Bulletin of Science, Technology & Society

http://bst.sagepub.com The Story of Semco: The Company that Humanized Work

David Vanderburg Bulletin of Science Technology Society 2004; 24; 430 DOI: 10.1177/0270467604269141 The online version of this article can be found at: http://bst.sagepub.com/cgi/content/abstract/24/5/430

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BULLETIN OF SCIENCE, TECHNOLOGY & SOCIETY / October 2004

10.1177/0270467604269141 Vanderburg / HUMANIZING WORK

The Story of Semco: The Company That Humanized Work

David Vanderburg The Centre for Technology and Social Development This article examines and analyzes Semco, a company that changed the way it viewed and treated its workers for the better. It is the contention of Semcos CEO, that at most large corporations everyone is part of a gigantic, impersonal machine, and it is impossible to feel motivated when you feel you are just another cog. Human nature demands recognition. Without it, people lose their sense of purpose and become dissatisfied, restless, and unproductive (Semler, 1993, p. 109). At Semco, employees were no longer just faceless drones acting as machines would. By putting more power and decision making in the hands of their employees, the company became very successful, as it was more efficient and flexible. Workers also reaped the rewards of significantly increased control and decision-making power. This improved their lives financially and personally, as they were better able to deal with stress. Keywords: demand-control model; worker satisfaction; humanizing work; worker efficiency; work stress they investigated the relationship between human health and work. In doing so, the demand-control model was developed, where jobs were divided into four basic categories, on a two-dimensional diagram, that were separated according to the demands made in a work place and the control workers had of their jobs. It is commonly believed that in a typical company that manufactures goods, the vast majority of jobs should have high demand but very little control, the quadrant with the least healthy work. Blind faith is instilled in the work-place pyramid hierarchy, where no one questions anything. This has become the operating norm for the vast majority of companies. However, at Semco that all changed. Workers remained at high levels of demand; however, they were now given much more control of their job. This is their story. Semco was the long-time dream of Antonio Semler, who after securing a patent for an oil-separating machine worked diligently to realize his dream of creating his own company. He succeeded, and Semco soon became a major player in Brazils marine industry, making many parts but specializing in oil-separating pumps. He was a traditionalist who treated his employees paternalistically and was regimented in the running of his company. Semler demanded respect and frequently inspired fear. Clerks would flip coins to see who would have to deliver his morning paper, as he had a habit of delivering his frustrations on whoever was nearest to him. Brazils economy suffered a downturn, especially in the shipbuilding industry, which devastated Antonio as 90% of their business was in marine products, such as pumps, components for propellers, and of course, water-oil separators for ship motors. At this time Semlers son, Ricardo, took over the company and naturally sought to make it more profitable. His first order of business was to surround himself with new and energetic people. He believed that his fathers

his is the story of a company that changed the way it did business. Through many years of trial and error, Semco came to fundamentally change its business hierarchy, not only to its benefit but also to that of its employees. This article, using the book Maverick: The Success Story Behind the Worlds Most Unusual Workplace (Semler, 1993), describes how Semco came to change the relationship between employee and employer, and how personal trauma led to the ideal of what became Semco. However, before delving into the story, a brief explanation of a demand-control model is needed, as it will help to understand the effect that the change in the workplace had on the employees and the business structure itself. The demand-control model was first developed by Karasek and Theorell in Healthy Work (1990). In this,

Bulletin of Science, Technology & Society, Vol. 24, No. 5, October 2004, 430-434 DOI: 10.1177/0270467604269141 Copyright 2004 Sage Publications

