ‘Is it possible that someone else could do this task at least 70 per cent as well as I could?’ If the answer is yes, let him.
Start being proud of not being aware of everything. Get off distribution lists. The reward will be an opportunity to engage in that under-appreciated occupation, contemplation.
Make time to think. Try blocking out a half-day a week on your agenda. I find that Monday and Friday mornings are good, because I can clear away post- and pre-weekend distractions.