People and Organization- Human Resources, Semco

I don't want to know where Semco is headed. It doesn't unnerve me to see nothing on the company's horizon. I want Semco and its employees to ramble through their days, to use instinct, opportunity, and ingenuity to choose projects and ventures. " - Ricardo Semler, CEO, Semco Semco was established in 1953 by Austrian engineer Antonio Curt Semler. Company started with manufacturing of centrifuges for vegetable oil industry but soon owing to development in naval area it sown its seeds in manufacturing of variety of equipments like hydraulic & load pumps, axles,etc.

In 1980’s when Ricardo Frank Semler, founder’s son took over, company explored various other segments & started manufacturing industrial refrigeration equipments, air-conditioners, food processors & mixers for chemical & mining industry. In 1990’s company moved into innovative service area. ERM Brazil (Environmental consultancy), Cushman & Wakefield (real estate consultancy), Semco Johnson controls (facilities in industrial sector), are the classic examples of companies efforts to establish network across the globe. Year 2000 onwards Semco extended its arms into electrical and civil maintenance services by forming Semco Manutencao.

It formed partnership with Pitney Bowes & marked its existence in postal and document management solutions. Semco venture also entered bio-energy market and formed BRENCO (Brazilian Renewable Energy Company) in 2006. (web1) Purpose of Study To study standard organizational design & structure, theoretical models of human resource planning in terms of recruitment, retention, success planning & to compare these aspects with similar models operational in Semco organization, to define the deviations & to critically evaluate the approach used by Semco. Organizational Structure Conventional v/s “Semco Way”.

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Every organization has its own structure & culture. Organizational structure is basically framework which can be defined and altered over a period of time while culture cannot be altered. It is very difficult to design or change culture within the organization. Structure and culture within organization goes hand in hand. It is essential for the organization designer to classify tasks based on mainly four concepts of Function, Territory, Product & Time-Period in order to get work done in organized manner. (Torrington, 1998) “Organizations are as different and varied as the nations and the societies of the world.

They have different cultures-sets of values & norms ad beliefs-reflected in different structures & systems and the cultures are affected by the events of the past and by the climate of the present, by the technology of the type of work, by their aims and the kind of people that work in them” (Handy 1993, p. 180) best defines the organizational structure & culture co-relation. Three forms of conventional organizational structures are compared with the democratic form of Semco’s organizational structure.

The Entrepreneurial Form of Structure Conventional Theme:

1. This form emphasis central power.
2. Power is concentrated in hands of one person or a group called as ‘key entity’.
3. As the business expands this type of structure becomes unviable since too many peripheral decisions cannot be made without taking approval of the ‘key entity’,
4. This form is suitable for small and growing organizations as they owe their existence to expertise or initiative or just one or two members.
5. It is difficult if by any means ‘key entity’ leaves the organization. It would be difficult to maintain business in the event of new non potential ‘key entity’.

Semco way:

1. It is a unique kind of ‘open management model’ wherein power and rights are equally distributed amongst the group members from the respective departments, but care is taken to see that it’s not misused.
2. The hierarchical signs are removed, everyone is treated equal.
3. Peripheral decisions can be made by implementing democratic way.
4. This form is suitable for developed and expanding organizations which are financially strong.
5. Even if the ‘key entity’ leaves the organization the system is in place and the process of production or delivering services is not affected.

Functional design conventional theme:

1. Positions, terms & departments are designed based on specific activities.
2. It is most widely used & accepted form of departmentalization, since grouping tasks and employees by function can be efficient & economical.
3. It is possible for members in group to undertake similar tasks & troubleshoot similar problems.
4. Employees are not in direct contact with the clients; hence they fail to meet the customer’s expectations, except marketing product line.
5. It is effective for organizations having narrow product line, competing in uniform environment, pursuing low cost or focused business strategy. hellriegel, 2005)

Semco way:

1. Positions, terms & departments are designed by the owner based on functions. Labors are allowed to select wages & their own managers.
2. The employee has only four titles Counselors who are like vice presidents, Partners who runs the business units, Coordinators who are part of first level management, & Associates who are workers.
3. The factory workers set their own production quotas, come in on their own time, help to redesign the products they make & formulate the marketing plans.
4. The ompany is divided in individual business units which are self governed, managers run business units with freedom, determining business strategies without interference from the top.
5. Semco undertakes partnership with established foreign companies & give them access to customers, risk monitoring & extensive network of contacts. They seek partner who has domain in their product & services.

Product design conventional theme:

1. Self contained units are established. Each unit is capable of developing, manufacturing, marketing & distributing its own goods or service. .
2. Organizations that produce multiple goods & services generally adapt this type of structure.
3. Problems arise when new product line is established or there are diverse customers or there is complexity in technological advances in functional design. Product design takes care of these limitations.
4. Company generally start with functional design & add some features in order to meet limitations of the functional design in terms of management aspects.

