Work With Minimal Rules

One of the most intriguing and thought-provoking management books I’ve ever read is the 1993 manuscript, Maverick by Ricardo Semler. After taking over his father’s business and teetering on failure, he turned the business around through democracy, profit sharing, and information for all employees. The results were resounding. Joining me on this show, is FP&A thought leader Daniele Martins who helps to uncover some of the big ideas in this book about participative leadership.

Episode Highlights

A special place to work – employees set work hours, determine their salary, review their bosses twice a year, are taught to read financial statements, take 30 days off a year, are encouraged to take sabbaticals, and participate in 25 percent of the company profits
The reason this is a great book for FP&A professionals
A quick overview of SEMCO and Ricardo Semler
A company survival manual
Only two company rules
Learning to think like a CEO
Not a management book but rather a book about work
Knowing when your company has arrived
SEMCO’s thought process with acquisitions
An over-focus on numbers and missing the mark entirely
Professionals who build cathedrals
Sharing 23% of the profits

Maverick is out of print, so you’ll need to search for a used copy if you want to read it. As mentioned on the podcast, Ricardo’s HBR article contains many of the key points in his book.

Participative Management

“What people call participative management is usually just consultive management. There’s nothing new to that. Managers have been consulting employees for centuries. How progressive do you have to be, after all, to ask someone else’s opinion? And to listen to that opinion—well, that’s a start. But 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. And that is true of participative management as opposed to merely paying lip service to it.” Ricardo Semler – Maverick

Cathedral Builders

Three stone cutters were asked about their jobs. The first said 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.”

“I had a sense we had far more stone cutters than craftsmen. What I wanted, of course, was a company filled with cathedral builders.” Ricardo Semler – Maverick

Take Two Aspirins a Day

One of my favorite stories in the book starts on page 58, where Ricardo relates some serious health issues he was encountering. His doctor told him, “Take two aspirins eight times a day.” After doing that for one day, he knew he had to make some significant lifestyle changes because he was eating, sleeping, and breathing work too many hours a day. He called his disease time sickness with the following causes:

The belief that effort and results are proportional.
The gospel that the quantity of work is more important than the quality of work.
Things are a little uncertain at the office right now. I’ll just have to work a little longer until they straighten out.
Fear of delegation, and its cousin, fear of replicability.

The Power of Scorecards

Soon, every section of the Hobart plant boasted scoreboards above the shop floor that tracked the workers’ current production against a monthly goal they themselves set. Managers didn’t put the scoreboards up; the workers did. They even had a master scoreboard in the cafeteria that showed the whole plant’s daily output, product by product. Page 88 – Maverick

However …

We were impressed with our statistical abilities that it took us a while to realize that all those numbers weren’t doing us much good. We thought we were more organized, more professional, more disciplined, more efficient. So, we asked ourselves with a shudder, how come our deliveries were constantly late? Page 52 – Maverick

Acquisition Requirements

SEMCO leaders had four simple acquisition requirements before pursuing any businesses:

Be number 1 or 2 in its market.
Have a connection with SEMCO’s businesses
Be technologically advanced.
Be on sale for the right reasons

Regarding the fourth point, the right reasons included no one to succeed the founder, inefficient management, or the parent company lost its interest in running the business.

SEMCO’s Profit-Sharing Plan

SEMCO started its profit-sharing plan in 1986, and the leadership team wanted it fully comprehensible to its workforce and controlled by the employees.

The leadership settled on sharing 23 percent of company profits after allocating 40 percent for taxes, 25 percent for the shareholders, and 12 percent for reinvestment.

“As a principal shareholder—and patron—of SemcoPar, I have to admit I initially thought 23 percent was awfully high. At other companies it runs between 8 percent and 12 percent. But I kept telling myself I stood to make at least as much money in partnership with a motivated work force as I would as the sole beneficiary of the fruits of less-inspired workers.” Ricardo Semler, Maverick

A Special Thank You to Daniele Martins

Daniele Martins is one of the rising stars in FP&A thought leadership. This is her second appearance on the show, and I’m certain it will not be her last. Feel free to reach out to her on LinkedIn.