Tag Archives: managerial system

To Stay Green

“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.”

But, We Have a Company to Run

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“But, we have an airline to run,” Samuel continued to object. “As chairman of the board, it is my primary responsibility to make sure we have the right person at the helm. It is not my responsibility to micro-manage you, meddle in the way you run things. But, the way you run things makes me wonder if we have the right person at the helm.”

“Look, Sam,” Catherine replied, “we can squeeze the legroom, rearrange the seating on the planes. We can start charging for checked baggage. We can add a service fee if someone wants a soda. But that is not our problem.”

Catherine looked intently at Sam, sitting at the head of the boardroom. In the periphery, she could see the logos of the other companies in the portfolio. Outbound Air was the company in trouble and she had been selected to turn it profitable. She continued.

“Sam, we have close to a thousand employees now. They work 40 hours per week. Economically, they depend on us. Our compensation system and job opportunities directly impact how they live, now, next week and next year. Their self-esteem, what they achieve in life, in large part, depends on the role they play for us. How we set expectations, how we define their working relationships, how we evaluate their effectiveness, all, have direct impact on their contribution. They come home at night, frustrated or satisfied based on how things went that day. The way we design the environment of their work has way more impact on our bottom line than any fees we may charge for luggage.”
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The saga of Outbound Air continues. Find out how Catherine got here.

Kiss Off

“Catherine, we hired you to run this company, and we want to give you free rein, but you must admit that some of your initiatives don’t translate into profit for this quarter.” Samuel Pierce was chairman of the board. He was not happy, but he was willing to listen.

“Sam, you didn’t hire me to focus on the next three months,” Catherine replied. “This company has some real problems that will take time to repair. In the short term, we will suffer. We will suffer some profit. I am not here to turn a single quarterly number. I am here to create a sustained profitability stream.”

“But, these employee initiatives are going to erode profitability. You want to change the wage structure. Your personnel plan adds in management overhead. These are long term things that will last beyond the next quarter. Are you sure you know what you are doing?”

Catherine took a moment. “On the surface, my role is to operate the business functions, define the metrics, create revenue and hold expenses. We can do that, and, in the short term, we can make a tidy profit. AND, my role is to create a sound and effective managerial system that will sustain those business functions. As CEO, right now, I have to focus on our people system, because it’s broken. As long as the people system is broken, you can kiss off all the rest.”
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The saga of Outbound Air continues. Find out how Catherine got here.