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Management at Semco and Leadership Styles of Richard Semler

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Peter Drunker (1954), defined management as the "way of getting things done through others", by organising, motivating and developing people through training. Likewise, Huczynski and Buchman (2001), defined management as the co-ordination of people towards the achievement of a collective goal. The management of an organisation could be ambiguous, complex and could be over a long period of time; this is when strategy is required. Strategic Management means "coping with complexity" (kotter 1991), the way and how the complexity is structured, organised, to accomplish a common goal is referred to as strategic management. The process of "coping with change" (kotter 1991) is known as Strategic Leadership, change is a normal occurrence in an organisation. The process of influencing people in the accomplishment of a goal is known as leadership. (Koontz & O 'Donnell). Style is the way or approach of doing things, leadership style is the way a leader influences its employees. Lewis (1939), defined leadership style as the method or approach used by leaders to influence their employees either by commanding, motivating or giving directions. There are three approaches to leadership styles namely:

  • Authoritarian or autocratic: Responsibilities such as decision making, procedures for achieving goals, general control of the organisation is focus on the leader
  • Participative or democratic: Responsibilities such as decision making, procedures for goal achievement and control of the organisation are focus within the group as a whole.
  • Laissez faire or free reign: responsibilities such as decision making, procedures for goal achievement and control of the organisation are focus within the group or individual, the group works with freedom of action, they decide on how they do things. No rules, no hierarchy.

1.1 MANAGEMENT AND LEADERSHIP STYLES ADOPTED BY RICARDO SERMER

Semler is known as the leading proponent, likewise the most evangelist of participative leadership or what is known as cooperate democracy. Semler took over SEMCO or what was originally known as Semler and Company in the year 1980 from his father Antonio Semler who practiced the traditional autocratic style of leadership. Ricardo followed this leadership style. On his first day as the CEO of SEMCO, Ricardo fired sixty percent of all top managers, for four years he practiced the autocratic style of management. At the age of 25 in the year 1984, he began to work on a diversified program to rescue the company; he was inspired to have a greater work-life balance for himself and his employees so he introduced the participative leadership style. In 1990, there was dramatic restriction on liquidity instituted by Brazilian president "Frenando Collor De Mello" to combat hyperinflation. At this turndown period employees at SEMCO agreed to wage down cut and were performing multitude roles during this crisis period which gave workers greater knowledge of the operation and more suggestions on how to improve the company, this led to full participation of employees. In SEMCO responsibilities such as decision making are focus on the employees, they are allowed to apply their creativity and initiative to the service of the organisation. In addition decision making such as the selection and election of their boss is focused on the subordinates. Sermel's participative leadership style can be related to McGregor's Y theory "capability of people with self direction and self approach" Euston Henry research (2010). Semler's way of work is letting employees choose what they do, where and when they do it, likewise they determine how they get paid. Semler has no organisational chart, no dress code, and no written rules; he replaced hierarchical pyramid structure with circle structure. He believes that this participative leads to a healthy and enjoyable way of life for employees. Semler leadership style allows a legitimate and reward power (i.e. profits sharing and promotion) on his employees based on his position as the leader of SEMCO.

WHAT IMPACT DO YOU THINK THESE STYLES HAVE HAD UPON THE COMPANY'S STRATEGIC DECISIONS?

Ricardo Semler style has a positive impact on SEMCO. In 1986, Ricardo Semler attempted to introduce a matrix organisational structure (people with similar skills are pooled for work) which failed to achieve desired improvement. In 1982 SEMCO annual revenue was $4 million, it grew over the years, as at 1994 it was $35 million, and in 2003 the annual revenue grew to $212 million with annual growth rate of 40%.

In 1982 SEMCO employees were 90, by the year 2003 SEMCO employees were over 3000. Over the years the company has diversified into different business by mergers and joint ventures. From the illustration made above, we can relate the success of SEMCO to the leadership style of Ricardo Semler.

EXPLAIN THE LINK BETWEEN SELECTED STRATEGIC MANAGEMENT AND LEADERSHIP THEORIES. WHAT IMPACT DOES THESE THEORIES HAVE ON ORGANISATIONAL AND LEADERSHIP STRATEGY?

Strategic Management is procedure of "coping with complexity "(kotter 1991). Drucker (1954) said strategic management is the motivation of people to achieve a common goal. There are various theories on how collective goals are achieved.

Henri Fayol five functions of management 1916: He classified duties of managers into five. There are: planning, organising, controlling, commanding, and coordinating.

