Like many chief executives, Ricardo Semler used to wonder what would happen to his company if he were hit by a truck. One night in February 2005, he found out — while driving 85 miles per hour on a highway in Brazil.

Miraculously, he was still alive within the remains of his car. Also miraculously, his company, Semco Group, of São Paulo, Brazil, carried on seamlessly during the months he spent lying in intensive care and recuperating from multiple surgeries. Numbers were met, deals were closed, and business continued pretty much as usual.

Semco Group is currently market leader in the industrial equipment area and solutions for postal and document management. Mr. Semler, is the leading proponent evangelist of what has variously been called participative management, corporate democracy, and “the company as village.” A company based on innovation, Semco does not follow the standards of other companies with a predefined hierarchy and excessive formality. At Semco, people work with substantial freedom, and a lot of respect. Everybody is treated equally, from high-ranking executives to the lowest ranked employees. This means the work of each person is given its true importance and everybody is much happier at work.

Semco’s 3,000 employees set their own work hours and pay levels. Subordinates hire and review their supervisors. Hammocks are scattered about the grounds for afternoon naps, and employees are encouraged to spend Monday morning at the beach if they spent Saturday afternoon at the office. There are no organization charts, no five-year plans, no corporate values statement, no dress code, and no written rules or policy statements beyond a brief “Survival Manual,” in comic-book form, that introduces new hires to Semco’s unusual ways. The employees elect the corporate leadership and initiate most of Semco’s moves into new businesses and out of old ones. Of the 3,000 votes at the company, Ricardo Semler has just one. In the past 14 years, the company has grown 27.5 percent.

In Mr. Semler’s mind, such self-governance is not some softhearted form of altruism, but rather the best way to build an organization that is flexible and resilient enough to flourish in turbulent times. He argues that this model enabled Semco to survive not only his own near-death experience, but also the gyrations of Brazil’s tortured politics and twisted economy. During his 23-year tenure, the country’s leadership has swung from right-wing dictators to the current left-wing populists, and its economy has spun from rapid growth to deep recession. Brazilian banks have failed and countless companies have collapsed, but Semco lives on.

The Theory of Participative Management

As proposed 45 years ago in a book called The Human Side of Enterprise, by Douglas McGregor, one of the founders of the field of organizational development, participative management says that organizations thrive best by trusting employees to apply their creativity and ingenuity in service of the whole enterprise, and to make important decisions close to the flow of work, conceivably including the selection and election of their bosses. Underneath this is a view of human nature that Professor McGregor called “Theory Y,” which holds that ordinary people don’t have to be managed with the “carrots and sticks” of incentives and controls. Instead, people are naturally capable of self-direction and self-control, even in a corporate or bureaucratic setting, if they’re committed to the organization’s goal and if they are treated as mature adults who can learn from their actions and errors. Participative management has inspired a fiercely dedicated following, and many managers find it appealing and compelling in principle, but it is often dismissed as utopian and naive in the real world of conventional workplaces


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