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managers were a little long in the tooth, and he wanted a fresh start. In his first week as the CEO, he fired them all. He then concentrated on making the company more profitable, where he started making the salespeople fill out customer visit reports and keep records on orders versus quotes offered. In addition, files were rigorously organized throughout the company, employees bags and cars were searched under a system that randomly selected them for inspection. Everyone was issued a plastic ID card and was compelled to wear it. Production schedules were displayed on boards in the planning and control department. Members of the new time and methods department were dispatched around the plant, searching for ways to speed workers up and make them more efficient. Semler wanted to make his company more stable by diversifying its product line. Semler and his managers flew all around the world, sometimes more than twice a day, trying to expand the company. For months, he and his top managers worked 12- to 15-hour days. Weekends were also reserved for work, for roughly 6 to 8 hours a day. Their hard work paid off as he secured seven licensing agreements with other companies to manufacture soup mixers, oil filters, liquid agitators for mineral tanks, compressors, and other industrial and food-processing equipment. This would mean that marine equipment would only count for 60% of their new product line. However this success was coming at a cost to themselves and their families. The demand they placed on themselves grew to the point where it was controlling them. It did not help matters that Semler and the top managers were convinced that nothing would get done if they did not do it themselves or push subordinates into doing it. Stress levels were especially high because problems were beginning to arise as the company was divided; small problems were difficult to resolve, and large ones were impossible. While wrestling with ideas, Semlers body convinced him it was time to change. While visiting a plant in New York, he felt ill and passed out on the shop floor. He went in for tests and told the doctor of his constant throat infection that, because of the pain, prevented him from eating solid foods before noon, resulting in chronic anemia. He was also suffering fainting spells on a fairly regular basis. At this time, he was also taking medicine for an accelerated heart beat and migraine headaches. Gastritis, heartburn, and a rash on his back, which would flare up when he was tense, also plagued him. It had been so long since he had exercised that walking up the stairs to his office presented a challenge. A series of

tests were called for by the doctor; however, they all came up negative. The doctor advised that he stop taking the 16 pills he was now taking a day and instead recommended a change in lifestyle. A drastic change was needed. Semler vowed to himself that the latest he would be in the office would be 7 p.m. no matter what, after which he would do a non-work-related activity such as going to the movies or reading non-work-related books. He also decided not to work on weekends, and for each long business trip he would add a week of vacation. His next step was to unclutter his desk and thoughts so he threw away any unneeded papers and decided to rely on intuition rather than on experts. Semler believed that the main reasons for his illnesses were due to the belief that effort and result were directly proportional and that the quantity of work was more important than the quality of work, the adage that things are a little uncertain at the office right now, Ill just have to work a little longer until they straighten out, and a fear of delegation (dont trust others to do a good job) and of replaceability (the need to be able to be contacted at all times even when on vacation). He began to notice results with a change in lifestyle, and he wondered what would happen if he applied the same principles to his company. He started with the accounting department, which was full of people who were simply cranking out pages of numbers, which no one got around to reading. Employees would bluff their way through meetings, and because of this it was later realized that this was the time when people knew the goings on at Semco the least. Semler simplified the budget system by reducing the number of documents, thus making the data more relevant. Other quick fixes were tried around the company, such as suggestion boxes, leadership training, Japanesestyle quality circles (a range of people, from janitors to managers, would sit around to find solutions to problems), reading books, and talking to executives from other companies. The desired results were not reached with these quick fixes. Semler saw the solution as breaking the structure apart, where he believed that Semco could be run with a fraction of the rules. He felt that the lack of enthusiasm and malaise at Semco had to be changed, and the traditional attitude of you cant trust your workers, you need to control them was dispiriting and demotivating them. He was disgusted with how his company had its own police to check and search workers as they came and left, how people were forced to wear ID badges, stand in line for lunch, ask foremen for permission to go to the bathroom, and

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bring a doctors note in when ill. Workers were controlled in every aspect, and their ability to make decisions as adults had been completely stripped away. He felt as though he was treating his employees as children. Now, Semco does not check its employees. Semler does not know if or how much theft is occurring, neither does he care. He would rather a few thefts a year than subject people to searches. Many other policies were beginning to be implemented. The office uniform policy was abolished as Semler felt it was an artificial kind of unity. Instead, people could wear what they wanted, with the thought being that workers would be more productive if they were more comfortable. The workers on the shop floor had to wear uniforms (mainly for safety reasons); however, they were allowed to vote on what color they should be. Parking was no longer reserved; it was changed to a first-come first-serve basis. Managers were encouraged to use the management by walking around (MBWA) system, where they would walk with no destination in mind and talk to people to see how things were going. Walls were torn down in the office to make room for one big space instead of many individual spaces. Workers put their desk where they wanted and used plants and flowers as dividers. Factory workers were allowed to paint their space any color they wanted, and it spilled into to the office as well. Factory committees were started (made up of machinists, mechanics, office workers, draftsmen, maintenance workers, etc.) to increase involvement in the company and to resolve issues. The same committees voted that managers should spend less money on retreats (they were no longer allowed to bring their spouse, they stayed in less expensive hotels, etc.) as they saw it was a waste of the companys resources. The committees became vital to Semcos success as they assumed some managerial responsibilities and took charge of caring for the common spaces. This system helped identify surplus managers, constantly questioned expenses, set production goals, and suggested major changes in product manufacturing. When plants faced hard times, their factory committees would take the initiative and lower wages or increase hours, saving money and protecting jobs. If people had to be let go, then people with more responsibilities (such as children or a sick spouse) would be more likely to keep the job, and people with less responsibility (such as those that were fresh out of school and had an increased ability to find a job elsewhere) would be more likely to be let go. Cafeteria food improved, and prices improved as a result of the

