Ricardo Semler - Brazil's Caring Capitalist

With John Howard proposing radical changes to this country's industrial relations system - a look at a very different system with a very different boss on the other side of the world. In Brazil, on the factory floor and in the office, workers at the SEMCO manufacturing and services conglomerate pretty much call their own shots. Some might call it Anarchic Socialism, maybe others, cutting-edge capitalism - whatever, it's certainly paying financial dividends. Indeed, it's so successful that it's unorthodox "worker participation" approach is being extended to other fields as well. Well you might ask is there anything this bold Brazilian experiment could teach us here in Australia? Imagine if you will, students sacking their teachers! SBS economics correspondent Peter Martin starts his report in exotic Rio.

REPORTER: Peter Martin

Sunny Brazil is a magnet for tourists. Each year thousands flock here looking for sun, sand and the good life. But I've come here looking for Brazil's other gift to the world. Welcome to SEMCO.
It might not look like it, but this is one of the world's most radical workplaces and the difference begins at reception.
In fact SEMCO has two receptionists - nothing unusual about that except that the company itself doesn't know which one will be there to greet you.

JOAO NETO: But we are not sure which one will be there in the morning and which one will be there in the afternoon. Because they talk to each other, they set their own schedule.

Almost every one of SEMCO's 3,000 employees sets their own schedule.

JOAO NETO: That man is the CEO of this business unit.

It seems the CEO doesn't have an office and he's leaving early. He's not the only one.

JOAO NETO: There's no reason why they shouldn't.

IT worker Joao Neto gives himself every Monday off. He didn't ask for permission and he knows it'll be very hard for his supervisor to check up on him.

JOAO NETO: We can do it.

Like these employees, he keeps changing work stations.

JOAO NETO: The idea is that you shouldn't use the same position.

Shouldn't?

JOAO NETO: Shouldn't, should not use, two days in a row.

It's a rule designed to make employees hard to track.

JOAO NETO: We can even work here, because if you have one area where you have all the fixed desks, the supervisor may be there and see, 8 o'clock, who's not here. But he is not supposed to do that, right? So the company is providing means to avoid that.

RICARDO SEMLER, SEMCO: We don't want to know what time people came in, how many hours they work, we want to negotiate a contract with them for much more important things that have to do with our survival which is what are we going to do this month, and what do we get from them out of this salary or this value that we are paying and what do they get out of us in terms of gratification for their life, the rest to us is secondary.

The SEMCO philosophy is that a lot of what managers normally do shouldn't be done.

RICARDO SEMLER: Absolutely I would say that maybe 30% of people's time is spent trying to understand why people make more than they do, how come people came late, why weren't you at the meeting, can you do this by Wednesday at 6 o'clock, and it's all very silly and there's an enormous waste and of course at a certain point in time people just sort of dumb down and they say, you know, "This is too much work, what do you want me to do, I'll just do my nine to five thing, I'll learn how to survive in this environment."

That's not what happens here. It seems that knocking off early isn't a problem if the work's been done. Normally this machine shop turns out parts for merchant ships. But the workers here supervise themselves - and had gone home for the afternoon when we turned up.

JOAO NETO: Well they are grown up, and they are producing what is required.

So when you open up that door you don't necessarily know whether the factory is going to be working or not?

JOAO NETO: Not necessarily.

Then again some of the workers might be back on Sunday, if they need to be.

REPORTER: These look like hammocks.

JOAO NETO: Yes, they are.

They've installed hammocks so they can rest and think in comfort.

REPORTER: And so do you see people resting in these in the middle of the day?

JOAO NETO: Nothing wrong.

And here's another radical idea. Each business unit within SEMCO, gets to pick its own furniture. This workplace has deliberately chosen cheap chairs.

JOAO NETO: Why, because they want to, they want to spend the money in somewhere else.

SEMCO's workers are frugal when it comes to spending their business unit's money, they each get a share of its profits. And then there's this - a cartoon guide to reading the company's accounts produced by the union and the company. Staff have access to all of the company's financial data and SEMCO wants to make sure its workers understand what they are reading. Ricardo Semler believes that unions still have an important role in his company, although as in many places they are in decline.

RICARDO SEMLER: Unions have less of a role because we deal more openly with these issues anyway, but we ourselves are looking for ways to substitute the decline of unions for internal processes where people elect - every 10 people elect somebody who is a keeper of the cultural values and who has job stability, people who can look at every firing and hiring and be able to take an independent position about it in the name of the employees.

With workers virtually running the business you could be forgiven for thinking that this cutting edge capitalism has a distinctly socialist tinge.

