Semco Transformational Plan: Leadership, Management, And Motivation

Semco’s Implementation of the Transformational Plan

Discuss about the Semco for Transformational Plan.

The purpose of this report if to identify the leadership and management styles adopted by Ricardo Semler and their effects on the tactical choices of Semco. It will also discover various risks taken in executing the new regime at Semco and the possible causes of imbalance generated by the styles of administration and leadership plus their collective applicability and the effects caused by the organization. Semco is an equipment manufacturing company that was established by Antonio Semler in 1912 and is found in Sao Paulo, Brazil.  The company was taken over by Ricardo Semler year 1980 after his father resigned from being the COO of the company. He afterward established a management system that allowed employees to have power and was employee friendly. It has come to design a worker empowerment pattern that is free of any political discourse which was common during the 19th century in the industry of economy. The sales have grown at a 24% annual rate since he assumed the role as the president of the firm.  (Semler, 2009)

Is the transformational plan implemented at Semco Universally applicable?

Yes, the transformational plan implemented at Semco is universally applicable. Transformational leadership is a style by which the organizational manager or the overall leader works with the juniors to ascertain any change that needs to be implemented, generates a vision to chaperon through inspiration and put forth change in line with dedicated team members. Richard Semler as a transformational leader had the aspiration, resolution, and expertise to execute the necessary changes and recognise the basics of his leadership. With this, he accomplished the degree of change needed in the dynamic environment and was able to handle crisis critically. The type of transformational plan that Richard employed started off with an idea, he put all his enthusiasm and energy into the idea with an outlook of the expectations that will motivate probable followers and later adapt to it. Initially, Semco had set rules and regulations that controlled every aspect of activities assumed in the company. However, Richard Semler after taking over the company embarked on transforming the firm to address the consistently poor performance experienced from the past. He started by dismissing all the top management and dismantling the existing management layers in the company. He eliminated all the job titles but the COO, which was made to be rotated among workers after every six months.

Changes That Improved Worker Motivation

This type of leadership style serves the purpose of enhancing the confidence of followers together with their job performance and motivation to execute their various duties.  Semler aimed at addressing employee motivation through means that will encourage them to make the organisational goals their first priorities before their own goals. He managed to be successful because by doing the above he connected the team’s feeling of identity and sense of character to a mission and the shared distinctiveness of the company. Richard’s leadership style is a rare one that succeeded in reforming the organisation continually to win in the world of the future generation. (Semler,2009) An organisation needs a skilled transformational leader as Richard Semler for it to be transformed that faster and prepared for future success. An organisation’s future depend on how many transformational leaders it has, it can be one or all of them. In this case, every team member at Semco learned to be an effective leader in one way or the other the reason as to why they prove to be very substantial in cases of any changes and crisis management in the organisation.

The transformational plan implemented is universally applicable because of the following reasons:

• As a result of the plan, there was improved transparency in salaries as workers were empowered in setting their working hours.
• The company’s implementation of the reward strategy set to meet the targets set by the same team members resulted in an immediate decrease in costs, the rise in productivity and the lost profit. (Semler, 2009)
• Workers were motivated by the profit sharing system where the profits made were divided among workers according to what the elected committee decided.
• Decisions were now made after detailed discussion and debate unlike through a set of procedures as it was done in the past. As a result of its success that the company gave a group of Engineers the power to a group that had the mandate to act in any necessary way to advance innovation in technology at the plant.

Changes That Improved Worker Motivation and the main changes at Semco that improved the motivation of workers.

Motivation is the psychological process that stimulates people therefore guiding them towards specific goals. It inspires people to intentional engage with definite activities to keep on with them and eventually try to find benefits from doing these activities.

After the retention of the COO title, the job position was made to rotate among workers every six months. This greatly improved their motivation as each strived to work harder and increase their productivity just to be selected as the next COO of the firm.

The establishment of teams of workers that were self-managed also improved the motivation of workers. They were given the responsibilities of being fully in control of their production remit, which included controlling the budget and setting targets. They worked harder to achieve their targets because of the motivational aspect of the technique. This is a type of content theory of motivation defined by Herzberg, motivation factors like giving employees things like a sense of recognition, achievement or responsibility can increase job satisfaction. (Semler, 2009)

The reward structure was later designed so that it could match the targets set by the teams. This is the greatest form of motivation, as each team would put in their best to reach their targets and be rewarded in return. Due to improved motivation, the firm got to gain back the lost profits and increase productivity. (Senge, 2014)

Possible Sources of Tension within the Existing Structure at Semco

Profit sharing was another new change that improved workers’ motivation. All the profit made was summed up and each division pf the business was given around 25% of the net profits then it was divided among workers as per the decision of a democratically elected committee. The equity theory of motivation was employed through the assessing of the team members’ levels of effort and then rewarding them for it. The profit sharing was the goal of the managers recognizing the need for employees to be seen being rewarded on a fair and equitable basis and adjusting any form of inequities. (Semler, 2009)

The empowerment plan motivated workers to accept more responsibility given to them for managing multiple duties and putting in action their knowledge to generate new and innovative ideas on how to keep reducing costs and improving quality. The workers were given the power to hire or fire some people they deemed incompetent after a democratic vote from everyone. They were motivated to find ways in which they could tackle the challenges they faced in the company by organizing themselves. Workers who know and approve to the ideologies of their organization will organize themselves into teams needed to get the most out of their chances of accomplishing the team’s desired goals. When workers have more control over their tasks, they will be motivated to become more productive and consequently more relaxed and, happy at the work site. David McClelland’s need theory is established in this context. It holds a great significance in understanding motivations. The need for power which is the desire for control over others and yourself was promoted by the empowerment plan. (Semler, 2009)

The manuals that used to define the factory life in the previous regime were disposed of, and a new system was adopted, decisions were made after a debate and a discussion rather than through a set of procedures as before.

