10 Myths Series: Myth 1 - It’s Utopian or Naive

When business maverick Ricardo Semler took over his father’s company, he decided to make several huge and unorthodox changes. The most radical was to fire 60% of the top management and flatten the hierarchy of the organization.

Semco increased participation and corporate democracy by allowing workers to be directly involved with the operations of the company. This new management style generated up to 40% of growth year over year. The company grew from $4 million to $212 million dollars annual revenue and the company grew from 90 to 5000 employees.

Semler’s management style is so radical that many corporate leaders are naturally skeptical. This is why it hasn’t taken over the business world yet. Another reason is that many leaders still believe in ten common management myths. Semler busts these fallacies by explaining why democratic management works for all types of companies.

This series of articles and videos detail Semler’s thoughts and explanations.

What many people believe

Is it possible for people to work together and be self-motivated? Many people don’t think so. They believe that it’s just a theory that cannot be applied in a real team.

This is the reasoning behind the first myth: corporate democracy is utopian or a naive concept, which only “newbie” leaders will believe.

A little bit of history

The concept of democracy or liberty began with the ancient Greeks. However, its effects on modern society can be traced back to 18th century Europe. Remember that this was a time when dictatorship or monarchy was the rule. People in power back then voiced these complaints: Democracy is utopian. “Ordinary” people don’t have the capacity to think for themselves and they need to be told how and what to do by their “superiors” for them to get work done.

Sound familiar?

Today, many countries testify that democracy works, and works well. Yet, the same can’t be said about corporations.

Autocracy is wasteful

Despite the overwhelming evidence of democracy’s benefits for people, top-down hierarchies and management styles are still ingrained in many companies.

Semler believes that each employee has the potential to work well with others and be self-motivated to do great output without being told to do so. By giving unlimited power to only a few who then force others to work at a certain time and in a certain way leads to this potential being wasted.

Autocracy also has a great diseconomy of scale. In other words, it affects the overall volume of production or output of a company.

Semler has proven that people who are allowed to decide how, when and where they will work generate a net productive value that’s greater than the theoretical net productive value of employees controlled by their superiors. If employees think and act for themselves, they don’t waste time and resources waiting for their managers and top management to make decisions for them.

Create a paradigm shift

Just like our forefathers who wanted to create better societies, the way forward for modern businesses is democracy. With over 100 clients worldwide the Semco Style Institute has proven that Semco Style is not a Utopian idea, but a practical reality. Companies that make the shift to this management style and organizational design are not only more attractive for their workforce but also more innovative and productive.

If you want to follow Semler’s path, learn more about the entire 10 myths here.