committees. A Robin Hood Meal Plan was devised where people would pay based on a sliding scale: The more you make, the more you pay. All the new initiatives started to change the way business was run at Semco; however, the biggest change was in the workers ability to start making decisions for themselves. Workers were now in a position with increased control of their job, their work became healthier, more productive, and in turn, more fulfilling. Responsibility and initiative became a significant part of the job requirement for the first time. One of the most important changes to take place was the change in manufacturing. When Semler was on one of his many business trips, he visited the Uddevalla Volvo car manufacturing plant. What he discovered was that the manufacturing line was made up of teams, which would assemble the entire car from start to finish. He decided to employ this manufacturing style to his dishwasher line, where teams of two to three employees were set in motion. It was soon discovered that the dishwasher line became more efficient as products were made quicker, and quality control concerns dropped. Workers were more aware of the goings on around them and could foresee and solve problems. There were many cases where workers were finding solutions to problems that engineers said would not work or were too expensive. Fewer delays in the manufacturing process took place. Parts that were needed were ordered in a more timely manner as each worker was aware of what parts would be needed in the upcoming hours to keep up with demand. This was found to be much more efficient then the old system where managers were in charge of ordering new parts, and delays in receiving parts were considered routine and normal. The new just-in-time delivery system was making the entire plant more efficient. Semler was saving money while at the same time felt he was dehumanizing his workers much less then before. Workers began to take an increasingly important role in the plant, where they were at the heart of many decisionmaking processes. By taking the monotony out of their workday, and increasing their ability to make decisions, it was found that workers were much more effective in their job as problems with quality control decreased. Workers took up the initiative to set up scoreboards in the manufacturing plants so that they could keep track of monthly goals they had set versus production, which allowed them to control the demand aspect of their job. This had the effect of changing the nature of demand associated with most jobs at Semco, where it increased problem-solving demand. The

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healthier kind of control allows for increased learning and growth potential, thus benefiting Semco and its workers. They began to take pride in their work. In one case, a group of workers could not meet their production goal because some parts were late in arriving to the plant, so when the parts arrived at the end of the working day, they clocked out and stayed until 4:30 A.M. to get the job done. Workers, for the first time, took pride in the work they were doing. Things became clearer for Semler. He began to realize that in their quest for law, order, stability, and predictability, corporations make rules for every conceivable contingency. Policy manuals are created with the idea that, if a company puts everything in writing, it will be more rational and objective. Standardization methods and conduct will guide new employees and ensure that the entire company has a single, cohesive image. . . it works fine for an army or a prison system. But not, I believe, for a business that wants people to think, innovate, and act as human beings whenever possible. All those rules cause employees to forget that a company needs to be creative and adaptive to survive. Rules slow it down. (Semler, 1993, p. 96) The next step was to split up the manufacturing plants, thus making them smaller. The thought behind this was that by making every department smaller, the employees could get more involved in the running of the company. This allowed Semler to take on a new role. As Semler (1993) said, Its 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(p. 83). Quality control was also at never-before-seen levels, and soon the quality control department was no longer needed at all. It was now up to the workers to monitor quality control themselves. Workers were now in control of very many facets of their job, relying on themselves to make important decisions to better the company. As well, the demands placed on them by their jobs changed for the better to include more problemsolving demands. Workers soon thereafter became a vital component in the hiring process. Semler decided to put hiring in the hands of the workers. When, for example, a machinist applied for a job, he would be interviewed by a group of the companys machinists. It was thought that they would be better at determining what

