One-Sentence Summary:

• The story of an industrial conglomerate in Brazil with a leader using his uncommon sense to create an unconventional workplace that focuses on investing in quality of life for business success. 

Rating On Time Of Review: 

• Best business book. 10/10. Just study this over and over again. 

Book notes below. My thoughts are in italics. Opinions are mine during the time of review.

Date Reviewed: July 2, 2020

Chapter 1 - Natural Business

**No unnecessary perks and privileges that feed the ego + hurt balance sheets. This also results in not having any dead-end jobs that just fill up the payroll. Aka, non of the useless managerial position that merely delegate even the most menial tasks. The design at Semco is for even the top managers to fetch guests, get their own photocopies, dial their own phones etc. They don't even have an executive dining room. All rare given the late 1900s work culture. 

"I try to create an environment in which others make decisions. Success means not making them myself."

Semco managers are encouraged to work from home whenever and Ricardo takes at least 2 months off every year to travel. 

**Profit sharing approach: Democratic. Leaders negotiated with workers and they agreed on 25% of corporate profits will be distributed. The distribution were decided by the workers themselves through assemblies. They decided amongst themselves that too big a raise at times with overextend a company so they shouldn't. It's amazing what will actually happen when you let people be adults regardless of some heirarchy. It just seems like poor leaders only think about the downside of trust because most seem to object at the thought of letting their own people decide the profit sharing. 

**Workers work in teams to assemble a full product. Not isolated components. This results in more control + responsibility. That translate to happier workers => better products. 

Titles are associate or coordinator. Meant to alleviate the notion of "boss". 

**Cut all the fat. Went from 12 levels of bureaucracy to 3. No training departments or quality control departments. Everyone vouches for their own work. This is all possible with skin in the game. It's so simple that proper incentives can make all of this possible. 

They've become leaner and more agile by supporting employees to become entrepreneurs so they can start their own business and make Semco just one of many other clients. Semco will also lend them equipments and provide loans at favourable rates. What a way to build up a thriving ecosystem for the future where you keep your own company lean to keep it robust (big is fragile) and create a form of scale by having a network of trusted entrepreneurs who have loyalty tied to Semco. Trust is the main competitive advantage. 

"Maximize possibilities and minimize supervision"

Hiring/promotion of leadership position requires interviews and approvals of the people who will be working under those folks. A bottom-up approach to selecting a leader. The people will have a say in who they want to be led by. Is this not what democracy is? Why are companies not democratic when we choose our societies to be? 

Even if a manager is hired, the employees get to grade the manager every 6 months and all grades are publicly posted. People end up leaving when they consistently get bad grades. Natural selection.

"We've taken a company that was moribund and made it thrive, chiefly by using to squander our greatest resource, our people.”

Chapter 3 - Dr. Dickie

"That's the trouble with mistakes. You don't recognize them at the time."

**Prior to taking over the Semco family business, Ricardo had noticed the 50-year age gap between him and the incumbent executives. Many were also set in their ways and unwilling to change despite deteriorating financial/business results. He called them to diversify the mental thought process by getting young blood and changing their ways. They didn't listen. So, when Ricardo took over the business he fired 60% of top management by 6pm on Day 1 under his leadership. He wasn't going to change the loyalty they had to his father and he wasn't going to change their unconscious bias against him and his age. So better get rid of the problem entirely. You can't willingly and forcibly change people's minds. Better to work with people you already align with. 

Chapter 5 - The Go-Go Years

**Semco's requirements for acquiring a business: 1) company is no.1 or no.2 in its market (The Nestle Kit Kat rule) 2) it was on sale for the right reason (i.e. no successor to founder, ineffective management, parent company lost interest) 3) No cash infusion required for business. 

An early mistake: should have started slowly and been patient. But no. They were young and impatient and they bought too many too quickly. 

