Berkshire beyond Buffet talks about the core values that make up the corporate culture of Berkshire Hathaway. The book also demonstrates that a special investment and management strategy will sustain Berkshire's success even after founder and developer Buffett is gone.
This book is a great choice for
- Financial or commercial professionals who want to learn about Hathaway's success;
- Entrepreneurs, business managers or company executives;
- Warren Buffett fans and his investment strategy.
The person who brings this useful information is
Lawrence E. Cunningham, law professor at George Washington University, DC Besides the school's journal, his articles have appeared in a number of famous newspapers such as the Financial Times, the New York Post or The New York Times. Among his other contributions include The Story of AIG (co-authored with Maurice E. Greenberg) and How To Think Like Benjamin Graham And Invest Like Warren Buffett .
Chapter 1. The book's greatest value: The role of a distinct corporate culture in the development of a company.
Warren Buffett is considered one of the great influences on the functioning of the world. Building on Berkshire Hathaway, a fortune worth more than $300 billion, Buffett is seen as an integral part of the company.
This summary outlines the core values that Buffett has worked so hard to embed in his company, thereby building a corporate culture that can sustain Berkshire's success even in the future. when Buffett is gone. By learning about Buffet's journey, readers will find out how to bring their own culture into their businesses.
What you will learn in the next section:
- How hamburgers can make your dreams come true;
- Why vice presidents should make more decisions than directors;
- The person who will take over the job of Berkshire after Buffett leaves.
Chapter 2. Although Berkshire has many branches, they all share core values.
From a humble beginning in 1965, Berkshire Hathaway has grown into one of the largest corporations in the world. The reputation of the exemplary leader, Warren Buffett, shot up in the 1990s when wise investment decisions helped him acquire shares in a series of major companies such as American Express, Coca-Cola or the Washington Post.
As a large corporation, Berkshire Hathaway's shares are also diversified in many fields such as commerce, finance or manufacturing. Some of Berkshire's subsidiaries include: GEICO, the 2nd largest US insurance company; Burlington Northern SantaFe, one of North America's largest transcontinental railroads; and MidAmerican Energy, a global energy supplier.
It's not just the influence of many businesses that proves Berkshire's ability to diversify. Their subsidiaries are also very flexible in measurable aspects such as purchase price, business size and number of employees.
With so many members under one roof, they need a certain degree of uniformity. In fact, each Hathaway subsidiary has a unique corporate culture built on common core values to bring uniformity to the large corporation.
One of those values is “eternity”. The long-term partnership model is highly appreciated at Berkshire Hathaway; they apply it to member companies, many of which are family businesses, where people can find a sustainable home.
In this way, the unification of corporate culture and employees is based entirely on trust instead of financial contracts. It can be said that the typical culture of Berkshire Hathaway is a combination of the above characteristics.
Chapter 3. Price sensitivity and keeping promises are the next two core values of Berkshire Hathaway.
The culture of Berkshire Hathaway is a combination of core values, each of which corresponds to a letter in the word BERKSHIRE. Let's explore the first two letters to know about their two most important core values.
The letter "B" represents one of Berkshire's most important rules: budget conscious. The way GEICO, the popular auto insurer and subsidiary of Berkshire, focuses on price sensitivity is a prime example of this rule. GEICO realizes sensitivity through radical savings and exceptional operational efficiency. With the most favorable price possible, not only profits increased, but in fact, the company gave customers the entire savings capital with the lowest insurance premium. This policy not only attracts many customers, but also boosts the total revenue of the whole company.
Next, the letter “E” is equivalent to the word trust . This is a rule that applies broadly to all of Berkshire's member companies, especially insurance companies. One of the members that applies this rule most thoroughly is National Indemnity Company (NICO), a subsidiary specializing in reinsurance. Their philosophy is that if an insurance policy is merely a promise, then NICO's goal is to give customers the promise of the best quality.
They offer a policy with an unusual premium rate that no other company can follow. A month after the 9/11 attacks in the US, NICO wrote extensive insurance policies including a $1 billion policy for a few international airlines or $500 million for the crude oil industry.
NICO was able to write and apply such policies to its corporate principles because it made Berkshire Hathaway's core values its own.
Chapter 4. Reputation and strong family ties are two factors that have played an important role in the development of Berkshire.
A good reputation , the “R” in BERKSHIRE, will last a long time, playing not only a role in maintaining relationships but also in a company's financial profitability. In particular, the way of investing based on reputation has brought very good results for Berkshire.
Jordan's Furniture, the retail furniture subsidiary of Berkshire, has total sales per square foot, six times the industry average. The secret behind this success is the company's solid reputation based on an exceptional customer service. Not only the variety of goods models and fast delivery service, the company also gives customers a special experience called "entertainment shopping" - "shoppertainment".
In one Jordan store, for example, customers might sit in a small movie theater to watch a flight simulator. Elsewhere, they can walk on a model of New Orleans' Bourbon Street and even experience a river cruise. In-store entertainment attracted a large number of customers and increased sales significantly. The reputation-based investment approach has really paid off for Jordan's Furniture.
The close family relationship (kinship), the "K" in BERKSHIRE, has proven its role in the development of member companies. In order to strengthen this relationship, Berkshire has always worked to create prosperity that will last for generations. Hathaway is a long-term corporation, so a business model based on fairness, respect and mutual trust like a family business is an ideal choice.
In 1995, Berkshire Hathaway acquired the family business RC Willey Home for $25 million less than its rival. PC Willey knew that Berkshire would recognize the strength of the family business and see the financial value of strong relationships. It can be said that it is Hathaway's family culture that has helped them not only sign contracts but also save huge amounts of money.
