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SEMCO was founded by Antonio Curt Semler in 1953, he was an Austrian engineer. The company was manufacturing centrifuges for vegetable oil industry. It was strictly hierarchical company with policies and rules for everything. It made many products however was generally known for marine pumps. His son Ricardo joined SEMCO when he was 19 years old and disagreed with his father's traditional autocratic approach of management. Ricardo thought that SEMCO got extra business from one industry, and was too strict, and required enhanced financial practices. His father rejected to allow changes. Therefore the son threatened to withdraw from the company. In 1980, Antonio resigned as CEO and vested most ownership in his 21year old son. One of Ricardo's first acts was to fire around 60% of the executives, which many were his father's friends, and all secretaries. He began applying a diversification strategy and shifting the way business was done (Zakomurnaya, 2007). Nowadays, SEMCO is a multibillion dollar company which offers a large range of products and services such as air-conditioning mechanism, inventory managing, real estate consultancy, environmental consultancy and mobile maintenance services (SEMCO, 2009).
At a Glance (Energy, 2005)
São Paulo, Brazil
No. of employees
More than 3,000 (Zakomurnaya, 2007)
1.2.2 Royal Dutch Shell
Royal Dutch Shell, known as Shell is a global group companies of petrochemical, oil and gas that produces and deals in a variety of energy resources. Shell as well has a broad collection of wind, hydrogen, bio-fuels and solar power interests (Shell, 2011). Moreover it also provides technical and consultancy services in addition to research & development capability to the energy industry. The company is active in more than 80 countries and regions, and employs 90,000 people worldwide (Shell, 2011).
At a Glance (Shell, 2011)
The Hague, Netherlands
No. of employees '2011'
2.0 SEMCO's Culture
SEMCO is one of the most interesting companies in the world. There are no job name, no written rules, no human resource department, not even headquarters. However there is CEO with half a dozen senior executives who overtake the position every 6 months. Other employees are acquaintances. They set their own working hours and salaries. Furthermore share the profits. All employees obtain the organization's financial statements. Meetings are voluntary; in addition there are two seats which are open to the first employees that come.
Let us go back to the company's history. In 1985, one of Semler's managers suggested creating self-managed teams of 6 to 8 workers who would be entirely in charge of all aspects of production. They set their own budgets and goals. Compensation was tied to budget and productivity. Costs went down; and profits - up. Semler liked that. Many workers liked that as well. It was the middle managers who did not like a new idea. They thought they were losing their power and rights. During a year, one third of them left.
In the late 1980s, three engineers at Semco proposed setting up so-called Nucleus of Technological Innovation to develop new businesses and product lines. At the end of the first 6 months, NTI had identified 18 such opportunities. Satellite units were encouraged throughout Semco. By the late 1980s, these units accounted for two-thirds of its new products and two-thirds of its employees.
One more thing has to be mentioned to draw the picture of Semco we see today - autonomous teams. During the crisis the company cut costs in just about every area until there was no alternative to either layoffs or salary cuts. So in the plants, workers started handling job duties and using their knowledge of how the factory worked to come up with new procedures that saved time and money. At one factory they divided themselves into three manufacturing units of about 150 people each with complete responsibility for manufacturing, sales, and financial management.
The idea of autonomous team was adopted throughout the company. As it developed the teams began hiring and firing both workers and supervisors by voting. Policy manuals were replaced by a policy of common sense. The only actual manual runs about 20 pages and is filled with cartoons.
At present time, at the centre of the Semco's organizational model there are six Counselors, including Ricardo Semler. A different one becomes CEO every six months. They deal with general policy and strategy, overall financial results, and inspire the Partners who are 6 or 7 leaders from each Semco division. But all meetings of Counselors and Partners are open to any employee who wishes to attend.
It is very likely that all above sounds like a recipe for making a real chaos, but Semco has grown consistently for the last 20 years though being located in one of the most unsteady economies on the planet.
Semler's Rules for Management Without Control:
Forget about the top line.
Never stop being a start-up.
Don't be a nanny.
