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A business model that believes in people

More than 20 years ago I was a non-executive director of an NHS trust. In this capacity I attended an NHS conference in Glasgow at which there was a keynote address by a young Brazilian called Ricardo Semler. He told the story of the struggle he had with his father over the business model they used at their company. The Semlers ran an engineering company in São Paulo. The father, Antonio Semler, had built up a successful business with a typical Brazilian autocratic style of management. The oil and water views of father and son were difficult to mix and Antonio relinquished control to Ricardo when he was just 21 years old.

Ricardo believed in a company in which the employees had much more control. We are not talking about a communist run organisation; we are talking about something that is almost the opposite. Ricardo wanted complete transparency about the way the company was run – salaries of all executives were known by everyone, profit margins and revenue performance was accessible to whoever asked. It wasn't an easy transition to make. On the first day of his responsibility as CEO of the company Ricardo fired 60% of the senior managers. It was necessary to change the culture of the company if his new regime was to succeed and this was impossible if his management team had the wrong mind-set.

Control is critical to most managers. They have targets to meet and means by which these will be achieved. Relinquishing control is scary. Managers have to answer to a board which has to answer to shareholders on a weekly, monthly or 90 day mandate. There is little incentive to back ideas that require an act of faith. Ricardo's business model has paid off. The company has grown from revenues of $4 million per annum when he took over responsibility through to revenues of hundreds of millions of dollars today in a diversified group producing equipment for rockets, managing ATMs, and financial services. It employs thousands of people around the world.

Central to the Semler business model is the idea of personal responsibility. Employees are respected to the point that they can make their own decisions about the business. They can decide how much holiday they should take each year, whether their bosses are doing a good job, how they can improve customer experience, how the company should be run.

The model has proved successful for Semler and it raises the question why it hasn't been adopted widely by other companies. The answer almost certainly lies with the ownership of the organisation. Privately run businesses can take the Semler long-term view. Richard Branson has embraced the idea of free holidays. In 2014 he announced on his website that his staff of 170 people could "take off whenever they want for as long as they want" - without approval. It fits in with his "screw it, let's do it" approach that would be too cavalier for most large corporates.

Take a look at Ricardo Semler giving a TED talk https://www.youtube.com/watch?v=-d0fxkoX0i8 . His approach may not be universally accepted by everyone, but surely everyone can learn something from his approach.

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