Chapter 6 - Keeping Our Balance

The early HR director, Clovis, joined Semco and soon after he got an offer from a large conglomerate to join in a fancy VP title (when VPs meant something) and was going to be paid 3x what Semco paid him and he'd get to manage 100s of employees. Semler told him he wasn't going to hold him and he could come back if he didn't like it at the new job. Clovis left and returned within a year and continued to reject competing offers since. Money isn't everything. Neither is prestige and all other useless things people value externally. You know something special when you see it. An organization run with uncommon sense. Also, kudos to Semler for not being that "desperate girlfriend" who is afraid of losing people so tries to keep them with money. The person needs to learn for themselves that money isn't the answer to their own fulfillment. 

Clovis' story is fascinating too as he started out as a schoolteacher and then became a university counselor and then moved into industry. 

Chapter 7 - Another Conquest

**Upon acquisition: "Our first move was to reaffirm the philosophy born with our first acquisitions of not changing anything we didn't understand and giving the people already in place a chance before supplanting them with outsiders. It's so easy to blame the managers when a business does badly, but often they haven't had the freedom to manage or the motivation to perform as if the business were theirs." Owner-mentality. It's so important to align incentives. 

Chapter 8 - Symptoms of Trouble

**"People were being pushed forward. But how much better to have a self-propelled work force."........ a business parable reference: "Three stone cutters were asked about their jobs. The first said he was paid to cut stones. The second replied that he used special techniques to shape stones in an exceptional way, and proceeded to demonstrate his skills. The third stone cutter just smiled and said: "I build cathedrals." As I walked around Semco's plants, I had the sense we had far more  stone cutters than craftsmen. What I wanted, of course, was a company willed with cathedral builders, and there were hardly any of them at all." The start of the organization rehaul for Semco. Starts with the leaders intentions to recreate the environment. 

Semco didn't have a single unified culture. It practically had two. One side who believed in law, order and organization above all and the other side that believes people, motivated by a sense of involvement, could overcome any obstacle. It was Weltanschauung - German for 'how you see the world'. 

**"We simply do not believe our employees have an interest in coming in late, leaving early, and doing as little as possible for as much money as their union can wheedle out of us. After all, these same people raise children, join the PTA, elect mayors, governors, senators, and presidents. They are adults. At Semco, we treat them like adults. We trust them. We don't make our employees ask permission to go to the bathroom, or have security guards search them as they leave for the day. We get out of their way and let them do their jobs." 

Chapter 9 - Coming About

**Fundamental problem with managing a business is management of time. False beliefs like: effort and results are directly proportional, quantity > quality (like talking about the # of hours you work), always more to do, fear of delegation. 

Semler stopped wearing a wrist watch to program himself away from measuring time in minutes and hours but to be able to think in years and decades. 

As the company grew, people got obsessed with measuring everything with data and trying to analyze everything. Most were a waste of time. So they slashed cost centers from 400 to 50 and cut out 100s of accounting classifications. A simpler system with limited but relevant data. Spending plans are limited to a 5-year report + 6 month report only. What gets measured gets managed. Monthly and weekly only incentivize short-termism. 

Zero-based budgeting. Never roll forward last year's projections. 

If a report only shows the big numbers, it requires a lot of knowledge and work to determine it. Whereas a report with every detail lacks the mental exercise of thinking. 

Semler wanted to do away with all the regulating businesses did. Checking time cards, keeping track of everything employees did etc.. It was unnatural and he wanted to operate a natural business. He told this to one of the top execs before he canned them all when he took over the company and the exec told him to stop being so naive for thinking a business could be conducted based on trust. 

Lead with trust. Anything that can go wrong will eventually go wrong in a long enough time scale. "Yes, there will be theft here and embezzlement there, but that's the case in companies with huge auditing and monitoring departments. It's a cost of doing business. I would rather have a few thefts once in a while than condemn everyone to a system based on mistrust." Theft will happen. Just leave it. Ignore it. Just account for a potential loss number and let it go. It's immaterial. 

