Employee Performance and Strategic Management - Assignment Example

Strategic management case studies 1.0 Introduction Employee performance, the yard-stick to a successful business ethics, stem from a strong belief and determination among the leadership and worker-class, which in unison can accelerate progressive changes to create a difference. Only those with exceptional influence can change the way an organization runs. Management has an active role to play in the integration of the organization’s operation and culture. Cultural influences play a vital role in the organizational operatives. A healthy work environment instigates happiness and motivation to perform. Increased and effective cooperation between men and women at workplace, a better awareness of gender differences, building different leadership styles and flexible work/career patterns are positive management practices. Motivation remains the biggest factor in making people perform. One can never get away from the fact that, man has and will continue to be fascinated by rewards and appreciation. Many hotels have come forward to openly recognize the best performer in the various departments of their hotel to encourage others to perform. Hotel personnel are stage performers, and to get the best out of them, there is nothing like showing the bait. Airhostesses have for long been the soft target in air. They are physically and mentally rebuked and still maintain a straight and friendly face throughout the flight. They may not like the attitude of the passenger(s), but it’s their duty to see that they behave in the best possible way, not to harm or embarrass their customers. While it’s easy to understand the logic behind such acts of hospitality, one needs to understand how it is possible to make these people take the filth with a smile and a courteous, ‘Please, its OK’, or ‘Not a problem Sir!’ Semler was faced with a similar problem, as he contemplated ways to find a solution to make his workers enjoy coming to work on Mondays. This he did with élan and his once over-debted company rose from the ashes. 2.0 Literature Review Q. Using appropriate theoretical frameworks evaluate how Semco’s firm boundaries were continually revised and redefined between the early 1980s and early 2000s. A. Ricardo Semler, Harvard-educated, took over Semco in 1980 at a time when the company was struggling to stay afloat. The company went bankrupt and fell into severe debts when the company found itself unable to sustain itself left with no orders and the government increased tax on the current business. When the business fell, it was natural that the management had to decrease its overheads to stay afloat. Workers were reduced and the company could not pay off its loans, warranting the board to look for a buyer. It was here that Semler took over the company and introduced the practice of expanding on the one-product theory, so that if by chance the company faced similar problems in future, it could always look to compensate from its other supporting products. Similarly, when the employees found that they were being distanced from company privileges, they found no interest in working for the company. Unless an employee was looked up as part of the organization, he/she would show least interest in working for the employer. This is precisely what happened before Semler took over. Semler felt that before he took over the management of Semco, the management kept itself from sharing in the company’s growth and prosperity, and were treated like slaves. This could never appeal to the workers to work and the company found itself short of production and quality. Semler’s theory surrounded on the belief that, if employees were kept happy and given equal privileges, the company would gain considerably. Motivation was his secret to success, and this is what he did; 100% motivation could lead to better efforts and more accountability. He introduced the concept of a democratic, transparent workplace with little controls, with each member directly responsible for his/her actions. This seemed to work, as he managed to take Semco, a moribund company, to great heights by refusing to squander his greatest asset, his employees (1). From a one-product company, the company got into ship-building, and Semco signed agreements with two British pump manufacturers to become a major marine pump supplier by the 1980s. Its 90% revenue was generated by pumps, components for propellers, and water-oil separators for ship engines (2). Sales were also stable at US$4m. Then recession struck and the prosperous ship-building industry crashed, sending Semco crashing. Ricardo Semler and Harro Heyde, convinced pump manufacturers all over the world that Semco had the infrastructure to manufacture their pumps and mixer, and deliver it for them there in Brazil. This move paid off and Semco began to show cash flows again to clear its debts in 1982 (3). Semco, instead of depending on one product expanded their manufacture base away from marine products through acquisitions. For US$0.5m, Semco acquired two businesses of Asea Brown Boveri and Merck. The first was Flakt, a refrigeration equipment manufacturer for ships and ventilation systems for marine engine room. The second was BAC (Baltimore Aircoil), another company that manufactured air conditioning