“Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy,” says Buffett. “And if they don't have the first, the other two will kill you. You think about it; it's true. If you hire somebody without the first, you really want them to be dumb and lazy.”
Buffett’s management style is as unique as the frugal lifestyle he chooses to lead. “We delegate almost to the point of abdication,” he says. While his company has almost 200,000 employees, less than 20 of those work from its Omaha headquarters. “Charlie and I mainly attend to capital allocation and the care and feeding of our key managers,” says Buffett. “Most of these managers are happiest when they are left alone to run their businesses, and that is customarily how we leave them.”
For Buffett, it is extremely important to hire the right people because he then gives them a tremendous amount of responsibility. He wants his managers to think and act like owners and he gives them a 10-20% stake in their company as an incentive to perform better. Despite running so many companies, Buffett ties the performance of each manager to their own business, not Berkshire Hathaway as a whole. Thus, each is treated on their own individual merits. He receives regular financial reports but otherwise, the only contact they have with Buffett is if and when hard times come. “If there is any significant bad news, let me know early,” he says as his only caveat.
Despite this, Buffett runs his company on a very personal level. “We can afford to lose money – even a lot of money,” he says. “We cannot afford to lose reputation – even a shred of reputation…It takes 20 years to build a reputation and five minutes to ruin it.” Thus, Buffett takes great pains to ensure that when he hires someone, they will add to that reputation and not take away from it. And, once they’re hired, he wants them to think of their business as a family operation. “Look at the business you run as if it were the only asset of your family, one that must be operated for the next 50 years and can never be sold,” he tells them.
The respect with which Buffett treats his employees is characteristic of how he approaches all his relationships. Even under the often-harsh glare of the media spotlight, Buffett is known for his professionalism. When an Italian journalist once asked him whether he had considered leaving his money to the U.S. government since it was already organized to address societal ills, instead of ridiculing the question, Buffett responded in seriousness and said that he believed the Gates Foundation would better deliver the services than the government. It is in part for this reason that in comparison to how fellow rich kids Bill Gates and Larry Ellison are treated by the media, Buffett has come under only relatively friendly fire.
“Working with people who cause your stomach to churn seems much like marrying for money – probably a bad idea under any circumstances, but absolute madness if you are rich,” says Buffett. By bringing in the best and then taking himself out, Buffett was sending the message that he had complete confidence in his staff. In turn, his staff rewarded him with hard work and loyalty.
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