Dress codes are about conformity. But what if people can be unified by something else other than how they dress? Semco got rid of required dress codes and people ended up wearing what made them comfortable. That's more important. 

Office re-design. Not open concept. Just replacing walls with walls of trees and flowers so people have boundaries. Also, people moved desks to sit wherever they want with whomever they wanted. No segregation by department because that doesn't result in necessarily "better" work. Yeah it's so weird to think that people have to sit in some department or that they don't even have a say where they sit. The company implying "they know best". What a joke. 

New office layout system meant people's status would no longer be tied to the size of office or furniture they had. Every movement starts with the little things. 

Chapter 10 - By The People

At times when economic hardship or extraneous factors required layoffs, employee leaders formed committees to take a common sense approach to firing by considering all kind of factors like: worker's history, loyalty, ability to find a new job, family commitments etc. There is no one-size fits all and assuming there is is like saying everyone is equal... they are not. Such a common sense approach to letting people go. Consider all factors. 

Chapter 11 - One Change Leads to Another

"Improved performance and a touchie-feelie style were not mutually exclusive"

"It's only when the bosses give up decision making, and let their employees govern themselves that the possibility exists for a business jointly managed by workers and executives." You let all the employees make decisions themselves and you allow them to make mistakes because without mistakes you don't learn and no mistakes mean you aren't taking any risk, hence no growth and positive change. You give them ownership and autonomy this way. 

Semco even let their own plant workers pick what color they wanted their factory to look like. They closed the factory for the afternoon so all the employees could get brushes and paint the factory they way they each wanted so the factory could become the symbol that the workers controlled their own destinies.  

Robin Hood Meal Plan - Semco subsidized 70% of meals for everyone. But employees thought this should be a sliding scale based on income (managers/execs paid 95% of the total cost while assembly line workers paid 5%). Some managers were outraged because they thought it unfair and brought their own lunch from home.... but over time they realized this was a better system for all and now the executives are the ones that defend it because they understand the value for their lower wage colleagues. This is how one creates a collective community. 

Instead of wasting money on management consultants, assembly line improvements were made by the assembly line workers because they knew what bothered them and they would lead the change. 

**Picking their own goals: whoever showed the greatest capacity to lead got the job. People formed teams themselves based on natural propensity and strengths. Executives trusted them and let it all happen. By giving workers ownership of changing processes and buying new equipment to improve production they were vested in the operations. Then, management led the workers set their own collective targets as a team and let them meet it. Because they were so vested in the factory now, the workers set higher targets than management would've and they worked harder to meet their own targets and learned to improve the process further as a result. 

Chapter 12 - The Trouble With Rules

The problem with bosses is that they think what matters is that they are the boss. That they should find errors and criticize instead of trusting subordinates. 

Semco traded in written rules for common sense. They did it quietly by slowly collecting procedural documents, org charts etc.. Trusting their people will know what to do. Eventually, if an employee got a company car there would be no rules for it. The company trusted the employee to have full responsibility of it and treat it like he would his own car. 

"Without rules all answers are suggested by common sense. No, I can't define what common sense is, but I know it when I hear it. Some of our people stay in four-star hotels and others, sometimes with much higher salaries, choose less digs. Some people spend $200 a day on meals; others get by on half as much. The point is, if we can't trust a manager to use good judgment about such things, we sure as hell shouldn't be sending him off to do business in our name." 

"The desire for rules and the need for innovation are, I believe, incompatible. (Remember, Order or Progress.)"

Banishing rules also allows people to make their own decisions, usually they are better qualified to do than their supervisors. Why did you hire them if you don't trust them to be capable of making good decisions? 

Chapter 13 - When The Bananas Ate The Monkeys

Determining pay: Should be an avg of what a worker thought he should receive and what the company could afford to pay. Semco asked its employees to go speak to their counterparts in competitors to assess comparable skills, responsibilities and pay. Use that to figure out the average and pay above market to show you are investing in the best talent. 