Semco’s organization is based on three core values employee participation, profit sharing & free flow of information. These core values are in line with the variables of socio-structural model of empowerment which are power, information, knowledge & rewards. Hence the hypotheses which were derived from the author’s understanding of the theories were easily verified. Other companies may have achieved workplace democracy in other ways by having their own pattern of working. Liberty given to the employees would benefit only if there is supervisory control otherwise it may happen that there is misuse of the available resources.

Recruitment plays a vital role in any industry. Whenever there is vacancy, individual is recruited after he is being thoroughly evaluated. It is essential to find out how the vacancy is generated, either because someone has left the job or there is the expansion within the company. Recruiting a person just because there is vacancy owing to person leaving the job is the appropriate way but not mandatory. Employer can reorganize the work within present employees, or ask them to work overtime, subcontract the work or make it part time in order to reduce the expenses.

It would be ideal to find out the nature of job, aspects of the job that specify type of candidature, highlight the job profile to the applicant before recruiting a candidate. There are several ways through which people are recruited. Once employers realized a need to fill the vacancy within the department or in organization, he can recruit by several means. Survey (Torrington, 1998) Investigated the method used by more than 1000 professionals when they were questioned (Torrington 1998) Table: Usage of various methods of recruitment by more than 1000 professional questioned.

Choice is generally dependent upon selection criteria for the post to be filled, administrative ease, accuracy, cost, time factor, abilities of the staff involved in the selection process etc. Interviewing is the most popular method of selection. Bio-data of the candidate is initially asked for. It is checked whether candidate meets the necessary specification and has relevant work experience in the same field, if found so he is been called for the interview or rounds of interview, where his domain is thoroughly checked either through verbal interaction or through written test.

Written test generally includes Aptitude tests, General Intelligence test, Trainability test, Personality test & Attainment test. Critical features of test use being validity, reliability, use of interpretation & context of texts. Group selection methods are also used if there are more candidates applying for one job. Three main types of group tasks were invented by Plumbley (1985) Leaderless group, command or executive exercises & group problem solving.

Also at times for critical job profiles there is factual as well as character check wherein candidate is asked to get references. Other methods include hiring a consultant or recruitment agency that would already interview the candidate and filter out the one from the masses. It reduces efforts of the employer since candidate is interviews before by the agency for the desired profile. Also sometimes candidate is asked to fill the application form and submit it, wherein entire details of the candidate are asked for.

Application form is customized per the need of profile unlike bio-data which has information which may or may not be useful for that particular job profile. (Torrington Hall 1998) Retention is generally maintained by introducing attractive policies for welfare of the employees, giving employee shares of the company at very low rate, market supplements, revising salary structure, providing with additional perks and cost to company components, depending upon the nature of appraisal received from colleagues and subordinates.

Providing employees with free medical facilities, pension schemes, and loans at affordable rates encourages employee to stay with organization. Semco has altogether different way of recruiting people and retaining them. Ricardo Semler, CEO of the company believes that workers or the Associates have the liberty to recruit their managers. In short the subordinates have the right to choose with whom they wish to work. Since everyone is treated equal in Semco, owner doesn’t interfere with the decisions taken by the subordinates.

People that are to be hired to leadership positions are interviewed and approved by all with whom he/she will be working with. Twice a year subordinate receives questionnaire that enables them to anonymously say what they think about their boss and evaluate their performance. Anyone that gets constantly bad grades at the evaluation usually leaves Semco (average is 80 out of 100) Preference is also given to friend or acquaintances of employees, but no family member is considered for job at Semco if all these ways fails then they move for head hunters & newspapers.

Semco business unit has a committee comprising everyone from different operations. Members in the committee have time off, with pay to do their work they also have job security as in they cannot be fired while they serve on committee. Semco has another salary programme called as ‘risk salary’in which about third of employees have the pay cut of upto 25% and then receiving supplement raise of 125% of normal salary if company is making profit. (Maverick, 1993)

References

1. Torrington & Hall (1998) Human Resource Management. Edition 4. Prentice hall, Europe
2. Slocum/Hellriegel (2007) Fundamentals of Organizational Behavior International student edition, USA.
3. Semler, Ricardo (1993). Maverick! Century random house UK.
4. Semler, Ricardo (2003). The Seven Day Weekend. UK Century.
5. Hackman, J. R, & Oldham, G. R (1980). Work Redesign. Reading, MA: Addison-wesley publishing company Inc.
6. web1: http://semco. locaweb. com. br/en/content. asp? content=1&contentID=610

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