The Fall 2009 Sloan Management Review headlines two articles:

• The first article is called Why Your Failing Business Model Is So Hard to Leave and sees “inability to experiment” as a major culprit.
• The second, Have to Downsize? promises “the right way for your company”. This assumes that downsizing is an inevitable response to deteriorating trading conditions.

However Joshua Ramo, in his book The Age of the Unthinkable, argues that “in a revolutionary era of surprise and innovation, you need to think and act like a revolutionary”. He uses the Semco case to illustrate his thesis. This marine equipment firm survived Brazilian hyperinflation to become one of the country’s fastest growing companies by refusing to impale itself on either horn of the downsizing dilemma, usually framed in words like “shed 300 jobs now or 3,000 later?”

“Semler [Semco’s CEO] felt tremendous pressure to keep the firm alive. He brought in management techniques from American business schools. They didn’t help. He reorganized the firm along the lines of a Japanese kanban (just-in-time) management system. That failed too. Following the government’s decision to seize the bank accounts of most Brazilians in 1990, Semler and his managers met with employees in groups of one hundred at a time and confessed they were out of ideas. There appeared to be only two options: cut salaries, which would devastate many of the workers, who were narrowly surviving as it was, or lay off employees, sacrificing some of the company’s workers to save the rest. No one liked either choice. ‘We went on desperately searching for a third way out,’ Semler recalled. Finally, after some careful consideration, Semler’s employees proposed an alternative. They would agree to a dramatic pay cut in exchange for three things: a larger share of the profits; a 40 percent pay cut for Semler and the management team; and, to make sure they knew where the money was going, a member of their union cosigning every check the company wrote.  ‘At that moment,’ Semler wrote, ‘we had no profits to share, so there was nothing for us to lose and everything to gain.’”

The results were transformative. Ramo’s conclusion? “What kept Semco alive was the fact that, whether he knew it or not, Ricardo Semler wasn’t building a business so much as he was, in every decentralizing act, building an immune system.”

In short, Semler made it safe to talk, listened, and acted on what he heard. He created a Yala.

If you are struggling to escape a failing business model and want to avoid downsizing’s death-of-a-thousand-cuts, better to heed the message of the Sloan Management Review’s first piece than its second. Be ready to experiment and, more specifically, to experiment with a Yala.