Introduction The biggest challenge facing any business today is change. Ricardo Semlars approach to management revolutionized they way in which S ecom did business. However it is of question if Semlars model of business can be successfully transplanted into New Zealand’s business environment and change the way in which they operate. This essay will therefore discuss if Ricardo’s unique approach to business, and how it can be successfully used in the New Zealand business environment. This essay will firstly discuss the idea that can motivate workers and how this idea is set up in the New Zealand business environment. Secondly the ways in which employee participation work in New Zealand, and how managers can better understand their workers.
Lastly the importance of information sharing to a success of a company, and ways in which this idea has helped New Zealand companies find business success. Therefore this essay will show that Semlar’s approach to management can be successfully adapted to the New Zealand business environment. Background Ricardo Semler at the age of 24, implemented three main management schemes to try and successfully run a business. Stated by some as unique, Ricardo Semele has gone and taken these schemes and used them in his fathers business Semco.
After struggling for many years (close to bankruptcy) because of the high Brazilian inflation rate and poor business model, Ricardo was able to turn this all around. Within 8 years Semco had become one of Brazil’s fastest growing companies with a profit margin of 10% on sales of $32 million. Ricardo puts this down to his three core management techniques of profit sharing, employee implementation and the free flow of information. (Semler, 1989) These management schemes are not new, but Ricardo Semler was able to successfully implement these schemes into the Brazilian business environment, while other companies in Brazil and international companies such as Allis Chalmers failed.
Thus it is of question if whether or not New Zealand companies can do what Ricardo Semler did. Profit sharing The first of Ricardo’s management schemes is the idea of profit sharing and the effect it has on the employee. Profit sharing is formed on the bases that employees should receive a share of the profits of the company. Semler (1889) believes that the idea of profit sharing shouldn’t be a gimmick of management to try to motivate workers, but insists that mangers should make it easy for employees to directly see how their productivity affects company profits. Another way of looking at this idea is that if an employee can directly relate to the success of the company, with the amount of profits they will receive, employees would join with management to improve the business profitability and productivity. Bell and Hanson (1987) also believe that by implementing a profit sharing scheme into a business, employees will have a greater sense of identity with the company and have a greater share in the company’s success.
One example of successful implementation of this idea in New Zealand is Mac Pac. Mac Pac is one of New Zealand leading outdoor equipment providers. After 5 years of running the business, CEO Bruce McIntyre has implemented a profit sharing scheme into the business where Macpac distribute 20% of pre-tax profits to staff each year. Other business in New Zealand has followed this business model such as the CEO of GMT Associates New Zealand, who believes that “There are huge advantages in profit share because the staff becomes totally committed to the company” (Clark-Reynolds cited in Light, 1997, p. 34). What this leads to is a decrease in employee turnover and increase productivity of workers, because they now have a greater interest in the company’s success.
This translates into a more successful company. However New Zealand businesses wishing to implement profit sharing schemes should not just look at shop floor workers buy managers as well. Currently in New Zealand most profit sharing schemes involve shop workers in manufacturing and labour intensive industry e. g.
Kawerau pulp and paper mill. However, more New Zealand business are looking at incentive schemes such as profit sharing to motivate managers. Kelly Sinoski (2004) stats that a survey done by McBride HR of 200 New Zealand companies, a quarter had profit sharing schemes in place for high level mangers. Numerous businesses in New Zealand have profit sharing schemes were managers receive a part of the company’s profits once they have meet a certain target.
Of those surveyed, McBride said companies with the profit-sharing provisions believed that system was the greatest contributor to overall performance of the company’s success. (McBride. J, cited in Sinoski, K (2004) Like most management schemes however they can be a downside to profit sharing for workers and manager. In some cases in New Zealand managers have receive their profits even though they have not meet their targets. Research done by the journal Management (2004) suggest that up to 45 percent of new Zealand companies paid out to senior staff who achieved only 80 percent of performance targets. Also according to Kelly Sinoski (2004) this can be counter-productive and mean that executives could view a share of the profits as an entitlement, rather than a reward for high performance.
Although this may seem to be a disadvantage for businesses “on the face of it there are many more getting bonuses and profit sharing plans than there were five years ago” (Smith, 1996, p. 20). This leads us to believe that New Zealand business have been able to successfully incorporate this management scheme into their business and is encouragement for more New Zealand business to set up profit sharing schemes for themselves. Employee Participation The second management technique in which Ricardo Semler gives credit for the success of Se moc, and which can be better implemented into New Zealand businesses is the idea of employee participation and employee freedom. Employee participation in this sense is to give greater control to employees by making them more involved in the decisions making process which they face day to day and in long term (Smith, 1977). One of the ways in which managers try to give more freedom to employees is the formation of autonomous work groups.
What this process does is to break a up the workforce into smaller groups to carry out tasks. Autonomous work groups may be given control over certain decisions such as flexibility of hours, who does what task, work breaks and work methods. What management endeavor to do, is to make the employee feel a sense of belonging and heighten involvement in their job task. (Smith, 1977) In New Zealand many companies have done this, but one of the most successful is Tegel Chicken. Tegel Chicken after going through a bad patch in the industry changed its management approach in numerous ways, but one of the key successes was the formation of small work groups. The self-managing teams formed the backbone of this new employment regime at Tegel.
