2014

Leadership Style OF Warren Buffet

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Warren Buffet- Defining new meaning of business to world.

Leadership Style Of Warren Buffet- Warren Buffet has transformational style of

leadership.

Warren Edward Buffett, he is the third richest person of the world. He is an

American business magnate, investor and philanthropist. In 2012 Time named him as one of the world's

most influential people. Buffett is called the "Wizard of Omaha" or "Oracle of Omaha", or the "Sage of

Omaha and is noted for his adherence to value investing and for his personal frugality despite his

immense wealth.

Business Life - Buffett worked from 1951 to 1954 at Buffett-Falk & Co. as an investment salesman; from

1954 to 1956 at Graham-Newman Corp., as a securities analyst; from 1956 to 1969 at Buffett Partnership,

Ltd. as a general partner and beginning in 1970 as Berkshire Hathaway Inc Chairman and CEO.

By 1950, at 20, Buffett had made and saved $9,800 (over $96,000 inflation adjusted for the 2014 USD. In

April 1952, Buffett discovered that Graham was on the board of GEICO insurance. Taking a train to

Washington, D.C. on a Saturday, he knocked on the door of GEICO's headquarters until a janitor

admitted him. There he met Lorimer Davidson, Geico's Vice President, and the two discussed the

insurance business for hours. Davidson would eventually become Buffett's lifelong friend and a lasting

influence, and would later recall that he found Buffett to be an "extraordinary man" after only fifteen

minutes. Buffett wanted to work on Wall Street, however, both his father and Ben Graham urged him not

to. He offered to work for Graham for free, but Graham refused.

He worked as a stockbroker while taking a Dale Carnegie public speaking course. In 1957, Buffett

operated three partnerships. He purchased a five-bedroom stucco house in Omaha, where he still lives, for

$31,500. Buffett operated five partnerships that year. In 1959, the company grew to six partnerships and

Buffett met future partner Charlie Munger. By 1960, Buffett operated seven partnerships. He asked one of

his partners, a doctor, to find ten other doctors willing to invest $10,000 each in his partnership.

Eventually eleven agreed, and Buffett pooled their money with a mere $100 original investment of his

own. In 1961, Buffett revealed that Sanborn Map Company accounted for 35% of the partnership's assets.

He explained that in 1958 Sanborn stock sold at only $45 per share when the value of the Sanborn

investment portfolio was $65 per share. This meant that buyers valued Sanborn stock at "minus $20" per

share and were unwilling to pay more than 70 cents on the dollar for an investment portfolio with a map

business thrown in for nothing. This earned him a spot on Sanborn's board.

In 1962, Buffett became a millionaire because of his partnerships, which in January 1962 had an excess of

$7,178,500, of which over $1,025,000 belonged to Buffett. He later claimed that the textile business had

been his worst trade. He then moved the business into the insurance sector, and, in 1985, the last of the

mills that had been the core business of Berkshire Hathaway was sold. Buffett wrote in his letter: "...

unless it appears that circumstances have changed (under some conditions added capital would improve

results) or unless new partners can bring some asset to the partnership other than simply capital, I intend

to admit no additional partners to BPL."

In a second letter, Buffett announced his first investment in a private business — Hochschild, Kohn and

Co, a privately owned Baltimore department store. In 1967, Berkshire paid out its first and only dividend

of 10 cents. In 1969, following his most successful year, Buffett liquidated the partnership and transferred

their assets to his partners. Among the assets paid out were shares of Berkshire Hathaway. In 1970,

Buffett began writing his now-famous annual letters to shareholders. However, he lived solely on his

salary of $50,000 per year and his outside investment income. In 1979, Berkshire began the year trading

at $775 per share, and ended at $1,310. Buffett's net worth reached $620 million, placing him on

theForbes 400 for the first time.

In 1988, Buffett began buying Coca-Cola Company stock, eventually purchasing up to 7% of the

company for $1.02 billion. It would turn out to be one of Berkshire's most lucrative investments, and one

which it still holds.

Buffett became a paper billionaire when Berkshire Hathaway began selling class A shares on May 29,

1990, with the market closing at US$7,175 a share. In 1998 he acquiredGeneral Re (Gen Re) as a

subsidiary in a deal that presented difficulties—according the Rational Walk investment website,

"underwriting standards proved to be inadequate," while a "problematic derivatives book" was resolved

after numerous years and a significant loss. Gen Re later provided reinsurance after Buffett became

involved with Maurice R. Greenberg at AIG in 2002. In 2002, Buffett entered in US$11 billion worth

of forward contracts to deliver U.S. dollars against other currencies. By April 2006, his total gain on these

contracts was over US$2 billion. In 2006, Buffett announced in June that he gradually would give away

85% of his Berkshire holdings to five foundations in annual gifts of stock, starting in July 2006—the

largest contribution would go to the Bill and Melinda Gates Foundation.

