“You continue to use the term managerial system,” I started. “What do you mean?”
“In the beginning, in a startup, every company is haphazard, organizing the work around the people they have. At some point, there is still work left over and the founder realizes work can no longer be organized around the people, we have to organize the people around the work. Specialized roles emerge. And, then those roles have to work together.”
“And the system?” I asked.
“Roles cannot be haphazard, working together cannot be haphazard, too much friction against profitability. I have seen companies work extremely hard and never make a profit. Eventually, they have to make a profit or the company dies (a long slow death exasperating death). For a company to survive and be profitable, they have to create a managerial system, what we call structure.”
“Structure?” I prompted.
“Organizational structure is simply the way we think about, often on paper, the accountability and the authority in the working relationships between people,” Pablo stopped. “Two types. Vertical managerial relationships and horizontal cross-functional relationships.”
“And this structure is important for profitability?” I clarified.
“Yes, and, this structure is important for the sustained creative output of the people who work in the company. Because without that, the company will also die, become a corrosive institution where no one wants to work.” Pablo paused again. “To stay green and growing, the managerial system has to be vibrant and well-thought-out.”