Semco Work Organization

Semco Work Organization

Introduction

Semco SA (Semco), a Brazilian company which manufactures over two thousand different products including industrial pumps, cooling towers etc. and also provides environmental and internet services, saw its revenues growing from $32 million in 1990 to $212 million in 2003. 1.1

In then decade of 1950 Brazil was rapidly growing economy. Ricardo Selmer’s father an Australian born engineer Antoni Curt Semler attracted by brazil economy. Antioni Curt Semler erected manufacturing unit of Centrifugal Pumps in Sao Paulo. Company became market leader within a decade due contract with military to provide marine pumps. Semco and company started to provide pumps to national shipbuilding Plan that was supported by Brazilian government.

Ricardo Semler youngest ever MBA graduate from Harvard school of business, returned to Semco and company to work with his father.

In this case study we will have look on the uniqueness of Brazilian company Semco. We will compare advantages and disadvanges of Semco with the other company like Goole India. In this

According to Ricardo Semler CEO SEMCO group of industries, one of the most interesting work place in the world is Semco.

Semco founded by his father Antino Cute Semler in 1953 in Seo Paulo.

Ricardo started work with his father in Semco. Thought of elder and younger Selmer were totally different the Antino Selmer believed in paternalistic, autocratic control, not only these but strict difference between personal life and work. That why elder Semler opted 12 layer pyramid structure for semco. Ricardo was not satisfied with his management system. That was very rigid organisational structure.

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Generally large organization opted pyramid or triangle structure, as shown in the figure 2.1. in this structure large percentage of employee are at the base of pyramid for manufacturing the product or the for the providing service to customers. In this structure junior staff feels powerless and demotivated. (Organizational behaviour andrzej and buchanan pg 447) .levels in the pyramid are divided in the top management, middle management, supervisory management and worker.

Chief executive

Senior executive

Department or division head

superintendents

General forman

Supervisory

Management

First line supervisor

Top management

Middle management

Worker

Antino Semler retired as CEO and hand over the company to this son. One the first day of work Ricardo fired around 65 % of top manger from semco for the reason of diversification strategy.

Ricardo believes that autocracy decreases the motivation and creativity of the employee. So he want the structure of semco should evenly distributed, he opted the matrix structure for the semco. In this system mangers of semco not only reported to plant manager but also to headquarter. He seems that this system is much more complicated.

In the matrix organisation (Preparing for the Project Management Professional (PMP) Certification Exam by bu Michael w newell pg no 11-12) , employees should report to functional managers in the type of organisation employees are placed on their skill , they are specialist in there field. The entire employee with same skill they have to report to the same functional manager as well as project manager. Project manager is who take care of project. Project manager meet ot the functional manager and negotiate for the employee those who are available and having proper skill. The functional manager works with all project managers as same way.

Ricardo found several difficulties in this structure,

In the year of 1980 semco manager introduced lattice structure, and he Ricardo convinced with the manager Joao Vendramin.

Business Without Bosses: How Self-managing Teams are Building High … By Charles C. Manz, Henry P. Sims pg-138-139

Lattice structure has some special characteristic, communication is direct from employee to employee, no fixed assigned authority, no bosses. In lattice organisation there are teams around 30-40 people but these are not formally designed. Another characherstic of lattice structure is formation if cross-area group, which are temporary. In this associate can make team with other associate (those are in different area) to complete job.

A lattice structure is shown in the figure 2.2

In semco under this programme, group of six to ten employees working in one group, and they have all the responsibility for production, budgets and production goals. Due to introduction of lattice structure, unit production cost decreases sharply and the productivity increases. Due to implementation lattice structure, within 2 years one third of semco managers quitted their jobs. T he reasons behind that the sudden loss of power and they were not comfortable with such type of organization.

Three engineers from Semco proposed an idea in late 1980. In this to take a small group of employee and set them free. They would work totally free environment, they don’t have bosses, titles or even no juniors. Basic aim of this group is to invent new product, new marketing strategy, finding and solving problems in production and innovation of ideas for new business line. They have freedom choosing their area, agendas, shift timing. Two times in one year they were report to the senior management. As compensation they offered percentage of sales, saving, royalties on their own innovations. This satellite team called as Nucleus of Technological Innovation (NTI). This was mast moving and successful model foe Semco. Semler and senior management decided to promote satellite teams through out the semco to increase creativity, as well as entrepreneur skills of employees. Initially management take guarantee for contract work of these satellite team. Management also provide the equipment, office space for lease to these teams. Now days almost 65% of new products are produced by satellite business and two-third of employee are the part of this satellite business.

