Semco’s Approach To Strategy
Semco’s Approach To Strategy
Introduction
One can regard SEMCO to be one of the most appealing organizations on the planet as it does not have job titles and personal assistants. In the organization, individuals set their own salaries as there is sharing of profits among everybody. This may look like courting disaster but; instead, the organization has continuous growth for the last twenty years. This is despite operating in one of the most volatile economies in the world. After handing over of the company to Ricardo, massive changes took place. The stimulation of these changes was as a result of disastrous performance the company was going through at the time. There was firing of most of the top managers, and there was the elimination of most management layers. There was also elimination of most of the job titles, and trading of titles by half a dozen senior managers every six months. Other changes included executives setting their own pay as workers set their own working hours. There was also ensuring the provision of company financial statements to all employees, as the labor union held classes on how to interpret the statements. Another change was employees choosing their own managers by way of vote. Evaluation of these managers took place often, as there was public posting of results. This is the organization environment that led to employees leading the organization, without relying on any executives. Gale, B. (1987).
Diverse schools of thought on strategy
The boundary school of thought
Increased international competition has led to the blurring of the boundaries of industry and uncertainty. This has led to organizations increasingly turning to their core activities. Organizations continuously strive to make attempts of enhancing their flexibility and innovation. Christensen, Clayton (1997). With regard t the approach of strategy of these new developments, firms opt not to make everything themselves. They rather opt to concentrate on their core competencies as they contract the other areas of the production process to other specialists. For this school, there are essential considerations such as what are the pros and cons of performing it yourself and contracting out. Andreas Moerke (2004). Another consideration is the time when cooperation is preferable to engaging in the activities as a company. The other consideration is the management of these dynamics. The SEMCO’s approach to strategy can have a challenge on this school of thought.
As the boundary school of thought has considerations on who should manage the dynamics, SEMCO’s strategy is clear. There is involvement of all employees and existing management on the current dynamics.
The Dynamic Capability School
The dynamic capability school has consideration of strategic management as a collective learning process. This process has the aim of creating distinctive capabilities that are hard to imitate. This school has no focus on development of an optimal strategy through industry and segment selection. It also has no focus on the manipulation of market structure for the purpose of developing market power. The school of thought rather has a more inward approach to strategy. In a situation where markets are in a state of flux, the school of thought has its emphasis on an internal approach. Internal capabilities and resources of a firm would seem to be a more suitable basis for strategy formulation. This is in contrast to external customer focus which has traditional association with marketing orientation to strategy. Evens, P. (1997)
The school of thought deals with strategies that involve how an organization is going to develop firm capabilities. It also has to do with how an organization will create capabilities that are complementary or will substitute existing capabilities. It also involves the determinants of successful development routes and how an organization measures or determines its collective capabilities. The notion of dynamic capability has relations with the concept of resources. The school of thought relates to an organization’s capabilities in using existing resources. It also relates to creating new resources and new methods of using current and new resources. In this school of thought, approach to strategy also has relation to examination of the concept of competence. This is because the concept of competence extends to the concept of resources and dynamic capabilities. Mulcaster, W. (2009).
The school makes an argument that the strategy of a knowledge intensive firm may have relations to the development of capabilities. This may have an impact on transforming the firm’s extensive individual and organizational knowledge resource into core competences. It is such competences that have a consistent, superior value to clients. SEMCO’s approach to strategy may have a challenge on the approach to strategy by the dynamic capability school. This is with regard to the making of decisions such as what internal capabilities and resources are of use for an organization. In the dynamic school of thought, the responsibility of such determination may be with top managers. This, however, is not the case with SEMCO’s approach to strategy, where there would be involvement of employees.
Success of SEMCO without any written strategic plan
SEMCO started witnessing the success after the entry of Ricardo whose joining of the company came when he was nineteen. At that moment, Ricardo was of the view that the company was having too much business from one industry and made recommendations for diversification. This is an approach to strategy which would result to the organization spreading its risk. Ricardo was also of the view that was not practicing appropriate financial practices, and that the existing practices ought to undergo changes. After he had got full control if the organization, set to work on designing and implementing a diversification strategy. This was with the aim of changing the manner in which business and planning took place.
After a duration, of one of the managers made a suggestion to Ricardo that they should develop self manages teams. The teams would have six to eight production workers who would have entire control of all aspects of production. It was the freedom of employees to set their own budgets and production goals that saw the company start improving. Another strategic aspect that made a contribution to the success of the company was tying of compensation to budget and production performance. This had significance consequences as there was a reduction in costs while productivity and profits increased. Ansoff, I. (1995).
In 1985, one of his managers made a suggestion to Semler that he should generate self-managed teams of six to eight production employees who would be fully in charge of all features of production. They lay down their own budgets and production goals. Payment was then attached to budget and manufacturing output. Costs went down. Productivity and profits went up. Gary (2002).
