SEMCO: A case study in distributing organizational power, Part One

In 1982, a Brazilian man who had built up a small company called Semco reluctantly retired. His son, Ricardo, inherited the pump manufacturing enterprise. Ricardo had carte blanche from his father to run the company as he saw fit. He was 24 years old.

Ricardo describes his father as “rigid as an I-beam.”  As the founder, his authority was absolute, and the workers were his to command and control.  The elder Semler harbored a deep distrust of unions and employees. For example, workers — including their cars — were subjected to random searches as they entered the factory and again when they left. Managers were installed on the factory floor to“make sure” people were working. No deviation from established processes was allowed. Information was dispersed on a “need to know” basis. Everyone was required to wear a laminated ID.

Young Ricardo had big dreams for transforming the little company. He wanted to diversify and expand. He created new rules and regulations, established his own policies and procedures, required different budgeting processes and new spreadsheets. Employees filled out myriad forms designed to track information, which generated hundreds of statistical reports, which were filed away in color-coded folders. He was determined to remake his company into a model of the modern American companies he admired. Like IBM. Like Xerox. Like General Electric.

In the first several months as the Semco’s CEO, Ricardo flew around the globe with his sales director, making deals that would generate the cash he needed to fulfill his dream of acquiring new companies. He worked 16-hour days, lived out of a suitcase, ate a lot, drank a lot, smoked a lot, and slept a little. Exercise consisted of taking a flight of stairs to his office.

In time, Ricardo developed a chronic sore throat and blinding headaches. He frequently grew dizzy, and had even fainted as he toured a company he was preparing to acquire. He slept too much, or he couldn’t sleep at all. Either way, he was constantly exhausted. His hands shook, his heart sometimes galloped and he suffered from painful gastritis.  The young CEO became convinced he had a horrible illness.

The symptoms were so persistent he thought he was dying. He checked himself into a world-renowned clinic and after three days of undergoing every conceivable medical test, he steeled himself for the bad news.