According to Peterson M and Spangs A,

In SEMCO’s work environment is Democratic, the satellite business units have more freedom. The structure of semco is flat and concentric circles, that mean low level of hierarchy. There are just three levels as shown in figure .in centre counsellors including Ricardo Semler , in second circle partners and that last concentric circle coordinators and associates are included.

There are nine business units in semco and they are autonomous. They offered power by semco management for decision making. They full freedom for choosing their partners, production planning, capital investment. But these business units should follow the norms, core value of semco, structure and management decision. These units are audited two times in a year. Management audits these units to make sure are follows policies or not and performance.

Process of psychological control plays an important role in Semco.

In semco they practices openness. Semco publish all financial documents for the employees along with guide. Even board meeting are public in Semco. Those employees’ wants to sits in meeting they cam sit. Purpose of this is to know how board made decisions. Advantage of this is that the employees become more responsible for the decisions. Reason behind this one is that the employees know how these decisions are in their favour and affect company.

Human resources include all people who are as part of organization, CEO, top managers, middle managers, non managerial employees and, worker. All these perform lot of work for the organization or company.

Human resource management is body who design activities for the better human resource. HRM develops skill, qualities and capabilities of employees for better efficiency and more effectiveness.

Definition of human resource management

“Human resource management is a managerial perspective, with theoretical and prescriptive dimensions which argues for the need to establish an integrated series of personnel policies consistent with organization strategy, thus insuring quality of working life, high commitment and performance from the employee and organizational effectiveness and competitive advantages.” (huczynski and buchanan)

There are five main key components for HRM

1. Recruitment and selection

2. Training and development

3. Performance appraisal and feed back

4. Pay and benefits

5. Labour relation

First task of HRM is recruitment and selection, in this component for recruitment of new staff, they ask for application through advertisement. Application are sorted on the basis of skill requires for the job. Selection criteria depend on organization to organization. Selected candidates invited for the training and development. in this components candidates trained for new skill that organization required and develop their own skill for the better performance from candidate. Successful candidates appointed on specific job or project.

HRM observe all the work done by new employees, if management satisfied with work of these employees, and contribution, third component ‘performance and appraisal’ come in picture. This component deal with performance of individual candidate, quality of work they do for the organisation. Employee who ‘s performance is outstanding they are appreciated. These employee are rewarded by the pay raise, bonus or stock options, this is included in the fourth componet pay and benefits.

Labor relation is important component of HRM. in this process both parties management and labor union work together to resolve the problems between them.

( introduction to business gareth r. jones 400-404)

Training and development

Performance appraisal and feedback

Pay and benefits

Labour relation

Recruitment and selection

Human resource management

Most of British and US model models of soft HRM are emphasis on the fact that ‘human resource’ is a assets, it is not variable cost. In hard version of HRM, they concentrate on the qualitative, quantitative and strategic management of ‘human resource’

During the year 1980- 1990, there are for models of human resource management. These models are based on location and name of authors. These models are as follows

• The Formbrun, Tichy and Devanna model

• The Harvard Model

• The Warwick model

• New York Model

The Formbrun, Tichy and Devanna model

In the year 1984, hrm model developed by Fombrun et.al the bottom line of this model is that people should used or managed as resource, just like other resource.

In this model selection, appraisal, development and rewards are the key components. Human resource cycle consist of these factor. These four key activities work together for the better performance of organization. As this is simple model of HRM it is suitable for explaining nature and significance of hr practices.

Selection

Performance

Human Resource Development

Appraisal

Rewards

The Harvard Model

This model on emphasis more human dimensions. Model in introduced by Michael beer and his colleagues in Harvard . Harvard model include six components , situational factors, stakeholder interest, human resource management policy choices, HR outcomes , long term consequences, feedback loop.

The situational factor affect strategy HRM. This deal with work force characteristic, labour market regulation, management philosophy, social values an suggest proper coordination of product management and socio-cultural logics. This model is more comfortable with scholars and practitioners because this state the reality that they know. Stakeholder interests realise the importance of ‘trade –off’, between interests of owner and the employees. Human resources management policy choices give importance to management decisions and actions in HR management only when these decisions are results of interaction between constraints and choices. In Human resource outcomes employee are highly committed to organization goal. And employees are highly committed to performance for reducing cost and better service.

Long term sequences divide in to three level, individual, organizational and social.

In the individual levels employee are rewarded for their efforts. In the organisational level survival of organization is depend on increase of effectiveness. Last component of Harvard model is feedback loop. In above discussion situational factors are influenced by hrm policy, the same way long term consequences can influence stakeholder interests, HR policy an situational factors. The Harvard model is the most popular model.

