Over the past few days, many of us read or at least heard commentary on Mr. Buffett’s letter to the shareholders of the investment firm he manages, Berkshire Hathaway Inc. (BRK) We found out that he was disappointed with his company’s “subpar” value increase of only 14.4%. Wow, most of the cash located in our bank accounts, barely does 1% and you are lucky to get 5% from most other investments, which carry much more risk. Almost anyone would love to be able to get a 14% return on their investments.
On a dissimilar note, we look at the diminishing fortunes of the Dallas Cowboys and their owner, Jerry Jones. Although Mr. Jones has won financial success, he has not enjoyed as much success on the field in recent years, which eventually will lead to dismal earnings for his football team.
Why has Mr. Buffett been so successful over the 48 years he has been managing his firm, while Mr. Jones has done so poorly? They are both successful, in terms of wealth, and they both manage well respected organizations. But there is a big difference in their style of management. Mr. Buffett manages from afar, while Mr. Jones manages with a microscope. Mr. Buffett looks at the big picture, while Mr. Jones looks at each and every detail. Sometimes I am surprised to see Mr. Jones in his owner’s suite and not on the field calling every single play.
When reading the BRK shareholder letter, we read numerous congratulatory comments and thanks to several different operating managers. Mr. Buffett finds companies that are well run and sits back and watches them perform. He has well defined incentive plans in place that allow the individual managers to run the show however they feel inclined and then reward those managers for their accomplishments and success.
He looks at monthly, quarterly and annual financial information and analysis and studies the overall picture very carefully, then may adjust or persuade the individual managers to fine tune a thing here or an item there. But he is mostly a hands-off owner.
Maybe we all can learn something from Mr. Buffett. In our own businesses we should find competent employees and managers and allow them to implement their ideas, after all, they are the hands on people involved in the various processes, divisions, product lines and such. One person cannot do it all. Mr. Jones cannot be owner, general manager, coach and whatever and find long term success. It will not work. That type of system is doomed to fail at some point.
So, find the right people, stay out of their way as much as you can, let them make a few mistakes but then watch them soar and watch your company soar along with them. Good luck.