Chapter 14 - Too Big For Our Own Good

"Human nature demands recognition. Without it, people lose their sense of purpose and become dissatisfied, restless, and unproductive."

Make complex systems to manage complications or just simplify everything. 

To make workers feel they matter for the long-term you must make the business unit small enough so people can all understand what is going on and contribute accordingly. Schemes and mchanisms to convince people they matter is a mere short-term tactic because if they don't truly see it and experience it it won't last. 

**"In a small factory, it is possible to know everyone by their first name, to debate plans and strategies, to feel involved. To belong." Small is robust. Economies of scale, improperly deployed, can get in the way. Not all economies of scale are equally good. 

Chapter 15 - Divide And Prosper

Motivation and feelings of belonging can't be quantified. Many of these advantages of being people-focused can't be easily measured (So people think, but it is for lack of trying). But disadvantages are concrete and can be calculated. ".... doesn't mean that the monetary value attached to the easily measurable items is greater."

Emotion peg: There would be a board at the plant entrance with the name of each employee and next to it a wooden peg where, every morning, the person would hang a metal tag when coming in. It would be a colour coded tag that showed: Green = Good Mood, Yellow = Careful, Red = Not Today, Please. 

Financial information on the company was always posted on the bulletin boards for everyone to see. Not just office workers but everyone in the plant. They would also learn to read what the numbers signified as well. 

When Semco decided to break up its massive plants into smaller divisions, critics said their overhead would increase because you'd need more people to do each task in the factory. Instead, they had to many people left over from the break up because the top performers were capable of doubling up on skills and tasks instead of doing the one type of tasks they were limited to before. All remaining employees were retrained for other tasks. Just beautiful. It's redefining the argument for how larger plants have better scale and you want to combine things. They've managed to prove at Semco that this is not the case at all! This is because humans are NOT great at being cogs. 

**When is a company too big? ".... people will perform at their potential only when they know almost everyone around them, which is generally when there are no more than 150 people. This is our experience anyway." It's as if they knew about Dunbar's law. They also split up the Ipiranga plant when it had 200 employees. It's a great way to prep for the future by splitting up before it gets worse and rather when you see the first signs of poor performance. 

".... economies of scale is one of the most overrated concepts in business. It exists, of course, but it is overtaken by the diseconomies of scale much sooner than most people realize."



Chapter 16 - The Inmates Take Over The Asylum

When deciding where to open up the new factory, the employees were asked to gather options and make the final selection. Even when it was positioned next to a factory notorious for labour union strikes, management trusted their people instead of imposing the worst case on the choice. "We never considered overriding our worker's decision."

Taylorism, referenced to Frederick Winslow Taylor, believed in ultra-specialization. The Henry Ford factory drone model before Ford. People were forced to stick to job descriptions and that actually led to people limiting themselves and not doing anything outside their job description. Leading to increased hiring, more overhead, less involvement per employee, less motivation and the downfall of a company like Eastern Air Lines. 

By 1986, Santo Amaro had 80% market share of biscuit making machinery. 

The case for transparency of information: "The problem with secrets is that people usually just assume the worst, whether it's about profits or salaries."

**Public salaries of executives should be a sign of confidence and pride. It should also be a sign of incentive for others below. If an executive is ashamed of their pay then it signifies they weren't earning it. 

**Worked with unions to teach financial statement and accounting to all employees so they could read all the documents posted publicly. Soon, everyone would know how to reach balance sheets, cash flow statements etc... 

Chapter 17 - Sharing The Wealth

Profit-sharing: ".. profit sharing doesn't create employee involvement; it requires it.".. page 139 has an extensive list of questions to consider when building a profit-sharing plan. Ask questions to set the proper foundations, don't mindlessly copy what works for another. 