Because of this and other employee participation techniques Tegel notice an increase in productivity, improved profits and a decrease in employee turnover. Smith (1977) agrees that by allowing for greater job participation such as the introduction of autonomous work groups, it gives employees a greater degree of interest and commitment that allows for more creativity and variety. Leading to happier and more productive worker. This is not the case for all companies though.
Some New Zealand companies have found it hard to implement and change to the idea of small groups. One of these companies is Tomoana. This company was on of the largest meat processing plants in New Zealand. Having difficulties in the increasing competitive meat processing industry, the company tried implementing greater worker participation with one of their key aims to create a better company culture by forming work groups. However Foster & Mackie (2002) believe that after a while middle management experienced difficulty coming to grips with the concept of greater employee involvement after many years of authority and control, and saw their positions being undermined by team captains. Also Workers could see no visible change in the operation and many felt that working in teams and changing the foreperson / supervisor to team-leader was only cosmetic as the same person still controlled that section.
This issue has serious complications for managers who which to implement this idea into New Zealand business. One thing however that Foster & Mackie didn’t consider was the idea that if managers and employees couldn’t adapt that they should be fired or leave the company. Other authors such as Bell & Hanson (1987) believe that if managers are not up to the task and are afraid to adapt to a new environment that they should be let go. If other New Zealand business can realize this point, they may be in a better to position to implement this idea into their business. Flow of information The Last idea of Ricardo Semlers managing approaches is the importance of information and the free flow of it in companies. The free flow of information is vital for any business success.
What Selmer has done like many other businesses is tried to maximize information by sharing it with all employees. The main benefit, in which Killian & Perez (1998) sees, is that with free flowing information gives managers, team leader and employees the best information possibly to make an informed decision and to reinforce the idea of employee freedom. One example of a New Zealand company who has already implemented this idea successfully into their business is MacPac. As already mentioned earlier in this essay MacPac is one of a leading New Zealand firm that specialized in outdoor equipment. The way in which this business implements this idea is that information is easily free flowed between working groups.” At the interface between operating systems, teams work in cross-functional groups to make sure they have the information they need to make the best possible decisions, and solve problems that require multi-disciplinary input” (Macfie, 2001, p 12) Above Macfie (2001) illustrates this idea that with access to all of the different group’s information employees can make the best decision possible, given this information. This therefore leads to better business decisions that could improve the business.
In the case of MacPac thy offer any employee that contributes a bright idea that makes or saves the company over $500, he or she gets a day off. Incentives like this that helps greater information sharing can be implemented into any number of New Zeeland business if they are prepared to share information across their organization structure. The free flow of information in any business can also reinforce the idea of worker freedom and worker democracy. By allowing information to be shared employees feel more involved in decisions making process and can better understand how the company runs. Like Semco that rotates its staff yearly so that employees better understand the business, Tegel Chicken gives the option for staff to rotate jobs. What Tegel Chicken endeavored to do was enable employees to identify with the work by seeing the big picture of the chicken industry and for employees to see how their tasks impacted on the tasks of others.
Thus by doing so it started to give employees the freedom, independence and discretion to schedule and determine procedures to be used in carrying out their own work. (Maetzig, 1999). What this accomplished for Tegel was that employee’s believed that they had more freedom of in their job, which intern caused an increase in productivity. Conclusion As illustrated in this essay Ricardo Semler three core success techniques can be found in many of New Zealand business. These management techniques of profit sharing, employee participation and the free flow of information can be successfully implanted into existing New Zealand business. One key point that was made in this essay is that profit sharing can motivate workers into increasing their productivity and making them feel a greater part of the company’s identity.
Participation management was another issue raised in this essay. This was shown through the New Zealand company Tegel Chicken that has had great success in this area. Once Tegel Chicken had implemented this program of greater worker involvement in running of their jobs, they had an increase in productivity and profits. The last key issue raised in this essay was the importance of the idea of free flow of information between employees. By letting employees have access to information across all sectors of the business, it leads to them being able to make better informed decisions.
Because of this New Zealand businesses such as MacPac are able to make good decisions that lead to the company’s success. In this essay there were two key examples of business being able to use these ideas in the New Zealand business Environment. MacPac and Tegel Chicken both show how successful New Zealand businesses can be by adopting Ricardo Semlers the key point on management success. However it has to be noted that not all New Zealand companies have found success in these management techniques. Tomoana for example failed to comprehend the idea of employee participation and could not successfully implement this scheme into their business. Finally, it is clear from the evidence above that New Zealand businesses can successfully implement the three key management techniques raised by Ricardo Selmer.
This essay has already shown two New Zeeland businesses that have adopted these management techniques and it is encouragement for more New Zealand business to try and successfully use these ideas. Thus it has been shown that New Zealand business can adopt these techniques into their business environment and hopefully more businesses will do so. Reference list Bell, D. W, & Hanson, C. G. (1987) Profit Sharing and Profitability.
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