photo credit www.evancarmichael.com
Warren Buffett, the CEO of Berkshire Hathaway and one of the world’s wealthiest people, is widely considered one of the most successful investors of all time. He is known for making shrewd and profitable business decisions and for being a suburb manager (Sorkin, 2011). It comes as some surprise then that Mr. Buffett employs a “hands-off” management style, which has worked extremely well for him (Stern). This style of leadership is referred to as Laissez-Faire, or delegative leadership, and often leads to low productivity levels (Cherry).
The characteristics of this style of leadership are:
1. Leaders provide little guidance.
2. Followers have complete freedom to make decisions.
3. Needed resources are provided by leaders.
4. Followers are expected to solve problems themselves (Cherry).
In Buffett’s case, however, this oft-maligned leadership style has had positive effects; by allowing his managers full autonomy, he has created an atmosphere where his employees feel confident and motivated by their extreme latitude (Stern). In Berkshire Hathaway’s 2010 Annual Report, Buffett states, ” We tend to let our many subsidiaries operate on their own, without our supervising and monitoring them to any degree. Most managers use the independence we grant them magnificently, by maintaining an owner-oriented attitude (Stern).”
The Laissez-Faire style can work if followers are motivated and highly skilled, but quite often, this is not the case (Cherry). Followers that are not highly skilled, competent, or good problem-solvers often end up failing at their tasks or not meeting their deadlines (Cherry). It would seem that Mr. Buffett has the ability to choose highly motivated and capable managers who thrive in a results-oriented environment. By choosing whom to place his trust in wisely, he is able to afford them the autonomy that they need to be successful.
References
Cherry, K. What is Laissez-Faire Leadership? Retrieved from http://psychology.about.com/od/leadership/f/laissez-faire-leadership.htm
Sorkin, A. (2011). Warren Buffett, Delegator in Chief. The New York Times. Retrieved from http://www.nytimes.com/2011/04/24/weekinreview/24buffett.html?ref=warrenebuffett
Stern, G. Why Warren Buffett’s Laissez-Faire Management Style Works. Investor’s Business Daily. Retrieved from http://www.marshallgoldsmithlibrary.com/cim/articles_print.php?aid=897
For a long time I have been intrigued by Warren Buffet. I enjoyed reading your analysis of his style, laissez-faire leadership. I try to watch any news show where he will be interviewed. I find him fascinating. Buffet’s sources of power come in every form, I feel. Even though he takes this “hands-off” approach to management, I feel as though his powers of influence keep his clients and employees loyal. Warren Buffet is a wonderful example of expert, referent, and legitimate power. He is an expert in his fields, has built respect and the label of role model to some giving him referent power, and is one of the wealthiest people in the world by his business transactions and is the top level of management giving him legitimate power. Buffet has acquired these powers over the course of his life and is looked to for financial and investing guidance and leadership skills. Thank you for your look into the leadership of Warren Buffet.
Hi Natalie,
Great point about Warren Buffet being a good example of how laissez-faire can actually be a very positive thing when done right. I think one of the most important differentiating factors between Buffet and many other leaders who implement the same style is first of the level of which he manages. He is at the top of the top, and the people he manages are highly capable executives. When managing at a lower level, the need for more direct feedback and support can mean that laissez-faire leadership does not fare as well.
The people he manages are already so competent and capable that entrusting them to do their work by giving them adequate levels of autonomy as opposed to micro managing them can mean that they perform at their prime and get a great deal of satisfaction out of what they do. I do not think this would be possible thought without having had a high quality highly competent team to begin with.
I find it interesting that this type of management leads to the managers adapting an “owner-operated attitude.” The business I work for was recently bought out and many changed took place. With the old company, the owners were very distant to the point where I worked for them for two years and never knew their names. The building managers had to report to a city manager, but overall, the buildings were classified as “theirs” and they operated them as such. Different buildings had different rules and achieved different levels of success depending on the managers. The new company is very corporate operated. Everything must follow the script set by the head people, random audits occur monthly and every decision must be approved by corporate. Although success was achieved in small amounts with the first company, they sold the locations because they were not profiting as much as they wanted. With the second company we have doubled what we made before and now are on the fast track to expansion. I think in this case, the managers took ownership of the buildings, but didn’t treat it as though if they failed, they would lose everything. The managers would change every couple years so to them the job was more of a transitional job until they found something better. With the new company, there is more of an ownership because if your building fails, you will lose everything.