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Pros and cons of self-governing companies as exemplified by Semco and Zappos

Today we’ll talk about the advantages and disadvantages of organizations that are managed not by a group of managers, but by each employee. Specialists will find out whether it is worth getting a job in such a company, and entrepreneurs will decide for themselves whether they are ready to choose the path of self-government and release the reins of control.

So, let’s imagine that an ordinary worker in one of the Russian companies had a brilliant idea on how to reduce production losses. From this moment, he has several options:

do nothing, following the principle of “initiative is punishable”;
go to the immediate boss and try to convince him of the prospects of the proposal;
Describe your thoughts and send them to a special mail to collect ideas, if any.
In all these options, the chance that the idea will be realized, even if it is really sensible, tends to zero. The boss may not realize the value of the proposal, and top managers can’t get to the mailbox, which they started several months ago, following the fashion.

However, there are companies in which the worker may not wait for the approval of his superiors, but take and independently implement his idea together with his colleagues.

Let’s look at the pros and cons of self-governing organizations using the example of the most famous companies with this form of management – Semco (a Brazilian company manufacturing and servicing industrial equipment, 3,000 employees) and Zappos (an online shoe store, 1,500 employees).

Let’s start with the pros. At the beginning of the article, we already mentioned the speed of implementation of ideas – and this is the main plus of such companies. They are very flexible and quickly adapt to changing conditions. Large companies with more than 1000 people that practice self-government are not inferior to startups in the speed of decision-making. How do they do it? For example, in Zappos, employees do not have positions with clearly defined responsibilities that may not be relevant when changing the conditions and goals of the company. Instead, each employee takes on several roles (on average 7), which are determined by the specific tasks of the company and the abilities of the employee. Roles are much easier to change than to enter or remove a specific position.

As for Semco, the secret to the flexibility of a production monster with 3,000 employees lies in the fact that more than half of them work in satellite companies – venture enterprises within Semco. Satellites themselves take care of their effectiveness and determine a development strategy.

Another important plus of self-government is that only in such companies do people really feel like part of a team. The strongest corporate culture based on trust is formed here. Employees are allowed to decide for themselves how they can help the company achieve their goals, and no one controls them. It makes no sense, since everyone understands that he has all the powers to influence the result and earn more, and also satisfy such an important need for self-realization. So, at Semco, employees themselves decide what to produce, when to come to work, with whom to work, and even how much to earn.

Any change in the company is a pain. Even the implementation of a CRM system turns out to be a difficulty that not everyone can cope with. And the project of introducing a new organizational structure is a change in the very essence of the organization, its heart, and success here is more likely an exception than a rule. And even in this case, such a transformation is not a matter of one day. Ricardo Semler, the owner of Semco, transferred power to his employees for 30 years, but today he complains that there are still decisions that he has to take part in, and at Zappos they have committed at least 5 years to implement holacracy.

For this reason, it is easiest to introduce self-government at the start-up stage, while the company is still young, flexible and has few employees. Then self-government will develop in a natural way and organically interweave in the workdays of the company. The main thing is not to lose the fuse and continue to maintain this order as you grow.
So, Ricardo Semler believes that the whole difficulty in switching to self-government lies in the heads of owners and top managers who are not ready to give up control and believe in people. Only if employees are fully trusted and given freedom of action, they reveal their potential and respond with full commitment, which contributes to the growth and prosperity of the company. But when the owner initially believes that people are able to work exclusively from under the stick and only think about how to get a bigger salary, it will not work to introduce self-government. This form of management requires a fundamental change in the thinking of entrepreneurs.
Despite serious restrictions, the advantages of self-government are outweighed, and there are more companies every year that implement these principles. According to information from the site, more than 1000 companies have already transferred to Holacracy following Zappos.

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