Another open strategy that led to success of the company was the incorporation of profit sharing. In the organization’s system network, employees had about a quarter of the net profits from their division. The twist had to do with the manner in which distribution of profits took place. There was democratic election of a committee that had the responsibility of designing the program for allocation of the profit sharing funds. Workers had the right of approving the expenditure, and this made it possible for there to be accountability. Champy, J. (1993).
Another aspect that had an impact on the success of the company is the handling of multiple job responsibilities by workers. There was also using of worker’s knowledge of how the company would develop new procedures that would save time and money. There was dividing of workers among themselves into smaller groups where each unit had its responsibility. There was the adoption of this autonomous team idea throughout the company. These autonomous teams had a contribution to the success of the corporation since there was an increase in efficiency. It would be possible for groups to deal with various issues hence an increase in accountability. Alfred (1992).
Currently, the organization does not have any traditional management hierarchy or typical organizational chart. It also does not have any matrix or lattice management structure. The company has an increase of its effectiveness due to the autonomous units that operate on a democratic basis. The organization also has a model of concentric circles. The history and approach to strategy of this organization provides a clear path of success. This is success that has its basis on how to adapt to changing environments and how organizations can truly arrive at success. With extremely few exceptions, most of the creative ideas did not come from the chief managerial administrator of the organization. They rather came from the employees and other managers in the organization. This portrays the quality of approach to strategy by Ricardo by implementing the concept of empowerment. It also shows how success came about due to allowing and supporting changes. These are changes that other mangers and executive officer would view as taking away their power. Hamel, G. (1994).
Complexity theory
Complexity theory, complex adaptive organization or complex theory and organizations are the use of complexity theory in strategic management and organizational studies. The application of this theory is in comprehending how firms or organizations adapt to their environments. It also has to do with how companies deal with conditions of uncertainty. The theory deals with organizations as collections of structures and strategies. The structure is complex, with consideration that organizations are dynamic networks of interactions. Complexity theory also considers that organization’s relationships are not aggregations of the individuals’ static entities. They are rather adaptive, in that the individual and collective behavior mutates and self organize according to change. Gerard H. Seijts (2006).
Complexity theory looks at the manner in which factors such as global macroeconomic network, holding companies and stock markets affect organizations. The business environment is characteristic of growing dynamics and diversity. The ambiguity and rapidness of the business environment require organizations to continuously evaluate their strategies. This is essential in order to be capable of coping with the external complexity and to improve the competitive position of a company. Kathleen M. (2005).
Practical lesson from SEMCO’S experience
There are practical lessons from the experience of SEMCO which other organizations can use in order to improve their competitiveness. One of the lessons is that managers should not force people to expand businesses beyond their natural limits. They should rather encourage employees to come up with new, innovative ideas that can create more business for an organization. Boyden(1994). The experience of SEMCO also introduces individuals to an extremely clear business philosophy. This is that managers should provide an environment in the organization where employees can do what they want. This is as long as the actions of the employees provide opportunities for growth of the organization. Such an environment would enable employees to be creative and innovative since they know that there can be implementation of their ideas. Whittington, R. (2008).
Another practical lesson is that removal of management layers enables a large number of employees to have a feeling of autonomy. It also ensures that there is accountability as there is a division of responsibilities among the various groups of employees. This kind of strategy, therefore, calls for elimination of the top line management that leaves decision making for a small number of individuals. These individuals make decisions for the entire organization without consultation of lower level employees. Such practices leave out opinions from employees that may be of substantial aid for the organization. Tichy, Noel (1993).
Conclusion
The approach strategy by SEMCO is one that allows the development of numerous ideas from employees. This is because of the existing environment in the organization where employees have the autonomy of making decisions. Such an environment results to employees improving on their productivity since their pay is dependent on the profits of the organization. It is also a source of motivation for employees and this result to an increase in output. Increase in motivation also results to an improvement on the quality of output by the employees.
Reference:
Andreas Moerke (2004) Corporate governance in multinational corporations during turbulent times-cases from the automotive industry.
Gerard H. Seijts (2006) Learning goals or performance goals: Is it the journey or the destination?
Kathleen M. (2005). Organizational change from the perspective of chaos theory. Strategy as structured chaos. London.
Whittington, R. (2008)Exploring Corporate Strategy, , FT Prentice Hall, Essex.
Ansoff, I. (1995)Corporate StrategyMcGraw Hill, New York.
Gale, B. (1987) The PIMS Principles: Linking Strategy to Performance, Free Press, New York.
Hamel, G. (1994)Competing for the Future, Harvard Business School Press, Boston.
Champy, J. (1993)Reengineering the Corporation, Harper Business, New York.
Mulcaster, W. (2009) “Three Strategic Frameworks,” Business Strategy Series, Vol 10, No 1.
Gary (2002)Leading the Revolution. New York.
Tichy, Noel (1993) Managing Strategic Change: Technical, political, and cultural dynamics. New York.
Christensen, Clayton (1997) “The Innovator’s Dilemma,” Harvard Business School Press, Boston.
Evens, P. (1997) “Strategy and the New Economics of Information”,Harvard Business Review.
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