S3 Ep. 197 Ricardo Semler: Revolutionizing Corporate Governance with Industrial Democracy

Speaker 1: Hello there, welcome to the World Cafe podcast. This podcast has been designed with created content that centers on the power of words. Can we really do anything without speaking? Can we really do anything without the agency of words? Yes, that is what this podcast is all about, and I am your host , amakri Isuboye, your neighborhood word trader. I believe in the power of words , for it is the unit of creation . I trade in words to profit my world. Good morning, good afternoon, good evening, good, everything. Wherever you are on the surface of the earth at this very instant listening to me, how are you all doing? Beautiful? I will always ask that question because it means a lot to me. Yes, thank God, you are there. Thank God I am here. We're both within this space. Yes, this is the space where we come into, lean on one another's experience to forge a positive path. I'm grateful. Yes, yes, yes, yes, yes, yes, it's been a wonderful, wonderful time. Yep, it's been a wonderful time . A lot has been going on. A lot will always happen. Yes, you know that a lot will always happen. Yes, you know that it will always happen, but the truth is we live in this unique moment where there's a lot of disruptions happening and people's understanding of reality, the perception and all that has been redefined. And it's like those who know what it means to evolve. You know, in the sense of evolution now, you know and live at once. But I say those who understand the future. You know, like living from the future back to the future, kind of thing. So it's been that, it's been that, yep, yes, I'm back, I'm back, I'm back, I'm back. Did I ever leave? Well, so what are we going to be doing today? Well, let me give you a background. Yes, what I came in to do today . Actually, I want to talk about a person, an individual, and he's referred to as the maverick Ricardo Semla. But before I go into that, I want to give you a background for change management. A lot of us fight with it, we resist it, we see it from the negative. You know like it's coming to take away what we are used to, what we are, what we know. This is how I know how to do things. Why come and change it and all of that. Like the Americans will say if it's working, don't change it, and all of that. Like the americans will say if he's working, don't change it, and all of that. So it brings this fear. But when you look at the world, the globe, the earth, things that we see happen, one thing that defines our reality is work . Yes, be it. Look at it from the very beginning of work. You know what we know work to be from the ancient and what have you. So today we now have the corporate space, what we call corporate space. You know, work has been defined by corporations and somehow they shift and shape our lives and people get excited. You know, I work with this organization, I work with that corporation and all that, and I've come to define the way I see, uh, organizations and corporations, the way I see them , I define them as the architect of I beg your pardon the architecture of organizations. I mean designed in such a way that they provide a platform for people to self-actualize. That's the way I see it. You work in an organization, you want to be. You hear about the vision and the mission and all of that. It excites you and you want to be. You know you hear about a vision and a mission and all of that it excites you and you want to be part of it. So you see, it's like you're standing on the platform that has given you the latitude to like express yourself yes, I'm an engineer or I'm an analyst or whatever. So they give you all the support, provide all the resources and somehow this is on the basis of profitability yes, you make profit for the organization and the organization also brings somehow profit into your life. All of this put together comes to define the way we do things and sometimes, if not most of the times, organizations now, or corporations kind of hold this what I call it God-like position in the society and they define things, they do things and you hear in organizations like well, this is what the company wants. And sometimes you ask yourself is the company an abstract, like something, a distant entity somewhere? Or the company is a group of people where you now have stuff and all of that? So I remember doing this course by post-grad with Diplomary or Global Human Resources Management, and one of the modules we talked about it had to do about, I think it talked about the democracy in organizations and one name that popped up that we studied was Ricardo Semla, and I think he did a book, the Maverick. So before I go into anything about I, have some stuff, some information I want to share with you in terms of I'm going to read and interject, say one or two things you know, but I want us to start from this point of the meaning of the word maverick . Maverick, this is what I've come to see from the word human being, as in human being, we are beings who are humors or that dwell in a body. Get my thought. What precedes? Is it humanity or being? You understand me. When you be or when you become, or when you embrace your being, you will become. This is what I'm driving at. Your activity is dependent on your doing, as in your being, who you are, the things you do are dependent or premised on your being. When you call somebody a thief, why he or she is putting up an attitude that defines that whatever. So, maverick, the word maverick comes from Samuel Maverick. It's somebody's name. Yes, maverick is somebody's name the Texas cattle rancher in the 1800s. He refused to brand his cattle Like. This is the practice there. He refused it. This was unorthodox at the time and led to people calling unbranded cattle maverick and calling people who