equipment. The acquisition of Hobart plant in 1984 with a head count of 150 people, which manufactured dishwashers, fryers, scales and slicers, increased the company’s strength and the management brought about incremental changes to Semco by streamlining its budgeting, by paring 400 cost centres down to 50 (4). Additional responsibilities were taking its toll on Semler and he decided to delegate work. Semco became well organized and disciplined, but Semler felt that the workers were still not motivated enough to work. He took unusual decisions, such as eliminating the company dress code, and the end of day security checks. The innovation began to fructify from 1985 when his decision to eliminate parking privileges brought about a change in attitude of the Hobart plant workers, and they began to show more responsibility in their work, setting new production quotas and redesigning their dough mixers (5). Empowerment to workers shocked some supervisors, but employees themselves took the initiative to walk up and ask for what they wanted. The formulation of the structured groups of 10-12 in ‘amoeba-like’ worked more effectively than larger groups, of say 200, where transparency was lost and one would need to put control systems in place to monitor people. The innovation of three Semco engineers in mid-1980s, to delegate a small group of people rose in Semco’s culture to focus on innovation on new product lines, improved production processes, and new market strategies met with success. This was the beginning of the ‘Nucleus of Technology Innovation’ (NTI), a concept of no boss or subordinates (6). At the end of the first 6 months this group unraveled 18 new projects, and over the proceeding years they uncorked an array of inventions, changes and refinement. Compensation based on performance, and royalties from new creations and share of any savings identified made waves. An engineer who made US$25K a year made between US$15K to $85K a year depending on performance (7). The country-wide job rotation programme was a phenomenal success. This programme touched every position within the company, including the CEO, and Semler became one of the 6 rotating counselors, who would meet on a day-to-day basis and take positive decisions for the company. The Semco hierarchy came down from 12 levels to 4. Profit-sharing programmes reached every member of Semco, and 23% of each autonomous unit’s profit was disbursed to the employees of the respective units (8). The country-wide transparency gave every employee an up-to-date performance sheet, which when compared to other employees records indicated the employee’s contribution to the company. This was a way to the heart, as all employees would do their best to out-perform or perform on par with others to get the maximum benefit of royalties or performance incentives. All the initiatives by Semler had a telling role in the company’s successful growth by almost nine times, at US$35m by 1988 (9). The drastic changes had made the difference between an, ‘also-ran’ and a successful one. Production improved, salaries increased, and the company grew. There was no, ‘Grand strategy’, or ‘Grand plan’ as stated by Semler. The company had no sound plan of its business in 15 years time, and Semler said that all he wished as an investor was that the company does well. He also remarked that strategic planning and vision were in a way, a barrier to success. This can be interpreted to be true in the sense that, the world has seen tremendous change in the past decade, and with new technology and innovations, to plan or strategise could backfire under new innovations. The structure was made up of 6 counsellors, of which Semler was one. The next ring was made up of those in-charge of the business units, called partners. The first line supervisors made up the third ring called as coordinators. The fourth and final ring was for the associates. These associates make their own strategy and programmes, including investment plans for the next year. Such a hierarchy was transparent and independent. This made all involved with the company take positive approaches to see the company grow. NTIs acted between Partners, Coordinators, and Associates (10). There was the implementation of the satellite programme, wherein counsellors, partners, coordinators and associates could set up their own businesses and sell to Semco items that were done in-house. They could also sell to competition. Semco benefited through the lease of machinery at reasonable rates. The company could also reduce overheads, and benefit from more produce. This programme was most beneficial to those with entrepreneurship qualities. Those who found it unattractive could return to work for Semco. The idea behind the strategy was to involve the workforce for higher production, and at the same time, giving the employees the benefit of owning their own business. In a more stunning effect, under Semler, the company introduced a rather peculiar but effective way of running the entire business. There was no one to oversee what others were doing, for each individual had his/her own schedule to devise or meet targets and clients. New appointees did not have to work under any particular coordinator or partner, they could move from one department to another within the first year