Fw Taylor 4 objectives of scientific management 1881: He classified managers duties into four, they are: scientific methods of doing thing, goal for production, system of reward for meeting goal, training of personnel.

Peter Drucker 1954 five management processes: He classified duties of manager into five, which are: setting objectives, motivating, task organisation, measurement (SMART), and training.

The table below shows how different strategic leadership theories are linked

HENRI FAYOL 1916

COMMANDING

PLANNING

CONTROLLING

COORDINATING

ORGANISING

PETER DRUCKER 1954

measurement using SMART objectives

Setting objectives to achieve

Motivation of staffs to achieve a collective goal

Improvement through training and coaching

Tasks organisation

FW TAYLOR 1881

Establish goals for production

System of reward for meeting goals

Training to use methods and meet goals

Scientific method of doing things

Duties of managers: Table 2.1

Strategic leadership theory: leader copes with changes in an organisation by setting direction (kotter 1991) for others to follow in the achievement of goals (koontz & O 'Donnell). There are various theories by authors, such as:

Leadership styles: Leadership style assumes that subordinates work more effective with leader who adopts a specific style rather than a leader who adopts alternative styles. There are different dimensions to leadership styles; however it can be classified into three (3) namely authoritarian, democracy and laissez faire. Tannenbaum and Schmidt (1958) classified 4 styles which controls the degree a manager maintains. They are tells, sells, consults and joins. These leadership styles depend on the leadership situation (Mullins 2007).

The authoritarian style: Power is focus on the manager, decision and procedures for achieving goals is made without consultation. The control is either by reward or punishment. This is related to Tannenbaum and Schmidt tells approach. In this style the concern for task is high.

The democratic style: The focus of power is within the group as a whole. Function such as decision making and procedures for achieving goals is shared within the manager and the group. The joins, consults and sells styles are democratic to some extent, except subordinate does not have a finally say. This style concerns for both task and people

A laissez-faire style: member of group work more effective on their own, managers do not interfere, however there is availability of help if needed. The concern for task is low and concern for people is high.

CONTINGENCY THEORIES: This is Based on the believe that no one approach to leadership appropriate to all situation. There are models such as:

Vroom and Yetton Contingency Model: classified leader's decisions into two. They are decision quality and decision acceptance. The model suggests five management decision styles.

Autocratic: A1: leaders make decision alone using information available.

A2: leaders consult subordinate but decision is taken alone

Consultative:C1: problem is shared with relevant subordinate, leader makes the decision

C2: problem is shared with subordinate, leader takes decision.

Group: G2: problem is shared with subordinate ,leader is chair, they both reach a consensus

Path-goal theory: the model proposes that performance of subordinate is affected by the extent in which the manager satisfies their expectations. Subordinate sees leader's behaviour as a motivator. leadership behaviours are:

Directive leadership: subordinate follow specific directions given by the leader, they know what is expected of them.

Supportive leadership: the leader is more concern for subordinates needs and welfare.

Participative leadership: the leader consult with subordinate, evaluates suggestion and managers makes the decision.

Achievement-oriented leadership: sets goals for subordinate, there is confidence in subordinates ability to perform well.

2.1 THE LINK BETWEEN SELECTED STRATEGIC MANAGEMENT AND LEADERSHIP.

Management and leadership theories can be linked with one another; most times they are used interchangeably. The link can be seen using Mckinsey 7-s frame work theory. Managers have a propensity on strategy, structure and system (hard element), they are easy to define and identify, and managers can directly influence them. Leaders on the other hand are based on styles, staff, skills and shares (soft element), they are more difficult to describe and more influenced by culture. Watson suggested that all the 7-s most work together to attain a high level of organisational performance.

Fig 1: shows the links between management and leadership.

Strategy: the plan to maintain competitive advantage over competitors.

Structure: the way the organisation is guarded.

System: this is referred to as the daily activities of the company.

Style: this is the style the leader adopts

Staff: this refers to the employees or the general work force of an organisation.

Skills: competence of employees

Share values: they are also known as superordinate goals. These are the core values of an organisation.

All these listed 7-s framework works together to form an organisation.

WHAT IMPACT DOES THESE THEORIES HAVE ON ORGANISATIONAL AND LEADERSHIP STRATEGY?