don't follow the rules maverick, like when you watch. What was the name of that movie now? The one by Tom Hanks that had to do with flights. Somebody remind me? Now Let me remind me, remind me , yes, I know you know what I'm talking about. Tom Cruise. Did that movie, tom Cruise? Hold on, let me get that information. Tom Cruise, the Maverick I need to get the name actually Mm-hmm . Yep, in that movie Top Gun yes, top Gun. They call him the Maverick. I need to get the name actually . In that movie, top Gun yes, top Gun they called him the Maverick. Now, he was called the Maverick because he didn't follow rules. If you remember one of the scenes in Top Gun, part 2, when they called him to train the Navy pilots, they had an activity to take care of. They called him and he just came into the room, picked up the materials, threw all of them into a dustbin and said well, you don't need them. Why I wrote them? So I'm here myself to teach you . So they were all taken aback, so that you know an individual who doesn't follow rules, like why should we? And all of that, he's a maverick. So the corporate space has been defined by certain rules. But this individual, ricardo Semler the maverick, as they call him came in and did he changed a lot of things. You know, if you Harvard Business School had to like, you know, they carried out a study about him and his style. All right, then, I'm going to do some reading now, give you some information about Ricardo Semla and why he's called the maverick, and what he did to change the landscape, the corporate landscape, you know, globally speaking, even though a lot of people, so many corporations, fight his thoughts and his approach and all of that. But for crying out loud, why change it if it's working? So he was born in 1959. That's Ricardo Semler, the chief executive officer and majority owner of Semco Partners, a Brazilian company best known for its radical form of industrial democracy and corporate re-engineering industrial democracy and corporate re-engineering. Under his ownership, revenue has grown from $4 million in 1982 to $212 million in 2003. That's a huge jump, and his business management policies have attracted widespread interest around the world. Time featured him in its Global 100 Young Leaders Profile series, published in 1994. While the World Economic Forum also nominated him, the Wall Street Journal's Latin America magazine named him Latin America Businessman of the Year in 1990 , and he was named Brazilian Businessman in the year 1990 and 1992. That's a long word, a Spanish word Virando a Profer mesa turning your own table that's the interpretation. His first book became the best-selling non-fiction book in the history of Brazil. He has since written two books in English and On the transformation of SEMCO and workplace re-engineering. Maverick, an English version of Turning your Own Table published in 1993, and an international bestseller and the seven-day weekend in 2003. Now let's have some background about this individual. You know Semla went to work for his father's company, originally called Semler and Company, then as mixer and agitator supplier in Sao Paulo in Brazil. Semler clashed with his own father, antonio Semler, who you know supported a traditional autocratic style of management you know the top-down approach, whereas young Semler favored a decentralized, participatory style. So you know this is a traditional. You know the pyramid that's how I describe it the pyramidal thinking or the pyramidal structure where you have that authority ego up there and everybody seemed to like do we're doing the bidding of the boss and nobody questions? Nobody, it's not participatory, you don't ask questions, you just do as you're told. So he had so much. I mean issues with his father, ricardo. I mean favored diversification away from the struggling shipbuilding industry which his father opposed. Obviously, you know the father did not like his approach. Obviously, you know the father did not like his approach. After heated clashes the son threatened to leave the company. Rather than see this happen, antonio, the father, antonio Semler, resigned as CEO and vested majority ownership in his son. In 1980, when Ricardo was 21 years old, on his first day as CEO, ricardo Sembler fired 60% of all top managers. He fired them, I mean maybe those who were working with his father and were not ready for change, to embrace and all that, he began to work on a diversification program to rescue the company. So Semla experienced health issues, culminating in a fainting spell, you know, at a pump factory, ah yes. So when he was 25, after seeing a doctor at the Lahey Clinic, as in Boston, he was diagnosed with an advanced case of stress. This inspired him to want a greater work-life balance to himself and his employees. So attempts to introduce a matrix organizational structure in 1988 failed to achieve desired improvements. So in the late 1980s, three engineers at SEMCO proposed setting up a nucleus of technological innovation, that's NTI, to develop new businesses and product lines, which Semla endorsed. He said no problem, ricardo, I agree to it. So at the end of the first six months, the NTI, that's the nucleus of technological Innovation, had identified 18 such opportunities. Following the success of this initiative, satellite units were encouraged throughout Semco. By the late 1980s, these satellite units, you know, accounted for two-thirds of its new products and two-thirds of its employees. Hmm, amazing. An assessment of Semla's business philosophy through a neurological analysis, with a radical change of Semco's management style, led Bombalala to conclude Bambala, I think, is a writer that it was an excellent exemplification of good leadership. A learner glow notes that the only accounts about the change in management style come from Ricardo