**"How much of our profits would we return to those who helped make them?"... Of total profits = 40% taxes + 25% dividend to shareholders + 12% for reinvestment (min. requirement) + 23% for profit sharing (distributed by the workers). 

**Workers decide how to distribute the profit but this is only for one quarter. The next quarter they will have to decide again. So they can change it up based on what happened in the quarter. Sometimes, there may not even be a profit. But quarterly payout also allows a safety net for the employees as well. No need for annual exodus' after bonus periods like other companies. This was the theory but what ended up happening in reality has been that the workers decided to split it evenly. Not evenly in terms of % to salary or something but evenly in regards to absolute amount. So, a person earning $100K would get the same profit share as someone making $10K in salary. I think this is also the possible scenario because people are invested in each other. Because the units are small enough that you know everyone and you end up caring about everyone. You all win together because you understand that to do better again you all need to work hard. 

**Semler had initially thought 23% was high since comparable companies were 8-12%. "But I kept telling myself I stood to make at least as much money in partnership with a motivated workforce as I would as the sole beneficiary of the fruits of less inspired workers." 

Chapter 18 - Miles of Files

Semler went from 3 secretaries to 0. This reduced the number of files down from 60/week to 3/month. Delegating can create more clutter since you take yourself out of the equation and put distance to yourself and the result. Align incentives with yourself. 

Chapter 19 - Affirmative Actions

**"Fairness is for employees like quality is for customers - it takes years to build up but collapses over a single incident.” / No exceptions can be made to merit-based reward systems. 

They pay all day care costs in child's 1st year, little less in 2nd year and less in 3rd year all the way until 6th year when they should be in school in Brazil. 

Chapter 20 - Trading Places

To combat boredom, unmotivation and unproductivity (not sure these are words... mine not Semler's)..... they instituted a program where managers were encouraged to exhange jobs with each other (i.e. accounting with sales) and plan it out a year in advance and work together to make that happen. This was not forced and was open to individuals who wanted to try something else. Two to five years in he new role was the norm and some would even stay longer in the new role.

Moving internally was made possible as people weren't kept prisoners to their degrees. Semco would help those who lacked formal education to a new field they desired: "If a secretary wants to be a sales engineer, we will help finance her studies." 

**"There are so many benefits from job rotation, both for employees and employer, that it's a wonder so few companies encourage it. It obliges people to learn new skills, which makes life interesting for them and makes them more valuable” / People also get a full understanding of company too. They don't fear losing experts because people will leave when bored. Hence, they led even expert specialist in a field rotate to different things because other experts can be born from such a rotation. It doesn't make the company dependent on one person. 

**"Truth is, life is pretty dizzying at Semco,..... I'm sure our managers feel less secure than they would...... at a subsidiary of a large multinational. Park yourself in a job at a huge corporation and play by the rules that are well known to everyone and you'll sleep soundly at night. Semco managers are likely to be confronted with challenging situations all the time. There's no risk of boredom here."

Professional recycling => Sabbaticals. "create a hiatus in a career during which our people can stop and rethink their work lives and their objectives.... they can plan ahead, sort out priorities...." => time to introspect. Wonderful. 

Chapter 21 - Minding Our Own Business

"Our employees are adults, and should always be treated as such."

Take care of your people. Semco has lend employees money for unpredictable emergencies and deduced % of their paycheque over time to pay back that loan. 

**"... you won't find a running track, swimming pool, or gym at Semco..... companies build them to help.... cope with stress. We try not to cause stress in the first place.” / They compromise by distributing the benefit money to employees to manage their own benefits and also they can decide on bigger scaleable products like health care insurance. 

2-3x per year a survey is sent out and everyone gives their answer. Survey is called "What Does the Company Think?" and it is published for all to see. Not censored for higher up eyes only. You earn the trust of your people by trusting them first as a company. 