These theories listed above helps to determine the structure of an organisation. The organisation could be an autocratic organisation; i.e. leader maintains full control of the organisation which is highly centralised. The employees accomplish the leader's goals, wishes and objective example of autocratic organisation is Semler and company headed by Antonio Semler. On the other hand the theories helps to illustrate the democratic management style where employees are involved in decision making, flexibility of work, freedom of employees i.e. SEMCO decentralised system by Ricardo Semler. The theory explains both leadership and management duties which lead to the smooth running of an organisational.

UTILISE APPROPRIATE TECHNIQUES TO REVIEW SEMCO LEADERSHIP REQUIREMENTS.

There are different techniques to review leadership requirement, such as: porter's diamond, porter's five forces, networks, role of the corporate parent and the macro-environment (steeple).

To utilise appropriate technique for SEMCO, the macro- environment (steeple) will be used to review leadership requirement. Macro-environment (steeple) are the external /environmental that impact to greater or lesser extent on almost all organisations (Johnson, Scholes and Whittington), these macro factors influences the organisational performance either directly or indirectly. The table below shows the external factors affecting SEMCO.

Social / cultural factors

Due to low rate of education in Brazil, there is high rate of untrained staff and unskilled staffs in SEMCO.

Due to high population in Brazil, the income rate of workers in SEMCO is reduced because of the high rate of unemployment.

Technological factors

Technological cooperation is increasing in Brazil, mostly in telecommunication, energy transmission and advanced materials. SEMCO businesses are related to this, and it results to competition.

Economic factors

Inflation rate in brazil

Low bank interest rate

Global financial crisis both in Brazil and USA

Environmental factors

Deforestation issue in brazil

Bio fuel and alternative energy i.e. oil

Water supply issue affects brazil

Political factors

Governmental policy on industries such as energy, oil and telecommunication

Government policy for low interest rate

Legal factors

Brazil and other BRIC countries have legal bodies that helps to check public right, corruption and the rule of law of the citizens.

Ethnical factor

Reduced rate of child labour in brazil

Employment opportunity for women and ethnic minority people are equal.

Table 3.1: External factors affecting SEMCO.

The factors listed above cannot be influence by SEMCO leaders, on the other hand, there are skills leaders should have in other to be able to work with these external factors effectively, and these skills can be a threshold competence or a core competence. Threshold skills are the basic requirement a leader must have while the core skills are the unique ability a leader has that gives him a competitive advantage over others. The table below illustrate the two competencies.

S/N

THRESHOLD COMPETENCIES

CORE COMPETENCIES

1

Vision: be able to communicate his vision to all members of staff, vision must follow the culture and value of the organisation

Negotiation skill: the leader must be able to negotiate effectively, SEMCO is known to have a diversified business through mergers and joint ventures

2

Motivation: decision making must be within all staffs and there is a reward power to motivate staff

Project management: the leader must be able to manage any change taking place in SEMCO, either through mergers and joint ventures

3

Communication: there must be a two way communication, there should be a diversity of opinion

Analytical / financial skill: SEMCO is a globalised company, dealing with in various business, leader must have an effective and a good arithmetic skills

4

Empowerment: people work more effective when left alone with a reward power

Decision making/implementing skills: the leader must have a quick decision making skill and must be able to implement the decisions made.

Table 3.2 leader competence skills

SEMCO organisation is still developing throughout the world through joint venture and mergers with other businesses. This developing process is known as organisational development. Organisation development is intervention strategies which aim at developing individual, group and organisation. Organisation development aim at improving the performance and effectiveness of an organisation (Mullins 2008

Flux transformation

Step- change

Incremental liquidation

Continuum

FIG 3.1. Organisational Developments.

The table above explains different stages which an organisation can find it's self. From the diagram above, SEMCO is presently at the incremental stage, SEMCO has gone through the transformational stage when Ricardo took over and began to diversify into other lines of business. SEMCO is increasing its network through joint ventures and mergers.

We have been able to identify the external factors affecting SEMCO, the threshold and core competences leaders at SEMCO should have and the organisational development of SEMCO. This will help us to determine the personal specification (ability a leader acquire in person) and the job description of leaders (core roles or duties of a leader).

Personal specification of leaders at SEMCO

Direction/vision: the leader must be able to follow the company's direction, SEMCO leadership style is participative, and the leader must be able to direct the employees using this leadership style.

Communication: the leader must have a good communication skill. Be able to provide adequate information on task given or when implementing a change

Flexibility: SEMCO system is flexible, all leaders must be flexible enough not interfering with staffs task and encourage staffs to participate in decision making

Motivation: must be able to encourage, give reward on staff performance, be of assistance when needed by a member of staffs and provide training when needed.