before settling down to a particular department of choice and expertise. Promotions were based on the report given by others working with him/her, promotions and salaries are raised. Only those who had a negative or low rate of score consistently were made to leave the company. Employees also had the benefit to decide what their pay will be, for each employee had to decide how much he could contribute to the company and how. This made everyone accountable for his/her action with absolutely no pressure from the top to perform. Such transparency was not available when Semler took over the company in 1980 (11). What was appealing was that employees (Associates) were ready to work, on voluntary basis of course, on a 25% pat cut if business was bad, but stood to gain 125% if the business was good for a year. Semco employees enjoyed the benefit of moving into new ventures within the company to outsiders, as they were familiar with the company ethics and could fit in without difficulty, however, job security remained aloof, as the company believed in performance as the yardstick to promotions and pay hike (12). The company followed a Shared Values policy (13), in which all employees work under the same strategy of democracy, profit-sharing and Information. Each employee worked under a complicated circle where each was dependent on the other two. They had the liberty to take independent decisions that would enhance the profits of the company and the company gave any information that they required to convert their strategy to profits. There was total transparency in the way the company dealt with their employees, and no one asked any questions that might be seen as personal interference. Employees were encouraged to take work home, if they found insufficient time in office, they could designate their own working hours and time, for no one was asked to report to work at a given time, or even go home at a particular time. All that employees had to show for their work was profits. In all, what Semco offers is an atmosphere of total freedom, absence of fear, encouragement to take risks, and the happiness of belonging to something that is unique and very interesting. Semco in 2000 was a complete transformation to its 1980 structure. From their standard practices, the company had to move on and to do this, the counsellors decided to expand Semco’s business lines. The company decided to seek new avenues to their concurrent business interests and decided to try new spheres by first going in for joint-ventures; their first in February 2000 with Bidcom. From Environmental Resource Management to Building designs and marketing, Semco was on the move. The company now sought to expand their business interests to stay abreast with the globally changing business environment. To do this, they had no better option than to go in with joint-ventures to understand and introduce their business practices to remain competitive and running (14). Q. Ricardo Semler is wary of strategic plans. He mentions in the case that his company, “does not have a grand strategy” and that “strategic plans are often barriers to success”. Using appropriate theoretical frameworks analyse and evaluate the strategy process at Semco, providing evidence for distinct time periods to support your point of view. Semco expanded their business by acquiring related-industries to grow and expand their reach. From a one-product company, the company got into ship-building, and it signed agreements with two British pump manufacturers to become a major marine pump supplier by the 1980s. Its 90% revenue was generated by pumps, components for propellers, and water-oil separators for ship engines. For US$0.5m, Semco acquired two businesses of Asea Brown Boveri and Merck. The first was Flakt, a refrigeration equipment manufacturer for ships and ventilation systems for marine engine room. The second was BAC (Baltimore Aircoil), another company that manufactured air conditioning equipment. Once these companies were acquired, Semco could expand their production capability and also increase their client base, with the customer-base of the acquired companies. Profits began to come and Semco that till 1980 was almost bankrupt was able to pay off its debts. Once the company established its presence in the market, the company could ill-afford to work on a one-product strategy and had to introduce new structures to improve the quality and turnover of the company. When Ricardo Semler said that his company had no, ‘Grand strategy’, or ‘Grand plan,’ he said so with the vision that long-term strategies could backfire under the continuous changes to market trends or innovations. Also the fact that strategies included the allocation of work and time-frames would create pressure on his employees also did not go well with the company before he took over. This made him realize that no long-term goals should be set, and that what mattered was for his employees to be happy to work where they were. Ultimately, if the employees were happy, the quality and profits would come on its own. The company had no sound plan of its business in 15 years time, and Semler said that all he wished as an investing partner, the company did well. He removed the existing company dress code, and the end of day security checks. He encouraged the development