would make a good machinist. This meant that employees had more stake in the company and were a major part of the decision-making process. By this time, Semco was making large profits, and Semler decided it was only fair to split the wealth with the workers who were now a significant part of the everyday running of the company. Thus, profit sharing was initiated, and everyone received the same bonus, regardless of salary or job position. This gave people more job fulfilment and motivation to get the job done well as it demanded employee involvement. Along with this, all financial information, as well as salaries became company knowledge. For the employees who did not understand what all the numbers meant, classes were offered at Semco to teach people. To further employee involvement, Semler encouraged managers to trade jobs with one another so that people would not grow restless, bored, unmotivated, or unproductive. For the transition to take place smoothly, they trained each other. This worked so well that Semler devised a rule that stated that someone could stay no longer then 5 years at one job. The only exception was if employees could prove to their superior that they could continue to challenge themselves in their present job. Employees are not limited by movement based on their resumes. Employees with high school diplomas have gone on to become financial or technical directors. Semco will even train people or pay for schooling if need be. The job rotation obliges people to learn new skills, and it discourages empire building. Employees also receive a much broader view of the company. It encourages the spread of diverse personalities, outlooks, backgrounds, and techniques. New and fresh visions are spread throughout the company. This also allows Semco to protect itself if an employee takes an extended leave or quits because there is always someone who can fill that position, be it temporarily or for the long term. This initiative also greatly benefited the workers who could now decide what they wanted out of their job and choose a position at the company that suited those needs. This has also allowed for another program to be instated. Workers can take leave from the company for a few weeks or months if they feel the need to spend time thinking about their job, redesigning it, or to simply think about where they are in life and to reassess their priorities. This makes employees much more active in the company, and when they come back they are in better shape to tackle their new goals. Workers have complete control of their work. They were encouraged to seek ways to make their job more effi-

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cient and productive, and in the end it was entirely up to them to implement any changes they considered beneficial. One of the latest initiatives to be implemented at Semco is also one of their most daring according to modern business practices. Instead of the company setting goals and giving people bonuses if they met them, they decided to let their employees set their own goals and pay themselves accordingly. The risk was thought to be high, as it was feared that employees would give themselves extremely high salaries. This, however, did not happen for several reasons. All financial information was accessible knowledge within the company, therefore employees could find out how much their coworkers were getting paid, and because by this time all employees had a vested interest in the company, no one wanted to be singled out as overpaid or greedy. Out of the hundreds of workers, only a dozen gave themselves an unfair salary, and one half of those gave themselves a salary that was far too low (in which case a manager would step in and talk to the worker in an attempt to come to an agreement on a more fair amount). The half dozen that gave themselves a salary that was deemed to be too high soon adjusted it, except for one who accepted a job at another company. Top managers were also paid modestly in comparison with other companies of similar size (roughly 10 times an entry-level salary), which meant that the gap between their salaries and workers salaries is much less, thus alleviating some of the tension between the different levels within the company. Semco is an example of a company that changed the way it does business by changing its relationship with its employees. In doing so, it has saved countless costs and has made their business much more efficient in the process. This has allowed them to become and maintain a very successful company that is an industry

leader. Workers have also benefited. Many examples of workers lives being improved financially and professionally and personally are cited. One such example is of a wife of an employee who called her husbands supervisor and asked him what had he done with her husband. The manager responded that he did not understand what she meant. She went on to explain that her husband was happier and less stressed out when he came home from work, and as a result he was a better husband and father. He would no longer come home from work angry and stressed out. By giving workers almost complete control of their job and by changing the nature of the demands placed on them, it made the work place less stressful and more enjoyable. Semco benefited as workers were more productive and more involved in the company, thus cutting costs such as unneeded managers, drastically reducing problems with quality control, and medical benefits as workers miss fewer work days as incidents of work-related disease decline. Workers became more human, as Semco learned to use these strengths to its advantage. Many companies could learn from this one little Brazilian company. Contrary to modern business belief and practice, workers can be the companys best asset, and mutually beneficial relationships can and should exist.

References
Karasek, R., & Theorell, T. (1990). Healthy work: Stress, productivity, and the reconstruction of working life. New York: Basic Books. Semler, R. (1993). Maverick: The success story behind the worlds most unusual workplace. New York: Warner Books.

David Vanderburg is a recent graduate of the University of Toronto, where he received an Honours B.A. in urban planning and geography.

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