Semco is a company that has been incredibly inspirational to me – I love it!  However, some people get the creepy-crawlies when they learn about it and how the executives let go of control:

“Semco has no official structure. It has no organizational chart. There’s no business plan or company strategy, no twoyear or five-year plan, no goal or mission statement, no longterm budget. The company often does not have a fixed CEO. There are no vice presidents or chief officers for information technology or operations. There are no standards or practices. There’s no human resources department. There are no career plans, no job descriptions or employee contracts. No one approves reports or expense accounts. Supervision or monitoring of workers is rare indeed.

Most important, success is not measured only in profit and growth.Strange, eh?

My summary may make Semco sound like a company with an offbeat management style that wouldn’t succeed anywhere else. Nevertheless, hundreds of corporate leaders from around the world have visited Sao Paulo to find out what makes us tick. The visitors are curious about Semco because they want what we have–huge growth in spite of a fluctuating economy, unique market niches, rising profits, highly motivated employees, low turnover, diverse products, and service areas.

Our visitors want to understand how Semco has increased its annual revenue between 1994 and 2003 from $35 million a year to $212 million when I–the company’s largest shareholder– rarely attend meetings and almost never make decisions. They want to know how my employees, with a show of hands, can veto new product ideas or scrap whole business ventures.“  (See below for links to a longer PDF article and to his book on Amazon)

Here are some more tastes of how things are different at Semco:

• Employees determine their own working hours
• Employees hire their bosses
• All employees rate their bosses twice a year and all ratings are published
• HR has been almost abolished, because leaders need to be able to treat their employees right themselves
• Employees choose their own salaries / comp structures
• ALL meetings are voluntary and open to everyone
• The Board meetings are open to everyone, and include employee representation

CEOFlow (though it’s early) will be a roadmap to the Seven Day Weekend.

A Semco-ish practice in my team at salesforce.com – transparent sales compensation

I discovered the articles and books about Semco before I joined salesforce.com, and really enjoyed having the opportunity to test out these kinds of ideas in a tangible way.  They make transparency a fundamental priority.  One example: they publish everyone’s compensation across the company!  In that case, I could see the problems created by doing that in the US, but I appreciate the intention.

At salesforce.com, I published the compensation of everyone on my sales team (this wasn’t a practice across the company), so that:

1) They could verify the comp calculations were correct (reducing payroll errors and frustrations)
2) They could see where they stood and who they should be emulating
3) It increased transparency and trust in the team

Hmm – less frustration, more motivation, better culture.  Works for me!

Now, this kind of comp transparency won’t work well if your comp plans vary per person or aren’t fair (usually because of special deals). People talk about comp anyway – it’s always best if you can avoid doing things in the first place that you don’t want to be discovered.  This kind of transparent comp practice forces you to make your comp planning sustainable, fair, and without arbitrariness.  As much as is humanly possible, avoid special tricks or custom deals for people – ESPECIALLY in sales!

UPDATE
My mom (who knows that I’m obsessed with Semco) found this excellent video documentary of a visit to their offices:

http://www.youtube.com/watch?v=gG3HPX0D2mU

More information on Semco

If the intro above, the appetizer, resonated with you, here’s a PDF with a little more information:
Download article on Ricardo Semler / Semco

His Books

And finally, for the main course, his book is called “The Seven Day Weekend”

http://www.amazon.com/Seven-Day-Weekend-Changing-Work-Works/dp/1591840260

Also, Ricardo Semler’s first book is Maverick: The Success Story Behind the World’s Most Unusual Workplace

The ends of the push v pull management motivation spectrum are:

There are some fundamental management values or operating principles that a CEO and managers can take to heart to move their culture away from push and closer to pull: Trust, Transparency and Alignment. The CEO must be the one to lead by example in creating this kind of environment.

You know your company is getting closer to pull when when the drama, confusion and wasted energy go down, and the synergy, “we’re getting things done” feeling, and seemingly effortless growth go up.

