More Than an Oracle – The Employee Engagement Practices of Warren Buffett

Warren Buffett is in the news these days after publicly expressing his confidence in the future of American corporations and recently investing $8 Billion Dollars to purchase interests in GE and Goldman Sachs. With the recent stock market turmoil, many look to the world’s wealthiest man for guidance, and rightly so. Buffett is widely recognized as an exceptional judge of corporate value. “The Oracle of Omaha,” as he is known, is arguably the most successful investor in history. Corporate leaders regularly make the trek to Omaha, Nebraska, seeking his wisdom. With so much attention on Buffett’s investment acumen, it’s easy to overlook another talent: motivating people. It’s one of a host of reasons his investments tend to outperform the market.

The talented managers who run Buffett’s companies remain with him because he keeps them engaged in their jobs. In Buffett’s own words, “Charlie [Charlie Munger, Buffett’s longtime business partner] and I mainly attend to capital allocation and the care and feeding of our key managers . . . Most of our managers are independently wealthy and it’s up to us to create a climate that encourages them to choose working with Berkshire over golfing or fishing.”

A closer look at Buffett shows, at least in part, how he does it.

He imparts an inspiring identity to members of the Berkshire Hathaway family. The vision he constantly communicates is that Berkshire companies are well managed and have great people. It’s not unusual to hear him tell employees to “just keep on doing what you’re doing . . . we’re never going to tell a .400 hitter to change his batting stance.” Who wouldn’t be flattered to be praised by Buffett?

Buffett shows that he values people in several ways. He is trusting and forgiving. By investing for long periods in the companies he owns, Buffett indicates that he trusts his managers. He delegates decision-making authority, in his own words, “to the point of abdication.” And when a manager makes an honest mistake, he keeps it in perspective. One manager who informed Buffett that his business had to write off $350 million was stunned when Buffett told him, “We all make mistakes . . . if you didn’t make mistakes, you can’t make decisions …You can’t dwell on them.”

Buffett models civility and respect for others. His secretary has said she hasn’t seen him mad once in the nine years she has worked for him. The one time I met Buffett at a meeting in New York City, he patiently waited around to speak with everyone who wanted to meet him. He was attentive and focused on them, never projecting the slightest hint of self-importance.

He is confident, yet humble. Buffett knows he’s very good at what he does, and he projects an easy confidence rather than superiority or arrogance. He credits his managers for his success, remains plain spoken, works in a modest office, lives in a modest house, and proclaims thrift as a virtue (the vanity plate on his former car read “Thrifty”).

Compare Warren Buffett to Donald Trump, for example. It’s hard to imagine Buffett prominently displaying his name all over everything he owns or relishing in telling someone “you’re fired.” Instead of everything being all about him, Buffett insists it’s all about others. He appears to be guided by the Golden Rule rather than Machiavelli’s The Prince.

Given the way Buffett treats people, it should come as no surprise that some private company owners report turning down more lucrative offers to join the Berkshire family. It is telling that no manager who sold a company to Buffett has ever left for a competitor, and several continue to work well into their eighties. Put simply, “people want to work for him,” proclaimed another satisfied manager, Rich Santulli, head of NetJets.

Buffett promotes communication by being approachable and candid. At the annual meeting he hosts in Omaha for Berkshire shareholders, Buffett and Charlie Munger sit on a platform, listening to shareholder opinions and answering questions for hours on end. In dealing with his managers he follows the data they provide him in periodic reports and makes himself available if they want to talk. Buffett writes and speaks with candor, even pointing out mistakes he made and what he learned from them.

Warren Buffett’s ways make the managers of Berkshire Hathaway feel proud to be affiliated with the company, feel valued as human beings and feel they can communicate openly and honestly with Buffett. These feelings (or emotions) make people want to give their best effort in their work and make them more energetic, optimistic, trusting and cooperative. Warren Buffett’s behavior reflects common sense and yet studies have shown that such behaviors are uncommon in practice among those with power in organizations. It is yet another reason why Buffett deserves to be called the Oracle of Omaha.

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