Even when an employee sued them over not paying as high as the most senior and retiring engineer they allowed him to sue the company. Semco let the employee sue because it was within his right and did not fire him. So he continued to get paid as an employee while suing the company for more money and he lost the suit and the judge even chastised the employee for such foolishness, applauded Semco and the employee continued to work for Semco. Don't take disagreements personally. 

Chapter 22 - Hiring and Firing The Boss

Some great multiple choice questions for assessing competence. 

“Why not let people elect their own boss? In a plant where everyone has a financial stake in success, the idea of asking subordinates to choose future bosses seems an utterly sensible way to stop accidents before they are promoted. It’s a wonder it isn’t done more often.” 

**Program for promoting from within: “…under a program we call “The Family Silverware” an employee who meets 70 precent of the requirements for a job will be chosen instead of an outsider…. Our people get a 30 percent discount on a new job merely for being here. As believers in the power of cultural adaptation, we are willing to bet that someone who meets 70 percent of the requirements will quickly develop into a 100 percent on the job.” / There are also are preference to referrals of friends/acquaintances but no direct family is allowed. 

Chapter 24 - Rounding The Pyramid

“My goal is to get people to decide things for themselves.” / what good leaders want. 

Bureaucracy is a result of the constraints of org. ‘Pyramids’. Firms choose to take the easy way out and just make layers of management for overachievers. This compounds to create layers of bureaucracy = waste. Bureaucracy is a product of laziness, negligence and a desire to control everything.

**Semco went from the ‘pyramid’ model to the ‘circle’ model. The model has 3 layers of circles. The smallest, innermost, circle is made up of 6 execs including Semler. They are called Counselors and they coordinate strategy/policy for Semco. Second circle has Partners who are the 7-10 business unit leaders, those who run the company. The outer large circle is everyone else and they are called Associates. The Associates are organized in small ’triangles’. Each triangle has a Coordinator and acts as a manager who would guide teams of 5-20 Associates in various projects. The triangles move around and a business unit may have 6-12 triangles. 

**“Associates could earn more than Coordiantors, no one would feel his paycheck depended on his title. A specialized software engineer who was nevertheless an Associate, for instance, could make much more than a Coordinator in the engineering department, who in a classically organized company would have the rank of manager and a bigger salary.” / Common sense. Reminds me of Mawer. One should not be penalized for having unique strengths that don’t meet definitions of the modern rat-race/corporate ladder model. Only those who are fit to managers should manage. Most are better as individual contributors in an organization. 

Semco’s never had to use an organization chart. 

“… when a promotion takes place at Semco we simply issue blank business cards and tell the newly elevated individual: “Think of a title that signals externally your area of operation and responsibility and have it printed.” Whatever he wants. But insider the company, there are only four options. (Anyway, almost all choose to print only their name.)” / Titles are a gimmick. 

Chapter 25 - Name Your Price

**When figuring out raises/pay: “We wanted each manager to focus on his role in the company and his value.” The focus is not to have a negotiation but to have a discussion to understand where the boss and subordinate are at in mindset and come to an understanding…. “Only then did the subject of money come up. Before they told us what they wanted to be paid, we asked them to consider four criteria: what they thought they could make elsewhere; what others with similar responsibilities and skills made at Semco; what friends with similar backgrounds made; and how much money they needed to live.” 

“In good times or bad, self-set salaries have encourages our workers to take that rarest of corporate perspectives, a long-term view. And they have the added virtue of eliminating complaints about pay..” / Semler leads with example has him and the top people (Counselors) have modest pay of $120-$300K. Semler’s declined to the lower end as the company went on. 

The plan for self-set salaries was implemented slowly over time. It started with 5% of employees, then 25%, and it was all voluntary but slowly, they organically adopted to the approach that was a ‘win-win’. 

To also deal with the cyclicality of the business, they created a program where in hard times, employees who chose to take a pay cut (max 25%) would then be eligible to have a 2x the cut pay bump (50% bump if they elected 25% cut) so that they would be properly awarded for sharing the load when the company fell on hard times. Another voluntary win-win program. 

