Semco Case

Q1) Semco’s transformation came during a dramatic economic crisis in the Brazilian economy. Could it have come if things were going well?

Semco had become a market leader of centrifuges in first 10 years of its conception. It saw a significant growth through acquisitions and large government orders. But the company was very hierarchical and had strict rules for almost everything.

After Ricardo joined at the age of 20, there was a clash of beliefs to be seen between his father, the then CEO and him. His father believed in autocratic, paternalistic control and an inextricable connection between personal and business matters. However Ricardo strongly advocated a more participatory, management style. During the Brazilian crisis, his father transferred the post of CEO to Ricardo.

After taking over, Ricardo fired most of the top managers and got rid of most management layers; there were only three left. He eliminated nearly all job titles. Half a dozen senior managers traded the title every six months, in March and September. Executives set their own pay, and everyone in the company knew what everyone else made. All workers set their own hours. Every employee received the company's financial statements, and the labor union held classes on how to read them. Workers chose their managers by vote and evaluated them regularly, with the results posted publicly.

But even if the crisis had not come and things were going like before, the transformation would have come due to the following reasons:

1) Even before the crisis, both father and son realized that eventual transfer of power would not represent a continuation of that status. One day when Ricardo would have to be given control, he would work out things his way.

2) The company was deriving 90% of sales from one industry and sooner or later due to competition or industry dynamics, its sales would have been hit. Thus,