(Human Resource Management: Theory and Practice

By John Bratton, Jeffrey Gold, Bratton,)

Stakeholders

Interests

Situational

factors

HRM

policy

HR

Outcomes

Long term

Consequences

Warwick model

This model is promoted by Chris Hendry and colleague in the warwick business school, this is the extended version of harvard model. This model has an impression of American culture traditions, management style, politics and industrial relations. The model is complex and consists of five elements. First element is HRM context, model identified human resource flows, work systems, reward systems and employee relations. Secondly this model deals outer context of organisation such as external political, social , economical and technical factors. In third element model realise importance of inner and external context and how external context effect inner context for the organization. In forth element inner context, there is effect of HRM context on inner context. In this they are concern way of organization defines role and structure. at the end human resource policies are also depend on the business strategyand organisation strategy just like in other model.

Outer Context

Inner Context

HRM Context

Business Strategy Context

HRM content

New York Model

Randell Schuler and Susan Jackson from new York University, introdued model, key point of this model is ‘needed role behaviours’. This support different type of organization strategy. In this they found twelve kinds of employee behaviour, some of them are suitable for the orgnization strategy to reduce cost, other behaviour are important for innovation strategy. Model chooses the five practice ‘menu’ these are depending on the organization strategy.

There is no human resource department. That why they are not referring any traditional model of human resource department. But the employee cycle is there. Semco adopted very unique procedure for recruitment, selection and retention. If there vacancy in the semco they put advertise in newspapers. Generally present employee refer person for the job, but no family member.

In semco, selection of employee is depending on interview. Interview is taken by subordinate not by an executives. They are several rounds of interview and evolution, still the person with appropriate knowledge and skill is found.

In brazil generally organization adopted culture of US and European countries salary model. But in semco employee opinion and involvement in salary process ins important.

Salary is depend on average of what company afford and the employee thought. There is also salary programme called ‘Basket of Salary’. For the employee job and activity changes then salary also changes. There is another salary programme called ‘Risk Salary’. This very interesting and risky. In this one third of the employee can opt this kind of programme. In this pay cut is around 25% and they receiving 125% of normal salary only in case when company is in good profit.

In semco there is no rewards for suggestions. Employee opinion is counted but not with thye money. There are eleven different type of rewards in semco. These are stipend, bonus , profit sharing , commission, royalty on sale on profit, commission on gross margin, options, IPO, compensation for the yearly decide goal. this type of rewards system is useful for the employee for new inventions.

In semco they have policy, for those who want to learn in skills. They sanction expenses of training in weekly meeting. In semco they offer a course of accounting for the employee to check the balance sheet.

In semco the promotion is base on the merit. Even they can be loose there credibility.

Persons to be promoted are interviewed by all those who are working with that person. Twice a year, there is evaluation of employee and leaders. The results are paled to each and every employee, those who have bad grades they leave SEMCO.

There is equality and fairness in the hiring and firing procedure. ( Mary Petersson and Anna Spängs 39-40 )

it is very difficult for management of infosys to adopt organisation culture and organisation structure of semco.

Basically these two are very different comp

Infosys technology is founded in the year 1981 only by group of seven people. They started with just 250 US Dollar. Now a day Infosys is the leading information technology and consulting firm with revenue more than 3 million. Infosys deals with businesses-enabled technology in which they define, they design and they deliver. These information technology products are helpful for the global market.

Infosys is a global organization. They have developing centres in six country and offices in 23 countries. Head office in Benguluru, India. Today around 80,500 employee are working with infosys .

(http://www.infosys.com/about/what-we-do/default.asp)

Organization structure of Infosys is functional organization structure. in the top management chief executive, managing directors, president and joint managing directors, directors, group heads , chief financial officer are there. In middle level management business manager, delivery managers, senior project managers, project managers are there. In supervisory management level consists of project leaders senior software engineers, software engineers and trainee engineers.

( intern hand book in step infosys).

Organisation culture of Infosys is very formal. Infosys has dress code for the employee. Dress code is just like that employee should look like professional. Employee should be in neatly ironed apparel with formal footwear with tie. There is no flexible timing for employee. They have eight hour shift per day. Infosys provide sophisticated sport complex for the employee.

Human resource management

Infosys technology is the first software firm in India which value its human resource.

Infosys valued its human resource at 1.86 billion. Infosys used the LEV and Schwartz Model. Role of the employee is very important from company’s point of view. They give importance to employee because they contribute in the company’s success. Human resource management (HRM) is one step ahead than other department in the Infosys. Even their work is appreciate by the CEO of the Infosys Mr. Naryan Murthi (1995)

Hr manger of Infosys are very quick to adopt new policies for the work force. Infosys realise the actual importance of skilled employee. Hr managers are continuously improving the performance level of their work force. Infosys more importance is given to the human resource accounting (HRA).

HRA model deals with the present value of employee and the future earning from employee. This model have assumption, first one is An employee salary include every thing the salary package, and second one is additional benefits are depend on the age and group.