Chapter 26 - The Public Awaits

"Semco was either No.1 or No.2 in every one its markets." / Semco was running this unique structure with 830 employees and $35M in sales. 

Semler was rejected by Harvard twice while building Semco. He wanted to learn from the best managers but they said he didn’t have enough experience and wasn’t qualified. He eventually got to do a corporate executive program there but most scoffed at his approach to building Semco. 

Chapter 27 - Swelled Heads

“When I spoke to the undergraduates at Brazil’s main business school, the theme was “Why Undergraduate Business Schools are Unnecessary.” 

Chapter 29 - Thinking For A Living

**The creation of the NTI business unit. It was an internally formed program by employees who wanted to be entrepreneurs. It became an internal group where no one in the group would have a boss, they would set their own schedules and effectively operate as another business unit inside Semco. They all took pay cuts as they would be tinkering up new product/business ideas (like an Entrepreneur-in-Residence in VC funds) but they would get profit sharing for their inventions/products. This limited the downside of being independent entrepreneurs by providing them with the safety net of Semco and the support a large organization could give. They only had to report their progress twice a year to the Partners. This created various products and an entire environment consulting business inside Semco. The success of the original NTI group led to junior programs to hire smart college students to ‘wander’ inside Semco for a year and work in 12 different departments of their choosing and contribute enough revenue to cover their salaries. 

Chapter 30 - Rise and Shine

“We had long ago let our office employees decide when they would start and end their work days…. Flexible working hours demonstrated our belief that we wanted to pay workers for results, not merely their time.” 

“… where does persistence end and obsession begin? How high is too high? How big is too big? Of course, some growth is necessary for any business to keep up with competitors and provide new opportunities for its people. But so often it is power and greed and plain stubbornness that make bigger automatically seem better.” / stop to ask yourself ‘why’. 

Chapter 31 - Collapse

When Brazil’s economy fell on hard times, Semco was hit too. They froze hiring. But instead of mass layoffs, they wanted to protect the lowest-paid workers (like the Robin Hood program they previously had). So, execs took 40% pay cuts, and many higher paid took 30% pay cuts and lowest cuts for the lowest paid. The leaders always led by example. If only other companies would do this. When they don’t and just layoff everyone, you get an idea of what kind of bosses they are. Not leaders. 

Chapter 32 - Launching Pad

As the economy created constraints to Semco, they decided to take the strategy of ‘horizonatalization’ where they would outsource everything that could be done just as well elsewhere. This created the Satellite program. It was designed to help employees set up their own companies and be the outsourced providers for Semco. Semco would fire the employees so they would be eligible for a large severance per Brazilian law and that would be the money Semco would use to help the employees set up the business with Semco as the first customer. During hard times this might result in less income than being an employee but this would save their job in case the economy got worse. But if the economy got better, the employees would be positioned to succeed. Eventually, 25+ companies were created through the program and 50% of Semco’s manufacturing has outsourced to their ex-employee owned companies. This also kept Semco’s operations lean and focused. But it also created an ecosystem of prospering companies that followed Semco’s culture/philosophy. 

“The Satellite Program works because it is based on the principle that people who have a stake in their company are bound to be more involved in their work.” 

Chapter 33 - Rebirth

The process for setting a new vision for Semco: “…managers pondered and then… wrote down their individual predictions… share them with a colleague and together meld them into a single portrait… each pair of managers joined another paid and repeated the melding process…. And what remained was a collective, integrated vision of what our top managers thought Semco would be like….. We expected, because of our annual growth of 40 percent or 50 percent in the mid-1080s, our managers would picture Semco with perhaps 15,000 employees by 2010. But the company they described was not much larger than the Semco of the present, although the quality of both our products and the lives of our employees was much higher. Our people did not want a bigger company, they wanted a better company. A company in which people could work at home, linterated from conventional structures and schedules. A company in which there was such fluid movement onto and off the payroll that it wasn’t always clear who was an employee and who wasn’t.” / Wonderful. 