In 2007, in a letter to shareholders, Buffett announced that he was looking for a younger successor, or

perhaps successors, to run his investment business. Buffett had previously selected Lou Simpson, who

runs investments at Geico, to fill the role; however, Simpson is only six years younger than Buffett.

On 14 August 2014, the price of Berkshire Hathaway's shares hit US$200,000 a share for the first time,

capitalizing the company at US$328 billion. While Buffett had given away much of his stock to charities

by this time, he still held 321,000 shares worth US$64.2 billion. On 20 August 2014, Berkshire Hathaway

was fined $896,000 for failing to report the 9 December 2013 purchase of shares in USG Corporation as

required.

Dimensions of his leadership style i.e. transformational style of leadership-

Idealized influence

Inspirational Motivation Intellectual Simulation

Individual Consideration

Idealized Influence: He is a charismatic role models who lead by examples. Every person say it

Bill Gates, Barac Obama, Dr. Manmohan Singh, Mark Zukerberg etc are his followers and they

all admire his business strategies. In 2007 and 2008, when the entire world was facing recession,

he not only motivated his employees to perform in double sense but also asked them to contribute

for the upliftment of US economy. At his organization employees are provided a common

purpose.

Intellectual Simulation- He also encourages innovation and creativity through challenging the

normal beliefs or views of a group. Legendary investor Warren Buffett has many monikers.

Oracle of Omaha. Champion of philanthropy. Fun loving banjo player. As the chief executive and

primary shareholder of Berkshire Hathaway, Buffett has built an empire by taking big stakes in

companies he believes in, particularly those that are easy to understand. Many of those businesses

are recognizable brands in consumers' everyday lives—from ketchup to chocolate.

Inspirational Motivation: Warren Buffet doesn’t believe in big meetings. He is famous for his

time management. In an year, he write only one letter and in that letter he writes only two

statement which is the vision of his organization. He keeps on reminding and motivating

associates to commit to vision of the organization.

Individual Consideration: He acts as a coach and advisor to his employers and employees.

Warren Buffet

Leadership Quality-

Democratic Kind of Leader

Very Organized Personality

Clear Vision Mission and Goal

Respect his employees

Works with his intelligence

Man of principles

Great motivator

Tries to learn from all

Great Passion to take his organization and his employees at the top.

Always deals with reality

He always gives chance to people to come up with new innovative ideas and also executive it in the

manner they want. He calls his organization being run by the people. Warren buffet always takes time

before investing any was and that is the reason while in 2002 and 2008, world was suffering from

recession, his organization still took charge on the investment. He always moves with a clear Vision,

Mission and Goal he and his organization have to achieve and that is how he has always lead his

organization on the path of success. Time magazine published the way Warren Buffet does work with his

employees. In that a small interview of one of the employees had been published. According to that

interview, Warren Buffet respects the work of the employees and always showcases all the work with the

name of the person who did that work. That particular work is known by the name of that person only.

Works with his intelligence- Greatest quality needed in any leader is that he must work with his

intelligence and that is the kind of person Warren Buffet is. He knows where to invest and how much to

invest so that he could drive profit out of his. In almost business, he invested; he got good return, not

because he is lucky but because he properly analyzes the risk and return from that particular investment.

Warren buffet is known for his principles. He has High value of integrity and honesty. He never got

engaged in any mal-practices. He always carried his business with honesty. If you talk about tax return, he

pays advance tax. He reaches in office before time. He never invests any extra amount in his leisure and

comfort. Warren Buffet has great motivating skills. He keeps on motivating his employees to work

superior. In 2007, when every company was throwing its employees out due to recession, Warren Buffet

took risk and didn’t do the same and kept on motivating his employees to work best of best and that was

the reason in 2011, his organization had been able to file 150% return out of all investment. He never

feels shame to learn from his subordinates and when he finds any suggestion good, he does implement it

quick. Since the very beginning he moved with one thing in his mind and that was to be a great

businessman and this lead him to build his own organization. Though he is successfully running his

organization but he never leaves the same joy, enthusiasm anywhere. Warren buffet deal with reality.

Whenever he makes any plan, he predicts the future and also what will be its implication in the present.

He always deal with real things not with what could happen. He is known as real-time businessman.

Transformation he brought-

Warren Buffett with his strong business sense transformed a clothing manufacturer, Berkshire Hathaway,

into a giant holding company that consistently outperforms its stock market peers. By purchasing the best

equipment available at the time and hiring talented writers, publishing icons Joseph Pulitzer and William

Randolph Hearst represent transformational leaders of their industry. These transformational leaders

provided an inexpensive communication mechanism to the average citizen and published information on

volatile topics including politics, religion and worldwide event.

Warren Buffett, the legend of long-term investing, can’t always rely on the same tricks.

At the recent Berkshire Hathaway annual shareholders’ meeting, Buffett was the subject of some

unusual criticism for his decision not to vote against Coca-Cola’s executive compensation plan — a plan

he publicly opposed. Many people weretaken aback by Buffett’s uncharacteristic behavior of neglecting

shareholder interests, especially considering how vehemently he has defended shareholders in the recent

past.

