The company’s 2014 Annual Report addresses the issue of future leadership in a fascinating and highly effective way. The report has two stories embedded in it. One, written by Buffett, is titled, “Berkshire: Past, Present, and Future (Page 24).” The other, written by Munger, is titled, “Vice Chairman’s Thoughts: Past and Future (Page 39).”
After working together for 50 years, it was no surprise that the two stories (which had been prepared by each author without collaboration of the other) told the same story with only stylistic differences.
There were several threads running through the past, present, and future sections of their stories, including investment strategy and guiding principles, but I will focus on the issue of the leadership succession. What follows is the “gist” of the succession plan I got from reading their stories.
My Version of the Berkshire Hathaway Succession Plan Story:
“After a few bad acquisitions, Berkshire began to focus on selecting well-managed, profitable companies and leaving their successful managers and operating policies in place. Thus, over the years, they developed a large cadre of seasoned and successful leaders operating in a highly decentralized system. While the total number of employees grew to over 340,000, the corporate staff was limited to 25. Good managers were given the freedom to manage a wide variety of companies without interference from headquarters.
Presently, several corporate leaders of Berkshire-controlled firms have been identified to have the competence to run the entire company.
When Buffett and Munger exit, the company is prepared to move forward with a new management team selected from within. Stockholders and employees can be confident the company will continue with the values and management style that made it one of the most successful businesses in the world.”
The Berkshire succession plan story is easy to remember and can be retold to thousands of investors and employees who have a stake in Berkshire’s future. It should go a long way in setting the stage for transitioning to a new management team and put the minds of many investors and stakeholders at ease. It will be a key factor in retaining investor and employee confidence in the future of the company.
Hey, it worked for me! I was spared having to read the customary voluminous corporate strategic plan, topped off with vision and mission statements full of buzz words. The vision of Berkshire’s corporate leadership succession plan is clear, memorable, and reassuring.
Stories are perhaps the most powerful tool available to a leader. It should be no surprise the leaders of one of the most successful businesses in the world chose to tell a story about the future of their company, instead of wordsmithing a vision statement.
Rather than take my word for this, I suggest you put the premise to the test. Please go back and read the Lawrence-Douglas County draft vision statement from my previous post and the Berkshire succession plan story once each. Then try to tell both to a friend without notes.
Joe Harkins’ career in public service spanned 50 years, including his service as the Secretary of the Kansas Department of Health and Environment as well as the Director of the Water Office during the administration of Governor John W. Carlin. He retired in 2002 as the Director of the Public Management Center at the University of Kansas. After a short break, he returned to work first serving as a special assistant to the Governor then retiring again after completing a term on the Corporation Commission for the State of Kansas.