UNIT ONE CASE STUDY

Read the following and answer the questions that follow

So who needs a strategy?

Semco is a diversified Brazilian corporation that has a range of international businesses which include marine engineering, facilities management, internet services and software development. Since the 1980s growth has been impressive and over the last ten years turnover has grown from $35 million to $1 000 million. Its principal shareholder (he owns 90 percent of the firm) is Ricardo Semler. He inherited Semco in 1980 from his father, an engineer who had founded the marine pumps company in 1954, although engineering now accounts for only 30% of sales. It has 3 000 employees (ten times as many as in 1980) and is structured as a federation of ten companies all of which are premium providers and market leaders in their fields.

Semler describes its principal purpose as selling intelligence, the capacity to think out service solutions, and to look at things from an intellectual standpoint. Our rationale for everything we do is that its heavily engineered or complex... businesses that have high entry barriers and which people cant get into easily and cant get out of easily.

Mr Semlers reputation as an unconventional businessman rests on books, articles and seminars that describe his unusual approach to doing business. On taking over from his father, Mr Semler quickly started making changes. He fired two-thirds of his fathers senior managers, dismantled the companys

very conservative structure, abandoned the practice of searching employees as they left at the end of

each day, and did away with time clocks and controls over working hours.

His shaking up of the company continued. Semco has no official structure. It has no organisational chart. Theres no business plan or company strategy, no two-year or five-year plan, no goal or mission statement, no long-term budget. The company does not have a fixed CEO. There are no chief officers for information technology or operations. There are no standards or practices. Theres no human resource department. There are no career plans, job descriptions or employee contracts.

No one approves reports or expense accounts. Supervision or monitoring of workers is rare. In addition:

- Attendance at all company meetings is voluntary

- Employees have no set working hours and can decide when to take holidays and how much time off they need.

- Staff can choose from a range of ways that they can get paid including a fixed salary, royalties on sales or profits, share options and commissions or bonuses.

- Employees choose their own training, and Semcos Work n Stop programme allows them to take up to three years off for any purpose.

- Its Lost in Space programme makes its young recruits roam the company for a year to discover

what they want to do.

Mr Semler sees it as his role to be disruptive and to encourage divergent thinking, and claims that this is a bedrock for all the companys practices ... ask why. Ask it all the time, ask it any day, every day, and always ask it three time in a row, even though this is something that he recognises is often very difficult for people to do. However, Mr Semler is adamant that this is necessary to prevent calcified thinking. This ethos means that the company has few written plans, which he believes encourages people to follow them like a Pied Piper mindlessly.

No one approves reports or expense accounts. Supervision or monitoring of workers is rare. In addition:

- Attendance at all company meetings is voluntary

- Employees have no set working hours and can decide when to take holidays and how much time off they need.

- Staff can choose from a range of ways that they can get paid including a fixed salary, royalties on sales or profits, share options and commissions or bonuses.

- Employees choose their own training, and Semcos Work n Stop programme allows them to take up to three years off for any purpose.

- Its Lost in Space programme makes its young recruits roam the company for a year to discover

what they want to do.

Mr Semler sees it as his role to be disruptive and to encourage divergent thinking, and claims that this is a bedrock for all the companys practices ... ask why. Ask it all the time, ask it any day, every day, and always ask it three time in a row, even though this is something that he recognises is often very difficult for people to do. However, Mr Semler is adamant that this is necessary to prevent calcified thinking. This ethos means that the company has few written plans, which he believes encourages people to follow them like a Pied Piper mindlessly.

This philosophy means that the company has no written mission statement or written statements of strategic objectives although Semler says the firm does have a mission: to find a gratifying way of spending your life doing something you like that is useful and fills a need. By not writing strategic objectives down he claims that employees are forced to constantly re-think what they are doing. Mr Semler even says he resists any attempts to make him define what the firm does: once you say what business youre in, you put your employees into a mental straitjacket, blocking them from thinking opportunistically. So rather than trying to dictate Semcos direction, he encourages employees to shape it themselves through their own interests and initiatives.

Every six months, Semco is shut down and started again. Through a budgeting and planning process all business units have to justify their continued existence. Executives similarly are forced to resign and be rehired in an anonymous assessment process by subordinates whose results are then made public. Such a ruthless focus leads to some being moved sideways, downwards or out. Mr Semler says,

ultimately, all we care about is performance. How this is achieved is down to the individual.

Semco judges its businesses on their ability to generate profits and therefore survive in the long term. But Semco does not set sales targets for its businesses, as long as their profits remain healthy. And if profitability tails off employees are encouraged to start anew. The company makes it as easy as possible for employees to propose new business ideas, and to get fast and clear decisions. Proposals go through an executive board that includes representatives from the major business units and the first two employees that turn up to the board meeting, and which all employees can attend.

QUESTIONS

1. Does Semco have a strategy? Justify your answer

2. What modes of strategy-making appear to be apparent at Semco?