Personal Examples

I’ve managed at both ends of the spectrum, and have seen the night-and-day difference:

1) Push: LeaseExchange was a company I cofounded in 1999, which did the dot-com to dot-bomb circle. We raised venture capital, launched, hired a bunch of people…and then crashed in the bust. I was a first-time CEO and manager, and while I did some things very well, there are plenty I’d go back and change if I could – such as trying to rush-rush-rush everything, not letting people do things their way, second guessing, etc. Pretty classic management by fear/control. Growth was a painful slog, and stressful.

2) Pull: salesforce.com. I learned from my mistakes at LeaseExchange, preparing me to succeed at salesforce.com. I created a Cold Calling 2.0 inside sales team that has sourced $100 million in recurring revenue for salesforce.com. Growth, month after month, year after year, just kept coming – practically effortlessly, because of the pull system I created. And for those of you who know salesforce.com – if you’re already jumping to a conclusion that the success was just because “it’s salesforce.com” – sometime I’d be happy to share all the reasons it should NOT have worked there!

The team culture and organizational system was designed to be as self-managing and sustainable as possible, by creating a pull environment of trust, transparency and alignment. One of the things I am most proud of is that the team never missed a beat when I left it to move to the acquisitions and investments team of salesforce.com.

Management values leading to Pull

1. TRUST

If there is one thing that would get rid of the internal cultural blocks on your growth, it’s more trust. Consider all the time we spend on issues related to lack of trust: controlling policies, tracking systems, “what are you doing?” meetings, contracts that are far too long and complex, constant second-guessing, internal gossip and drama…what a damn WASTE! None of this leads to growth, and it’s a pain in everyone’s ass. Some needs to stay – but how much of it can you let go of?

Keep in mind: employees will not trust a company more than the company trusts them. If you want your people to trust you and the company, the CEO and management team have to lead by example, even in little ways. For example, next time someone comes to you with an idea that you disagree with or want done differently, don’t automatically say “no” or tell them what to do. Just try letting them explore it and see what happens. Even if it doesn’t go anywhere, they’ll be a little more motivated and appreciative of you. Start with little steps.

2. TRANSPARENCY

…is a modern form of truth. Especially in business and politics, “truth” can be relative – but transparency is absolute. Transparency prevents miscommunication and confusion, improves decisions across the company and increases trust.

How much of what you feel should be secret really has to be? What is the cost of hiding information from your employees? What would be the benefit of having them know more about what’s going on and trusting the company more? Let the paranoia go.

Except for a few truly sensitive topics such as margin data, sourcing or product plans, HR issues, etc, I’d bet that most of what you keep confidential doesn’t need to be (internally). Really, if you’re a private company and a competitor got ahold of your financial statements, so what?

Get naked! Share board updates with the whole company after every meeting. Publish financials internally. Do 15 minute CEO updates every week. Put webcams up in executive meetings. Just try it and see the effect it has on your people and their motivation!

3. ALIGNMENT

Having all these motivated people doesn’t help much if they’re all working at cross-purposes. Alignment means more than having common goals – is there a common vision, and does everyone understand it? As a CEO, founder or executive, it’s very common to assume that everyone gets it – because you do. Nope. The most common problem with communication is assuming it happened.

Do people work under a common set of values? Is there a common (aligned) culture?

Does the team feel like it’s in the same boat with the executives, or do the executives set themselves apart with a variety of perks and special treatments? (FYI – I’m a believer in blowing up executive offices, because they hurt transparency, communication, and alignment. As an investor in companies, I want the CEO to get the hell out of his office and work among his people, so he and they are in constant sync. It’s the right business decision.)

As the goals change, sometimes by the week or month, is that information transparently propagated through the company so that everyone can update their own, and stay aligned? Wikis and company dashboards are two kinds of useful tools for this.

Positive feedback loops

These three fundamental values of trust, transparency and alignment are synergistic. Increasing one increases the others. Increasing transparency = increased trust and alignment. Increased alignment = more trust. Etc.

Just try it

You don’t need to jump into this with both feet – start with babysteps, with some bite-sized chunks. Experiment and explore this. Try something new and ask your people what they think – my bet is that you’ll be surprised at how hungry they are for any of this.