Ricardo Semler and New Zealand
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Introduction
The biggest challenge facing any business today is change. Ricardo Semlars approach to management revolutionized they way in which Secom did business. However it is of question if Semlars model of business can be successfully transplanted into New Zealands business environment and change the way in which they operate. This essay will therefore discuss if Ricardos 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 profit sharing 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 Semlars 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 Semelr 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 Brazils 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 Ricardos 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 shouldnt 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 companys 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 GMV 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 companys 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 companys 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 companys 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 Semoc, 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