Warren Buffett (Trades, Portfolio) boasts a 50-year record of success as a CEO. So why hasn’t corporate America done more to imitate his management style? Blame executive-suite timidity”‰…”‰and Wall Street.
Warren Buffett (Trades, Portfolio) is regarded as the best investor of our time; arguably, his management record is just as singular. He took over as head of Berkshire Hathaway (BRK.A) 0.40% in May 1965 –Â 50 years ago. And he is still at it. Think about that. Alfred P. Sloan, perhaps the most storied CEO in American business, ran General Motors (GM) -1.05% for 23 years. John D. Rockefeller ran Standard Oil for 27. In recent times, Bill Gates (Trades, Portfolio) was CEO of Microsoft (MSFT) 1.00% for 25.
But here’s the thing. Investors around the world avidly mimic Buffett’s investment approach, yet it’s fair to say his managerial model has had zero impact on the corporate culture. Charlie Munger (Trades, Portfolio), Buffett’s longtime partner and Berkshire’s vice chairman, says the “Berkshire system” is essential to its success. Nonetheless, Munger wrote in this year’s annual shareholders letter, “No other large corporation I know of has half of such elements in place.”
One hallmark of Buffett’s management is unusual attention to capital allocation (for Buffett, adding a company to Berkshire is akin to adding a stock to an investment portfolio). But once he makes an acquisition, he almost never sells and gives managers extreme autonomy. Another is shunning of bureaucracy. Berkshire has no processes to standardize the more than 60 operating units it owns, no companywide budgeting for a conglomerate with 340,000 employees. A third hallmark is renunciation of familiar rituals that, in Buffett’s view, promote short-term thinking. Thus, no earnings guidance, no regular stock splits, no stock options.
Admittedly, not every aspect of Buffett’s style would fit every business, and you can argue that elements of his approach can lead to problems. (More on that later.) But over the half-century of his management, Berkshire’s stock is up 12,000 times while the Dow Jones industrial average is up 18 times. Berkshire’s market cap is $350 billion, the third highest in America. You’d think some manager would find something worth imitating.
continue reading: http://fortune.com/2015/04/21/warren-buffett-the-manager/