“Much about growth is really about ego and greed, not business strategy.” / specifically in reference to M&A. Semco’s experience with family-owned businesses has specifically been difficult as there are so many skeletons in the closet. Instead, acquiring components of a multi-national are best because they are more malleable Thant family-owned ones that have an internal way of doing things. 

Chapter 34 - Who Needs A No.1?

“…the ideas Semco is built on aren’t mine, either. They flow from the company’s culture and that belongs to everyone at Semco.” 

“Most people live either in their memories of the past or their hopes for the future. Few live in the present.” 

“Looking back. I should have moved away from Semco earlier. But to its owner, a company is like an adolescent child. You want it to grow up and face the world on its own, but you lie awake worrying about whether it is going to smash up the car.” 

“I also read fifty books a year, mostly histories of war and empires. Centuries of blunders and successes are there for guidance. For a handful of dollars you can buy an explanation that would have spared Napolean thousands of lives.” 

Chapter 35 - Will It Travel?

**“In their desperation for quick fixes, too many executives are too quick to jump on the latest managerial fads and fashions, as if they will be panaceas for sagging productivity. Quality Circles. Just-in-time deliveries. Kanban production systems. Networking. Direct costing. Total quality. You’d heard all the buzz words. Transporting Asian values to, say, Smyrna, Tennessee, is like wearing a kimono to a Tupperware party. Nothing is less Western than the notion of total loyalty to a company, except possibly the belief that age should come before competence. If you must borrow from Japan, don’t forget to fill a 747 with enough Japanese to populate your factory.” / This is gold. You can’t just manufacture 1000s of years of culture and history that leads to a mindset and behaviour. Its imperative that companies build systems bottom-up specifically because they are made up of their own set of cultures and behaviours through their people. Trying implant another culture/organization’s systems directly is like transplanting a heart that is not compatible to a different body. Quick fixes never last. 

Chapter 36 - Modern Times

“The conflict between advanced technology and archaic mentality is, I believe, a major reason why the modern workplace is characterized by dissatisfaction, frustration, inflexibility, and stress.” 

“Technology is transformed overnight; mentality takes generations to alter.” / This is also crucial in assessing companies. It’s not the business model that is at risk.. it’s whether the business has build a culture that can adapt. It’s the mentality it has built in its employees. 

“The truly modern company avoids an obsession with technology and puts quality of life first.” 

**Information is more valuable than money. Semco focused on spreading and sharing information (i.e. transparency) so the lowest levels employee knew just as much about the company as the top management. This took away the mirage of ‘power’ and people had to focus on developing leadership skills and learning how to inspire respect. Democratize information and trust people 

**“Companies and organizations must be redesigned to let tribes be. They must develop systems based on coexistence, not on some unattainable ideal of harmony…. Fixed working hours, organization charts, and policy manuals are all so negative. They strip away freedom and give nothing in return but false feeling of discipline and belonging.” 

**”To survive in modern times, a company must have an organizational structure that accepts change as its basic premise, lets tribal customers thrive, and fosters a power that is derived from respect, not rules. In other words, the successful companies will be the ones that put quality of life first. DO this and the rest - quality of product, productivity of workers, profits for all - will follow.” 

** The goal of the book is to ”..forget socialism, capitalism, just-in-time deliveries, salary surveys, and the rest of it, and to concentrate on building organizations that accomplish that most difficult of all challenges: to make people look forward to coming to work in the morning.”

Disclaimer - I’m writing this for myself. For my past, present and future self. Much of what I write is my opinion. If it somehow ignites agreement in you then great, I’d love to hear about it. If it sparks disagreement in you, don’t reach out because I don’t care for it. There always are obvious exceptions and the flawed person in me hasn’t considered them all.