Semler himself rather than from the effect of the workers. Yes, his perception. So, after those dramatic restrictions on liquidity instituted, as we're still reading now, by Brazilian President Fernando Collor del Melo to combat hyperinflation in 1990. The Brazilian economy went into a severe downturn, forcing many companies to declare bankruptcy . So workers at SEMCO agreed to wage cuts. When we're doing this course, this particular aspect, when we got to this point, he called for a meeting. Yes, ricardo himself. He laid out the cards before them that this is where we are and this is what is going to happen. What I mean he called, he called the whole company, be it a janitor, be it an analyst, be it whatever. He got at everybody. This is what is happening in brazil. So, and if we don't take certain steps, we are going to go under and somehow he, I think , if I, if I remember correctly the story, you know then the material we, we used. He was like I've known these people all my life, we grew up together and all of that. How do I let them go? How do I just, you know, and all that, we need to do something. So he let them know like, see, we need to do something. And they all agreed for a pay cut. As in it was a democracy, more or less. They all agreed, providing their shares of profits was increased to 39%, management salaries were cut by 40% and employees were given the right to approve every item of expenditure. That is recognizing you are part of this system, as in the big picture, you are not just an employee who is earning salary, that you are part of this organization in terms of the growth, the decision making and all of that. So performing multiple roles during the crisis gave workers greater knowledge of the operations and more suggestions on how to improve the business. So reforms implemented during that time led to a 65% reduction in inventories. Can you imagine that? A marked reduction in product delivery times and a product effect rate that fell to less than 1%. People became like they look at the bigger picture. I'm seeing myself the bigger picture. So, as the business climate improved, semco's revenue and profitability improved dramatically. So, as of 2003, semco had annual revenue of $212 million, up from $4 million in 1982 and $35 million in 1994, with an annual growth rate of up to 40% a year. It employed 3,000 workers in 2003, as opposed to 90 in 1982. The company's units include the Industrial Nationary Unit, which now manufactures mixing equipment as opposed to pumps, sembobac, a partnership with Baltimore Air Cooler. So they're just giving you all what I call it now what they have in their portfolio, and all of that call it now what they have in their portfolio. And all of that. So as Semko grew, ricardo Semner received a great deal of recognition. He was named Brazilian businessman of the year in 1990 and in 1992. And the World Economic Forum named him one of the global leaders of tomorrow. Leaders of tomorrow. A high-profile committee appointed by CIO Magazine, featuring Tom Peters, jim Champy and Michael Hammer, selected Semco as one of the most successful re-engineered companies in the world. It's in Brazil, it's not in the US, it's not in Europe, it's in brazil. The bbc included semco in the series of re-engineering the business for creating one of the most successful management structures in business guys. Now, okay, let me read some more, then we'll come into the discussions. Semla has reduced his involvement in Semco in the past decade to pursue other activities. He wrote a book Maverick yes, it's out there on his experience at Semco, which became a worldwide bestseller in 1993. Became a worldwide bestseller in 1993. His second book, the Seven Day Weekend, changing the Way Walks, was published in 2003. He has appeared in the media around the world and speaks regularly to business schools, businesses and groups to promote his philosophy of industrial democracy. He has also been a visiting scholar at Harvard Business School. Yay Semla has been vice president of the Federation of Industries of Brazil and a member of SOS Atlantic Forest, the leading environmental defense organization in Brazil. He founded the Rastro Semla Foundation and the Lumiere School, a democratic school where children from 0 to 14 years old engage in projects of their interest. There are three such schools one in the city of Sao Paulo and two in the vicinity of Campos do Jardal that's a Latin I mean a Portuguese word now and two in the vicinity of Campos do Jardal that's a Latin, I mean a Portuguese word now in the state of Sao Paulo. Now, you will agree with me. This is not common. The time we did this course and I read about it, it stuck with me. I always share it with my wife, share it with whoever cares to listen. He looked at the business, what I say, the industry, the landscape, differently. Yes, did he have challenges? Of course he did. But he stuck to his conviction and looked at the definition, how leadership, business leadership was defined and how they were doing things. And he's like we can do something different, we can do it differently. And he brought his own definition. One thing I've come to understand for an organization to thrive and do very well, two things are very important culture and people, or people and culture. Culture and people or people and culture. And again you have this you know, organizations don't operate in empty spaces. No, they don't. Organizations don't operate in another planet or another climate or something. They operate within a given geography and the over should I say whelming cultural practices. In that geography has a lot. It puts so much pressure on the whole organizational culture, whether you want to believe it or not, because from what we read now, ricardo's father, antonio, he's more of that. You know, old school, we may want to call