Let talent find its place.
Make decisions quickly and openly.
What could have gone wrong with Ricardo's expansion plans?
His plan gone wrong because he reduces his interest from the business and devoted more time to writing books.
His book was the best selling non-fiction book in the Brazil, his great literary success was his second book, the 'seven day weekend'.
He's also setting up a new eco-tourist resort, built with considerable participation from the local population,
Descriptive Vs. Prescriptive schools
Mintzberg stated there are prescriptive (what should be) and descriptive (what is) approaches. Prescriptive schools are "one size fits all" approaches that designate "best practice" while descriptive schools describe how strategy is implemented in specific contexts.
Strategic management can be viewed as bottom-up, top-down, or collaborative. In the bottom-up approach, employees submit proposals to their managers who funnel the best ideas up the ladder. This is often part of a capital budgeting process.
Complexity theory has been used in the fields of strategic management and organizational studies. Application areas include understanding how organizations or firms adapt to their environments and how they cope with conditions of uncertainty. The theory treats organizations and firms as collections of strategies and structures. The structure is complex; in that they are dynamic networks of interactions, and their relationships are not aggregations of the individual static entities. They are adaptive; in that the individual and collective behavior mutate and self-organize corresponding to the change-initiating micro-event or collection of events.
Organizations can be treated as complex adaptive systems (CAS) as they exhibit fundamental CAS principles like self-organisation, complexity, emergence, interdependence, space of possibilities, co-evolution, chaos, and self-similarity.
Other examples include - the complex global macroeconomic network within a country or group of countries; stock market and complex web of cross border holding companies; manufacturing businesses; and any human social group-based endeavour in a particular ideology and social system such as political parties, communities, geopolitical organisations, and terrorist networks of both hierarchical and leaderless nature
Most executives like to say they empower their workforce, but few come close to the work arrangements at Semco Corporation, SA. "Can an organization let people do what they want, when they want and how they want?" asks Ricardo Semler, who took over his father's marine pump business in São Paulo, Brazil, 20 years ago. The answer appears to be "Yes." Today, Semco pushes the limits of empowerment at its dozen businesses-high-tech mixing equipment, inventory control, environmental resources management, to name a few-with 3,000 employees and $160 million revenue.
Organized into small groups of 6 to 10 people, Semco employees choose their objectives every six months, hire their co-workers, work out their budgets, set their own salaries, decide when to come to work, and even elect their own bosses. Semco factory workers have chosen future factory sites management didn't like. At the head office, Semler installed hammocks so employees can snooze whenever they want.
The success of Semco's approach to empowerment was recently demonstrated when Carrefour, the French supermarket chain, hired Semco to take inventory at its 42 Brazilian hypermarkets on June 30. The assignment required 1,000 workers in 20 cities on the same day, a major challenge for any firm. Unfortunately, June 30 also turned out to be the day that Brazil played in the World Cup soccer finals. If Brazil won the game (which it did), employers could count on losing 40 percent of their employees to street celebrations. Semco managers asked employees to figure out among themselves how to work out this dilemma, which they did. Semco completed the task on time.
Semco may have radical empowerment, but Semler says that the company is "only 50 or 60 per cent where we'd like to be." Semler believes that replacing the head office with several satellite offices around São Paulo would give employees even more opportunity for empowerment. "'If you don't even know where people are, you can't possibly keep an eye on them," Semler explains. "All that's left to judge on is performance."
Employee empowerment is a strategy that enables employees to make decisions about their jobs. It helps employees own their work and take responsibility for their results, it also helps them serve customers at the level of the company where the customer interface exists. It is the process of enabling or authorizing an individual to think, behave, take action and control work and decision-making in autonomous ways.
Figure: Adapted from "Empowering People" (Smith, 2000)
In the book "Empowerment Takes More Than a Minute"; the authors illustrate three simple keys that organizations can use to effectively open the knowledge, experience and motivation power that people already have (Blanchard et al., 2001). The three keys are that managers must use to empower their employees through:
Share information with everyone. You are giving them a clear picture of the company and its current situation. It helps to build the trust between employer and employee.