The leader's job specification is the day to day duties of the leader which gives them a competitive advantage over others in the market.

Negotiating and making decision effectively and speedily towards the company goal and objective

Empowerment to provide creative innovations and motivation of people towards expected results.

Financial control and accounting control: the leader is in charge of all monetary value when change is taking place

The leader must be a good project and change management, much have a positive outcome when implementing change.

All the illustrations made above are the techniques use in reviewing SEMCO leadership requirement. SEMCO has an inter- organisation relationship with other organisation either by mergers, joint venture or by strategic alliance. This relationship with other organisation makes SEMCO a sharper in the role of corporate parent where there is agreed business plan with other companies.

PRODUCE A FUTURE LEADERSHIP SKILLS PLAN FOR SEMCO. REPORT ON HOW USEFUL WERE THE METHODS USED TO PLAN THE DEVELOPMENT OF LEADERSHIP SKILLS. ENSURE YOU EVALUATE EACH METHOD AND DISCUSS WHAT YOU THINK OF EACH METHOD.

SEMCO's role as cooperate parent is a shaper which allow agreed business plan for companies involved by either merger or joint ventures. The methods/ theories that will be evaluated are to develop a future leadership skill plan for SEMCO.

Firstly, we will explain SEMCO organisational behaviour by studying how it functions and the impact of the organisation on the behaviour of its employees. Organisational behaviour is defined as the learning and understanding of individual or group behaviour and the pattern of organisation structure in order to improve organisational performance and effectiveness (Mullins 2008.pg 3). The organisation structure determines the culture of SEMCO; the culture on the other hand determines the type of leadership, communication and group dynamic. There are different methods of organisational development but we shall look at the ones relevant to SEMCO.

There are different methods of organisational development according to Newstrom, Davis 1993 which leaders in SEMCO must have, namely:

Humanistic values: there is positive belief about the potentials of employees. At SEMCO employees exercise a self direction and self control in the service of objectives, there is a function of reward associated to achievement, creativity and decision making is distributed among employees.

System orientation: SEMCO is made up of different systems such as the technology, structure and the employees; they must all work together towards the organisation objectives.

Problem solving: this is a normal occurrence in an organisation, leader must be able to identify the problem, gather adequate information, and involve members of staffs when implementing a change and progress effectively.

We defined organisational behaviour as learning and understanding of employees. What is learning? This is a permanent change in behaviour that occurs as a result of practice or experience (Bass & Vanghan). Peter Senge (1990) defined Learning organisation as a place where people expand their capacity to create a result they desire, where new pattern of thinking is nurtured, where people are continually learning how to learn together to give them a competitive advantage (Mullins 2008). There are different ways of learning, they are;

Behaviourism: this is learning through behaviour and those actions that could be observed, measured and controlled, learning through experience.

Operant conditioning: this is a step by step learning, the motivation comes from reward

Cognitive approach : this is relevant to SEMCO leadership skill, the leader as a prior knowledge of what should be done either from previous experience in addition to the new information given on job description the two gives an elaborate knowledge. Learning takes place when there is new information. This leads to the learning curve showing the gradual process of acquiring knowledge

The learning curve. Showing the level of competence and the time spent.

Level of competence

Time spent

Fig 4.1 learning curve.

There are different development plan processes, such as

Setting objectives

Performance metrics

Rewards

Short term training

Technical and specialist skills, transferable skills and the organisation system are all short term training. SEMCO operate a reward system mostly by recognition, salary or by promotion. Leader must have a transferable skill which will improve employees' performance; he must be able to work effectively with others, good communication skills and must be good with applications of numbers. Leadership training in SEMCO is mostly done by experiential learning and informal learning that comes from work. Formal education is also an advantage.

Implementation Plan for SEMCO

objectives

To have an agreed business plan for mergers and joint venture

measurement

Skill measurement is by Experiential learning and informal learning that comes from work. Training will be available when required

target

To be a globalised industry, have a competitive advantage over others in the market and to remain on top.

Initiative/ action

Avaliabity of resources, people and adequate information will be required towards task achievement

Time scale

SEMCO,s aim is to remain in the market for a long period of time

Responsibility

To represent and lead SEMCO towards meeting organisational goal

Performance indicator

Benchmarking (using an effective leader to raise the standard of SEMCO). i.e. to be the leader in the world by 2020.

Review/ contingency

Open market between brazil and USA for alternative energy.

This entire implementation plan helps SEMCO to achieve organisational goal.


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