it what's the right word, now Let me call it correctly so that I don't muddle it up. He's more of the autocratic yes , like top down. And you know, if you look at the brazilian uh culture, there's a lot. If you study brazil so well, you come to see that he's in latin america. Uh, you would see, is he, he Latin American? Okay, they speak Portuguese there. So you would see that slave, the slave culture. And he said it's there, it's heavily there, where the boss speaks and everybody follows that. He fought against it. He was like we can be better, the individuals, the people who work for us, as it were, or with us. If we let them have that ownership mindset, it will be a question of you park this car at your own risk, like you see in car parks, this car is parked at owner's risk, so the organization belongs to all of us. And so he drove the process and today somehow they call him the maverick. I will tell you from my own observation there's been a lot of change I keep saying it in the past two, three, four episodes A lot of change. Changes have been going on. Things are happening Economic downturn, crunch, here and there there's a redefinition. There's a redefinition from from where I stand and where I see you. You know you, you notice that a group of people who have the economic or political will can come together to define the cost of people, that when you look at that definition, it may not really be in the interest of everybody. And I think that's where he came from. He looked at it. What do you think if you own a piece? What do you think if you own a piece? Imagine if you own a piece of the world, the earth. You own it, like literally, you own it, a piece of it. How would you want it to function? How would you want it to? You know, and you come to look at it, all of us own a piece. It's a question of you taking a piece to pray for the peace. It's a question of taking a piece to pray for the development. It's a question of taking the piece and looking at it like, wow, if my piece or my portion works and I've put it in like a piece of a puzzle, I mean a piece into that puzzle and it fits and the picture comes out. Can you imagine that for a minute? So a lot of business owners, top leaders, you know, in the business space they have a lot, yes, reengineering to do, a lot of reengineering to do. Yeah, technology has brought a lot of advancement. Yes, but policies are still there. So how do we go about it? Is it going to be the pyramidal thinking, top-down approach, where people are not seen for who they are and what they can bring in the upliftment or development? Because the truth is, every geography on which organizations are built, if the geography improves, the organization also will improve. If the organization does not improve, likely the geography is not improving because the geography feeds into the organization and not the other way around. That's my belief, that's my conviction. You don't try to segment it in such a way that, yes, this organization has a culture, no, the overacting, prevailing culture puts a lot of pressure on the organizational culture and you see it play out. But if we are as individuals, come together individuals I mean now decision makers, policy makers and see that we can actually change things for the overall good. That's the story of Ricardo Semler, the maverick. All right, guys, this is what I came to do today on the show, just to share with us that we can actually make that change in our organizations, decision leaders and all that. And let me use this opportunity to say this out there. I've been meaning to have Ricardo Semler, himself the maverick, on my show. I've tried to do one or two reading about him, to reach out. If you hear this and you know him, or you know somebody who knows him well, just tell him. The World Cafe Podcast would love to have him. You know, come, share with us. You know firsthand information about, you know this democratic re-engineering, industrial democracy, so to say, and I mean to share with my audience. Please let this word get to him . So, guys, this is what I came to do today. Yes, guys, be a maverick. Yes, sometimes you may not be understood, but, hello, do you understand yourself? Yeah, so do it, go ahead, do it , go ahead, do it as, in the light of good and truth, you understand me. So you do it and you're just like okay, fine, this is my contribution. All right, guys, thank you so much. Thank you so much. It's always a pleasure for me to come in, you know, to share with you and all of that. I want to make this appeal If you're listening to me at this very moment, go ahead and share the World Cafe, what we do here, with your friends, family and all of that. It means a lot to me, you know, and I know this is my own way of contributing Yep, from my geography. Thank you so much. It's always a pleasure coming in sitting down here and speaking with you. Okay, guys, you know how we do it on the show. This is a place where we come into, lean on one another's experience to forge a positive path. I hope this positivity is getting to you All. Right, then, till I come your way again. You know how we say it on the show. Bye for now. Awesome time it has been with you on the World Cafe podcast today. Thank you for being there. You can catch me up on my social media handles Twitter, Facebook, linkedin and Instagram , all at Amakri Isoboye. Also, you can get copies of my books A Cocktail of Words, the Color of Words by H Aaron Notebook and Hocus Pocus on God on Amazon and Roving Heights online bookstores. You can also subscribe to my YouTube channel at the same address at Amakri Issawe. I love to hear from you and how this podcast has impacted you. You can leave me a message at my email address at macrigaribaldi at gmailcom. That is A-M-A-C-H-R-E-E-E-G-A-R-I-B-A-L-D-I . Yes, till I come your way again . Bye for now, you.