Ricardo Semler: Set Them Free

Ricardo Semler had the sort of reckoning at 21 that most executives don’t face until middle age. Fresh from law school, where he’d been a restless underachiever, Semler took over his father’s business, which manufactured pumps and propellers for the world’s merchant marine. He was awfully young, but his dad sensed that if he didn’t give his son a chance, he’d lose him to another career. Besides, Semler Sr. was a pragmatist. “Better make your mistakes,” he told his son, “while I’m still alive.”

Straightaway, Semler Jr. spearheaded an ambitious plan to diversify his dad’s ship-parts company, which, like the Brazilian economy in the mid-eighties, was sinking. At Semco headquarters, in São Paulo, he tried to learn everything there was to know, and, while a quick study, he irritated plenty of the old hands with his precociousness and micromanaging. Working from 7:30 a.m. to midnight every day, or jumping planes overseas to raise capital and find new partners and companies to buy, his live-to-work lifestyle seemed ripped from the pages of John Grisham’s The Firm.

Then one afternoon, while touring a pump factory in Baldwinsville, N.Y., Semler collapsed on the shop floor. After resting in a doctor’s office for a few hours, he traveled on to his appointments in the Boston area. Once there, he took the advice of the Baldwinsville doctor, and checked into the Lahey Clinic for some exams. “After amortizing all of their machinery, they told me I had nothing,” Semler recalls. “But the doctor told me that if I kept going like I was, I would soon be using their brand-new cardiac wing. He walked me through it and showed me how good the hotel structure of that wing was, how much I was going to like it. I got the message.”

In the months that followed, Semler determined to balance his work and personal life more carefully, and to do the same for his employees—all while improving Semco’s fortunes. To his great relief, he discovered he didn’t have to reconcile these two goals: The more freedom he gave his staff to set their own schedules, the more versatile, productive and loyal they became, and the better Semco performed.

Nor did he stop with flextime. He did away with dedicated receptionists, org charts, even the central office—it now resembles an airlines’ VIP lounge, with people working in different areas each day. He encouraged employees to suggest what they should be paid, to evaluate their bosses, to learn each other’s jobs, and to tolerate dissent—even when divisive. He set up a profit-sharing system and insisted that the company’s financials be published internally, so that everyone could see how the company was doing.

Semco hit some bumps and yet, despite a recession and staggering inflation in Brazil, the company grew, and, by 1993, Semler had a spirited turnaround story to tell. His first book, Maverick: The Success Story Behind the World’s Most Unusual Workplace, became an international bestseller (it’s more Rocky than The Firm), and laid out his unorthodox, if strikingly commonsense approaches—no dress code, voluntary meetings, mandatory vacation time.

Skeptics of Semler’s CEO-who-manages-least-manages-best approach suggested that the cheerful tyro might be taking a victory lap too soon. Or, they said, maybe it works for you, but you can’t generalize it.

Well, a decade later, Semler, now 44, is back to answer his critics. In his new book, The Seven-Day Weekend: Changing the Way Work Works (Portfolio), due out in May, he argues that his approach to management is precisely what sclerotic corporations and the stressed-out leaders who run them need if they’re to avoid Chapter 11—or the Lahey Clinic, as the case may be.

Click here for this month’s Web Extra on MIT Sloan Professor Tom Malone and the advent of a values-based, 21st-century organization.

How has he fared? Semco’s revenues have jumped from $35 million to $212 million in the last six years, and the firm grew from several hundred employees to 3,000—with employee turnover of about 1 percent. The privately held firm has eight businesses, or, says Semler, “nine, depending on the week,” having expanded into outsourcing management (for four of Brazil’s five biggest banks), to environmental site remediation and engineering risk management.

Semler, who will be a guest lecturer at the Harvard Business School this summer, relishes the role of provocateur. “The desire for uniformity is a major problem with IT,” he says. “But it is a subproduct of the same problems that plague management, which is the need to feel in control, that we’re all on the same page, and everyone is being treated equally. But what I want to ask is, ‘Why do we all need to be on the same page?’ And you realize, of course, that no two people are equal in any respect.”

Semler’s rhetoric will likely elicit some groans from the gallery—as in, “Didn’t we choke on enough of this business revolution gas in the ’90s?” But Semler makes a compelling case for his methods, as Executive Editor Brad Wieners discovered over sandwiches in CIO Insight’s New York offices.

Photograph by Jason Grow