But in Buffett’s early days, he actually engaged in numerous activist investments, including his takeover

of Berkshire Hathaway. Much like today’s most notorious activist investors (Carl C. Icahn, Bill Ackman),

Buffett made a name for himself by identifying market inefficiencies that could be exploited for the

benefit of his investors and public shareholders. But unlike the corporate raiders of the 1980s, Buffett

wasn’t out to tear companies down. In fact, he wanted to help build them up.

Here’s a look back at some of Buffett’s most notable activist campaigns and how he’s adjusted his

approach to take advantage of a constantly evolving investment environment.

Sanborn Map

In 1958 Buffett bought a major stake in the Sanborn Map Company, a publisher of detailed maps of all

US cities and towns. Buffett noticed that the company had built up a sizable investment portfolio, so he

joined with other shareholders to lobby the board to realize the value of the portfolio. The board had

virtually no ownership of the stock — a telltale red flag for today’s activist mavens — and protested the

efforts of the “outsider” attempting to make change. But Buffett ultimately got what he wanted when

Sanborn Map executives voted to exchange a portion of their investment portfolio for company shares,

narrowly avoiding an ugly proxy fight.

Buffett says that Beware of corporate executives with minimal stock ownership. Their interests likely

won’t be aligned with common shareholders.

Dempster Mill Manufacturing Company

In 1961, Buffett obtained majority control of Dempster, a manufacturer of farm implements and water

systems, purchasing 80% of the stock at nearly a third of its value. Initially, Buffett worked with the old

management to try to improve operating numbers, but the effort proved fruitless. Instead, Buffett brought

in his own manager to clean up the balance sheet by getting rid of slow-moving inventory and selling off

unprofitable facilities. The company quickly became profitable again, allowing Buffett to exit his

investment in 1963 with a nearly threefold gain.

Buffett says that, “try working with current management to improve the company. If it doesn’t work,

don’t be afraid to cut the cord and move on.”

Berkshire Hathaway

Beginning in 1962, Buffett began buying up shares in textile manufacturer Berkshire Hathaway, and by

1965, he had acquired majority control of the company. Buffett then met with management and offered to

sell his shares back at a discounted rate, but the company lowballed him. Infuriated, Buffett forced out the

management team and installed Ken Chace as manager. Since then, the company stock has soared by

about 500,000% (no, that’s not a typo).

Buffett believes that- If you can’t trust someone to keep their word, you probably can’t trust that person

as a business partner.

Coca-Cola

Buffett first bought Coke stock in 1988 — right at the cusp of the beverage company’s emergence as a

global brand — and is today the largest shareholder. Yet when it came time to cast his vote against a

controversial executive compensation plan, Buffett abstained from voting altogether and opted to speak

privately with Coke CEO Muhtar Kent. Buffett defended his actions by explaining how corporate boards

are “part-business and part-social organizations,” rationalizing that an open dialogue would be more

effective than going to “war” with Coke, a company which he still considers a core part of his portfolio.

Buffett says that, “Don’t go to war with your business partners if you don’t have to. The potential short-

term gain is not worth the long-term consequences.”

Role Of leadership in Change Management:

Leaders act as advocates for the change at their level in the organization.: Warren buffet himself

faces all the resistance of employees and tells them the need of change. As been published in

Times Magazine couple of years ago, Warren Buffet administers and explains to all his

employers and employees about the need of change and the pros and cons of this change.

Leaders of change must be willing to go first. They demonstrate the behaviors and attitudes that

are expected of everyone else. In all businesses Warren Buffet has staked, had been the initiative

of his own. He himself predict and initiates what all changes he wants to see or new ventures he

wants to get in.

As managers, leaders usually control resources such as people, budgets, and equipment, and thus

have the authority to make decisions that affect the initiative. They have the ability to say “yes”

or “no” to the project moving forward within the span of their control. Warren buffet has said no

to almost many projects of US Government because employees of his organization had stated red

signal and said that they would not be able to take on this project. On the other hand Warren

Buffet did bet $ 30 billion on Solar and Wind because this initiative of his had to bring greater

return.

Leaders are the face and the voice of change. They communicate often to share information, keep

people updated and offer encouragement. ̀ Information Sharing Policy with employers,

employees, and workers at Berkshire Hathaway is a perfect example wherein every relevant

information is shared

Leaders provide the motivation to change. They create a sense of urgency and importance about

the change, and show commitment and passion about getting things done. They offer recognition

to those who are participating and doing well. As had been seen during great recession, how

Buffet acted as a motivational master and kept all his stakeholders abreast and motivated to

perform.

With their authority, leaders hold people in the organization accountable for the change. They

uphold agreements and make sure others do the same. They don’t let people get away with not

changing, and work to understand the underlying reasons so they can remove obstacles. Buffet’s

organization has clear vision, mission and goal and they are been properly communicated to all.

Through proper trainings, they are been administered and brought on the exact track organization

demands them to.