Create autonomy through boundaries. This builds upon the previous key. By opening communication through sharing information; it opens up the feedback about what is holding them back from being empowered.
Replace the old hierarchy with self-managed teams. This ties all the keys together. By replacing the old hierarchy with self-managed teams more responsibility is placed upon unique and self-managed teams which create better communication and productivity.
3.0 Strategic Management Process
Semco was well placed to improve revenues and profits considerably.
The participatory management at semco enable worker to understand the challenges facing the company
Ricardo was one of the most well-know Brazilian businessmen
Semco have grown their annual revenue over $200 million.
The entire shipbuilding industry in south America was struggling at that time.
Setting up a new eco-tourist resort. Built with considerable participation from the local population.
Introducing a more participatory form of management and diversify away from the struggling shipbuilding business.
Royal Dutch Shell (Fabe, 2011)
With a trademark that is globally recognized, Shell is the fourth largest company in the world and the second largest private sector energy corporation. The company has also several branches and sub-offices worldwide apart from its oil refineries and subsidiary companies, making possible the penetration of Asian, African and North American Markets. The image that the company had established over the decades is of integrity and honesty which was perceived to be the key in accumulating the large customer base. Apart from its long range of products consisting of oils, lubricants, diesel fuel, jet fuel, petroleum-based products and oil refinery heavy equipments, the company has also ventured into a large network and supply-based transportation of oil products in different destinations.
Strong market position
Vertically integrated operations
Steady financial performance
Strong exploration technological capability
shell's current investments on exploration will help it to continue for decades
incremental increase in supply: According to the Economist, "shale drillers can speed up production or wind it down, just as an electricity supplier does to meet changes in demand." This variable ability of shale drillers gives them a major advantage when prices change. Gas companies will act more like utilities than oil companies, whose revenue is tied to the price of oil. â€¦"Incremental Increase In Supply" has a significant impact, so an analyst should put more weight into it.
The dramatic shift to renewable sources of energy has been one of the main challenges, and this hurts the company since the core business of making and manufacturing oil-based or -related products is increasingly becoming inefficient and ineffective. Provided that Shell acquire the majority of its products from the Middle East, there are several international disputes, ethics and labor dilemmas and negative activities in that region that affecting the Shell brand. For instance, proper waste disposal in oil refineries is a persistent issue that Shell struggles on. Cross-border delivery of products usually adds up to the total cost of diesel, gasoline, fuel and oil as well.
Declining hydrocarbon production
Operation in unstable environment
Tendency of committing unethical environmental practices
Creating a new dependable, ethical culture is daunting for Shell. The least that the company could do is to conduct an ongoing dialogue with local stakeholders who are otherwise are affected by business practices of the company. In addition, Shell must venture into the development, research and promotion of renewable energy sources. The company should conduct studies and researches about the techniques, materials and policies that would contribute in decreasing the company's reliance on oil that is very harmful to the environment and human health. The company should also increases its demand on nuclear, solar and hydroelectric as sources of power. The exploration of potential oil fields in order to ease the dependence on Middle East oil could be another opportunity that Shell could exploit.
Acquisition of Duvernay Oil Corp
Joint venture in China
Increasing demand for liquefied natural gas
New oil and gas reserves are still being found
Dicersification into new products and alrernative fuels may open up new markets
Biennially, new oil players emerge within the global oil industry, and they can quickly adjust to the market demands and requirements. Further, these companies are equipped with new technologies and materials in their products and are somehow less affected by state legislations and regulations which govern the use of oil and petroleum products. Lobby groups are another threat to Shell wherein local and international legislations are being influenced in order to make law and statutes stricter, and in a way that it will uphold the ecological and environmental protection. Publicity and press releases are among the many avenues that lobbyists and special interest groups are using in order to convey the message while thereby damaging the reputation of the company.
Economic slowdown in the US and EU
Risks associated with wide geographic presence
5.2 External Environment
5.3 Five Forces
5.4 Product differentiation
5.5 Value Creation