Payment is made by the sales percentage, this way, workers, were motivated to work hard to get the most sales to increase their payment.

Possible Sources of Tension within the Existing Structure at Semco

When Semler took over the company and started initiating his radical plan of running the business. He recognized that the firm’s highly turbulent markets needed a different organization structure to stay successful for a longer term. He reduced the size of Semco’s administrative organizations by assigning its functions to the operative units. The organization’s structure was redefined moving from hierarchical to business unit approach that put the team to the core. This caused a lot of tension, and as a result, Semco has no centralized data processing, there are no training departments, no rules, and no audits anymore. Because of the organizational structure changes implemented, the firm does not use a formal organization chart but rather sketch the structure of the company in pencil when it is only necessary and then dispense with it as soon as they are done. However, as a result, the ideas of self-governance and self-management were promoted, and responsibility into the overall strategy of the organization was incorporated among the employees. (Semler, 2009)

When he took over the firm, his first move was to dismiss all top management personnel and dismantle the existing layers of management, therefore, reducing the hierarchy from seven to three. The managers get to run their units with so much freedom from top management. This created tension in the firm, and as a result, almost an entire layer of middle managers left the business after almost a year because they felt that the newly empowered subordinates had undermined their authority.As it is well known by most scholars, the management of any initiativeneeds that someone exert control over the idea, the process, and the factors of construction in order for an economically possible product or service to materialise. Semler set up a new leadership system, the managers would put forth their plans to other members of the leadership team to get their opinion on the matter for approval. This was something that only the prerogative team used to do in the past regime. The system made leaders show exactly how they added significance to the process because the leadership team’s new roles encompassed setting budgets and therefore the management roles that were deliberated as being ineffective would be disregarded of. (Senge,2014)

Semler’s first moves included abolishing all the norms, manuals, rules and regulations. This caused tension because it can be very hard running an organisation without any rules and regulations. However most organisations have sets or rules and regulations that rarely solve problems. Richard expected that the workers would develop a sense of responsibility enough to take them use their common sense in every aspect.Semco’s corporate culture is based on employee participation in management decisions, companywide profit sharing, and an open information culture. Semco managers and workers together make decisions The role of manager was changed and instead of the manager making all the decisions, he would have to ask the right questions for the support of the team members, this then formed a basis for decision-making in the firm.

The new change in culture brought about tension, however, it brought about a competitive position build around the corporate culture that resulted in a creative R&D process and a highly efficient manufacturing system. Changes in the corporate culture ensured that Semco employees were assured of representation through a democratically elected factory committee of each business unit. The workers were given the right to vote, choose and contribute to the decision making processThey were supposed to read the charter, take part, and ensure that their committee defended their interest effectively. These interests at times would not correspond to Semco’s interests, therefore, bringing about a necessary and healthy conflict.(Senge, 2014)

One of the biggest risks taken by Richard Semler in implementing the new regime at Semco was starting by dismissing all the top management and dismantling all the existing layers of management for the reason of diversification. He dismissed almost every employee that had worked for the firm for a longer period and therefore had a better understanding of the business more than any new employees. It was a huge risk to take although it led to positive results. (Senge, 2014)

The second risk he took was the transparency in salaries; this was something that was not common in the normal business practices. All financial information were discussed openly and freely and displayed for every person to see. Every person was able to know just how much the other is earning.

He also took the risk of placing all the responsibility of overseeing processes, managing output and securing quality to the workers and later on extended it to managing salary levels, bonuses, decision-making processes. It was a huge risk to undertake in a business of such size. (Senge, 2014)

He took the risk of empowering his employees by establishing self-managed teams of up to eight production workers to be fully in control over their production remit that included complete control over budgets and setting targets. (Semler, 2009)

Semler took the risk of changing the work environment day by day , to some other people this will present itself as a risk towards job security, however, through these changes , he had gave all the workers, from top management to lower opportunities making every one of them do their work more sincerely. They all knew the importance of their work and therefore made wise decisions for other demographic factors, furthermore, the changes ensured that employees could not be dismissed without the proper procedure being adhered to.(Senge, 2014)

Conclusion

Semco is an unusual kind of organization because of its structure and the way things are done there. It managed to safely traverse through the challenging economic environment without incurring major organizational damages. It is very different from other traditional organized firms because of its open policies towards information sharing. Compared to other international companies, it is a small firm and it is not quite clear yet if the organizational principles employed by Semco and made it successful can be applied to other companies and gets the same results. It is unclear as to what the management principles at Semco cold do to a much larger organization, and it is, therefore, unclear as to whether the system could work in a highly competitive international economy due to the relatively young age of Semco’s structure of an organisation.

Reference 

Semler, R. (2009).  The Seven-Day Weekend: Changing the Way Work Works.  New York: Warner Books.

Senge, P. A (2014).  The Fifth Discipline Field book.  New York: Currency Doubleday.