The Semco Style 5 Principles to transform the way we work

Minimize Auditing

– Let them control their own work

Most companies have entire departments that generate mountains of paperwork trying to control their employees. We have absolute trust in our employees– Ricardo Semler


What

A Semco Style organization or business is built up of Groups of Ten (Cells), in business units no larger than 150 employees. If these units achieve the performance expected, they are not visited or audited by headquarters. They may organize their own auditing mechanisms as needed.


Why

In Semco Style, employees are treated as adults. Adults are able to run their own lives, also in the work environment. Part of the philosophy is to honor boundaries: between personal lives and work, between clients, suppliers, shareholders and company, and within the company.


How

Centralized auditing is minimized, in order to let the Groups of Ten (Cells) control their own work environment and partners. Each business unit has various logical groups of employees – stockroom personnel, technical personnel, office personnel, sales personnel, maintenance workers, etc. To represent the varied interest of all these groups, each business unit forms a committee onto which representatives of each group are elected. These committees are the appropriate entity to audit the records of their business unit.

How to get started?

Teach everyone to read financial information, and educate some more in depth: See Powerful Practice ‘Financial Number Reading Bottom-Up’. Set up elected committees: See Powerful Practice ‘Elected Committees’.

Agree on a timeline to phase out audits from headquarters: Both parties must feel confident the local business unit’s ability to monitor their own financial data before minimizing auditing from headquarters. Discuss and agree on guidelines for minimal auditing and a timeline to reach this goal.

When (NOT) to use it?

When performance is not at the level expected, or other serious issues arise, or when there is a request from the business unit to help look into matters, managers from headquarters may come in to review the books and discuss them with local unit leaders and employees.


Level to implement

 Hard


DO’S

Provide employees with all the information that is available.

Allow employees to customize the company to meet their needs.

Use peer pressure to control the organization.

Discuss and establish guidelines for minimal auditing from headquarters.

DON’TS

Have a long list of rules and regulations that must be complied with.

Leave a business unit that is not ready to its own devices.

Wait too long before stepping in when business performance lags behind expectations.

Pros

There is less need to have legal, accounting or quality control expertise on a head office level. Individual business units can acquire the specialist services they need at a much lower cost.

Employees will feel more pride and responsibility for their business unit when they are in control.

 

Cons

Business units may hold back on data, wait too long when the situation is serious.


CASE

It is rare for a company to reject internal audits. But audits are destined to seek out breaches of trust. (Almost all big companies have external auditors who inspect the books and review procedures to guarantee to shareholders that an independent entity has verified business claims. But the main activity is an inspection designed to ensure that everyone is following the rules.) Auditing is also used to ensure uniformity; inspecting is a tool for control. It’s a lose-lose situation: If you are inspecting to ensure uniformity, then you are using it for control. If you believe it is because people will do wrong, than it is mistrust. At Semco, any company that is 100 percent owned by us is not audited at all, internally or externally. Further, about half of our joint venture partners, all of which have strict auditing rules at their headquarters, have accepted our philosophy and don’t audit our units, either.