RICARDO SEMLER: If you say, you know, is this Trotskyist or Marxist, is this New Socialism, is this European Socialism? I don't think so because the basic issues of the free market are there, which is - tell us how much time you want to work, tell us how much you need to make, tell us what you need in exchange, how you gratify yourself by doing something like this, and this does away with the political ideology issues which of what ism does this fall under because its just respecting anthropological issues instead of political ideas.

Every six months, every SEMCO worker is invited to select his or her salary. He or she is given information about what workers in similar jobs are getting elsewhere.

JOAO NETO: Average, minimum, maximum, the sizes of the companies.

And imagine your boss telling you, you should be asking for more!

JOAO NETO: We have cases where we say, "No, think again, we don't think this is fair." We want to pay you more? Yeah, we want to pay you more.

But don't ask for too much. You might be fired, by your colleagues. The entire unit, not just the bosses decide who to hire and fire, and with workers sharing profits no-one wants to work with a shirker.

JOAO NETO: Let me suppose, you ask me: Why are you not working? if you are not doing all your job this is going to affect our profit sharing, so you're taking money out of my pocket if you are not doing what you are supposed to do.

You get the feeling that it's in some ways hard to work at this most successful of Brazilian conglomerates. There's freedom, but with it plenty of pressure to perform.

JOAO NETO: There is peer pressure for bad behaviour. If you're here just to collect things for yourself, to live from some other, from other people's efforts. You're not wanted here.

It's a philosophy that's worked well for Ricardo Semler. These days he's a public speaker and author. He organised this seminar to bring together 50 of Brazil's best minds to discuss the future of the nation. His company turns over US$160 million a year, up from $4 million, when he took over what was a struggling ship parts supplier 25 years ago. He wasn't in the day we visited. He hardly ever is.

JOAO NETO: He doesn't like the day-to-day operations, he doesn't like to be checking purchase orders or signing cheques, he's bored with it. He gets bothered with these small things.

So he's turning his attention to something grander - shaping Brazil's next generation. Education without compulsion... The man who believes in managing without managers wants to teach without teachers. His Lumiar primary school in Sao Paulo uses tutors and 'masters' instead. The masters are architects, astronomers, painters, musicians real experts chosen by the students themselves to come for weeks at a time. It sort of helps if they are not teachers. The thinking is that children want to learn and that ordinary schools stop them.

RICARDO SEMLER: There's a lot wrong with traditional education. The real question is why do we think we have anything to add to that field and what we find is that the adults that come to us after being uniformalised and homogenised over the years and calcified in the school system, they come to us ready to follow orders, to understand what it is we want them to do, and we've realised that the only way to change this, and it's very expensive and difficult and long to change it with the company, the only way to really change it is to start working at the moment that society does all the harm to them which is really at two.

But just as within SEMCO that doesn't mean a school without rules. It has rules, decided by the students themselves.

WOMAN: One of the most important rules of the school, it's forbidden to fight, bite, kick pinch and this is very interesting because we sit down at the school meeting and say, "Come on, let's think about, can we fight and bite and kick everybody." We can say yes, but at the same moment everyone says no, so there's an idea of a school being run by the kids don't mean crazy place. They know what's reasonable or not.

Three hours down the road the 46-year-old Semler is preparing to enjoy some of the spoils from his radical initiatives. He's building a multimillion-dollar family weekender. But even here in the Mantiquiera mountains he's applying his philosophy to a new venture.
Across this valley, is a 20-room luxury eco-tourism resort is a property development in the most traditional sense, except that the locals aren't being displaced. They're being given jobs, shares and a say in how it develops.

REPORTER: How many of these people working here would be locals?

MARCOS AURELIO: One hundred.

Marcos Aurelio is a local who now finds himself the project's head gardener. It's a responsibility he never envisioned coming his way.

MARCOS AURELIO, (Translation): I’ve lived here all my life and I’ve never heard of a project of this size coming here.

RICARDO SEMLER: I think people are a bit perplexed at the whole thing. And basically in the beginning they thought this must be some ruse to finally buy our houses or to buy our land or to get us out, and economic expulsion is something that we have to fight actually because it doesn't even take us buying it, it's other people come around and oh there's this great resort here, let me buy this guy's house. And so were giving them long-term financing and other ways to make sure that they stay put.

It seems like nirvana. But it hasn't been easy for the locals, nor has it been easy for the students in Ricardo Selmer's school or the workers in his firm.

RICARDO SEMLER: They are under a tremendous amount of responsibility because they're on their own, meaning that if the sales don't happen the business unit ceases to exist, if the student doesn't learn anything they really don't have the capacity to go out into the world, if the hotel people are not able to give sustained service at a quality level, they are not going to have customers and guests, so in this format they are obliged to actually make things happen and that responsibility is many times more unforgiving than it sounds.

Source SBS

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