of the ‘amoeba-like’ working groups to make work more transparent and qualitative. It also made each member of the group accountable and responsible. The company he said followed a simple structure, where each member of the company was his/her own boss. The structure was made up of 6 counsellors, of which Semler was one. The next rung was made up of those in-charge of the business units, called partners. The first line supervisors, known as coordinators came next, and finally the associates. Associates make their own strategy and programmes, which included investment plans. NTIs acted between Partners, Coordinators, and Associates, and there was also the satellite programme, wherein counsellors, partners, coordinators and associates could set up their own businesses and sell to Semco items that were done in-house. This was a way to motivate those with entrepreneurship qualities to be independent. Those who found it hard to work on these terms could return to work for Semco. The idea to give total freedom to associates worked wonders. No fixed time, no targets, and no reporting made each associate independent and accountable for their actions. This improved the company’s production volume and increased the quality of the products. The company could avoid unnecessary overheads and personal supervision. Q. Drawing on your evaluations for question 1 and 2, how would you define strategy as a concept according to the case? Strategy is employed to derive positive results. Be it with a student who plans his hours of study to score well, or a company that devises management strategies to produce more and in turn enjoy healthy profits. In contrast to earlier practices, many companies today recognize the strength and importance of employee-specific programmes. It is employees who form the pillar to growth and unless these people are recognized and rewarded for their tireless efforts, the company will face severe market downfalls. What Semler did to Semco is strategically employee-centric. It’s more of a concept than a strategy. Strategies are implemented, while concepts are introduced. The strategy formulated by Semler is more of a concept because he sought to help overcome employee-specific problems rather than look at company-related programmes. The way he removed security controls and work ethics made employees more attracted to work for Semco. He removed the various hierarchies to introduce a rather simpler form of company structure that made all employees of the company feel a part of the organization and work towards their own goals rather than company goals. His strategy was to indirectly gain profits through the offer of a democratic-style work system. A concept is an innovation that is put into practice not by force, but with trial. In Selmer’s case, the concept was rewarding and the company, once bankrupt grew to acquire and expand their business scope. For Semler, the strategy was motivational; the motivation to make his employees enjoy coming to work on Monday mornings, and this he did in style using the concept of giving them full independence and accountable. Motivation remains the biggest factor in making people perform. One can never get away from the fact that, man has and will continue to be fascinated by rewards and appreciation. Inspiration comes from a cordial and warm work ethics, a nice work environment, and recognition and rewards for hard work. Managers or Partners need to support and place great faith in the available workforce, support them and sympathize with them. Pay rise, bonuses, benefits, promotions, and so on are some tactics that many companies use to get their work done. The idea is to make teams aware of their own goals and seek suitable avenues to achieve that. Selmer went a step ahead, and introduced a concept that took the world business houses by surprise and wonder. He gave absolute freedom to his employees, and left their fate in their hands. Should they perform, they would benefit, but should they perform poorly, they had to go. No pressure to perform, no time-bound duties, no staff support, and most importantly, the space to act and work on their own terms made Semco a great company to work in. 3.0 Bibliography 1. Ricardo Semler: Introduction, Page.2 2. Semco ‘A’: A Most Unusual Workplace, Company Background, Page.3 3. Semco ‘A’: A Most Unusual Workplace: Ricardo Semler Steps In, Page.4 4. Semco ‘A’: A Most Unusual Workplace: Ricardo Semler Steps In, Page.4 5. Semco ‘A’: A Most Unusual Workplace: Making Unusual Decisions, Page.5 6. Semco ‘A’: A Most Unusual Workplace: Making Unusual Decisions, Page.5 7. Semco ‘A’: A Most Unusual Workplace: Making Unusual Decisions, Page.6 8. Semco ‘A’: A Most Unusual Workplace: Making Unusual Decisions, Page.6 9. Semco ‘A’: A Most Unusual Workplace: Making Unusual Decisions, Page.7 10. Based on: Semco’s Structure: Source: Maverick, Ricardo Semler, Arrow Business, London P. 183-192, in Semco ‘A’: A Most Unusual Workplace: Semco Practices as at 2000, Page.8 11. Semco ‘A’: A Most Unusual Workplace: Structure: Satellite Programme, Page.9 12. Semco ‘A’: A Most Unusual Workplace: Structure: Risk Factor, Page.10 13. Semco’s shared values in Semco ‘A’: A Most Unusual Workplace: Shared Values, Page.11 14. Semco’s shared values in Semco ‘A’: A Most Unusual Workplace Read More