"It's the unique culture that has helped Berkshire buy businesses at much lower prices than rivals."
Chapter 5. Berkshire's non-interventionist management policy has facilitated the development of entrepreneurs and business-minded people.
As a successful merger entrepreneur, Warren Buffett shows how a small business can grow into a huge corporation. So it's no surprise that entrepreneurship has always been what sustains Berkshire Hathaway's corporate culture.
At Berkshire, directors must be self-starters , the "S" in BERKSHIRE. With a broad vision, they are the ones who can run the business on their own. In fact, there are directors at Berkshire who have received the Horatio Alger Award, an award that honors individuals who have consistently achieved success despite many hardships. One of them is Albert Lee Ueltschi, founder of FlightSafety International.
When he was 16 years old, Uelschi opened a mobile Hamburger called "Little Hawk" and used the profits to learn to fly an airplane. This passion is the driving force that motivates him to teach others this "flying" sport. Eventually, Ueltschi opened the world's first pilot school that used the pilot training model to teach takeoff, landing, and emergency first aid. Since 1996, FlightSafety has officially been the next member of the Berkshire family.
To encourage the self-starter spirit of employees, Berkshire has adopted a management policy of no intervention (hands off – letter “H” in BERSHIRE). Most businesses are bureaucratic, using a plethora of reporting templates to manage all the announcements and decisions. In contrast, Berkshire's operating method is in the direction of decentralization and self-management. All subsidiaries operate independently, only important decisions are handled at the head office. Interestingly enough, the subsidiaries of Berkshire employ 300,000 people, while at headquarters there are only 24 people.
Some of Berkshire's member businesses also follow the 90/10 rule, where 90% of decisions are made by the deputy director, and the director will only be involved in risky decisions that require special skill. or beyond the capacity of the deputy director.
This non-interventionist management approach has attracted many entrepreneurs to Berkshire Hathaway. They appreciate the opportunity to run the business independently while still receiving security from parent company Berkshire.
Chapter 6. Investment prudence and simplification, Berkshire Hathaway has benefited greatly from the potential for mergers of its subsidiaries.
Over the past 50 years, Berkshire Hathaway has incorporated 12 businesses whose value has steadily increased over time. The secret behind that is the ability of subsidiaries to successfully merge. They all have the ability to invest very wisely (investor savvy), the "I" in BERKSHIRE.
Businesses often keep an eye on companies that share their culture, so it doesn't take much to attract those companies. In addition, many members of Berkshire have followed the parent company's merger approach, which is attracting businesses that also focus on core values such as trust and partnership.
The chemical company Lubrizol, which is also a member of Berkshire, has merged many smaller businesses. In addition to a team of talented scientists, this success also brings in managers who not only have the ability to develop, but also have the right leadership method for the company.
We have all seen Berkshire's wide coverage in all areas such as energy, transportation, chemistry, insurance, furniture. Do you recognize the outstanding commonality of these member companies? All in all, Berkshire's merger criteria have revealed a truth to entrepreneurs: The core of business is simplicity - the "R" in BERKSHIRE.
Because business is a long-standing field, everyone understands it quite well. Furthermore, Berkshire's preference for long-term and sustainable values is entirely in line with the industry's long-term expectations.
A simple business strategy will always carry less risk than entering new and toxic industries. At Berkshire Hathaway, instead of taking risks to make money, it's much more important to keep things simple and preserve the budget.
“Berkshire chooses simplicity to shine”
Chapter 7. Despite always drawing long-term plans, but Berkshire always faces challenges ahead.
Everyone wonders: What will happen to Berkshire when Warren Buffett is gone?
Many fear that Buffett's departure will put an end to Berkshire's prosperity. However, remember, one of the company's most important values is permanence. Buffett has led Berkshire up in a way that can guarantee its sustained success even as he steps down.
Since 1993, Buffet has started to list the characteristics of a Berkshire without him, and he has also drawn up a formal succession plan, which divides Buffet's work into two areas: management and investment. private.
Since then, Berkshire has decided to hire Todd Combs and Ted Weschler, two potential takeover investment managers who in recent years have sometimes outperformed Buffett at work.
Buffett assures that his company always has good candidates waiting to take over management positions in the future. The most important thing is that Buffett's successor must follow the corporate culture that the company has built before. Therefore, according to the succession plan, the most suitable candidates are those in the company or the employees who manage a subsidiary of Berkshire. Frank Ptak, who has 40 years of business experience and has been the chief executive officer of Marmon Group since 2006, is the best candidate in this election.
However, whoever the successor is, they will all face challenges ahead. Chaos in Berkshire's membership system is almost certain to happen. The person who comes to power next must learn carefully about managers to avoid straining the relationship, and at the same time choose the best leadership apparatus, but still have to ensure the long-standing management system.
Another big challenge is catching up with Buffet's distinctive merger approach. The team of accountants and attorneys must analyze potential merger targets weekly or monthly. In contrast, Buffet conducts employee surveys and checks with high frequency, and each deal is even approved after just the first call!
Of course, not everyone can work that way. The next successor will have to rely on their own ability to find their own method of merger.
“Berkshire can be without Buffet, but member businesses cannot do without Berkshire”
Chapter 8. Berkshire can draw valuable succession lessons from the Marmon Group's experience.
In the mid-1990s, financial analysts were constantly pondering the question: Will the Marmon Group decline when the two founders Jay and Robert Pritzker step down?
Today, the financial community is asking the same question of Berkshire Hathaway when Warren Buffet turns 85 in 2015. The Marmon Group and Berkshire have a lot in common, from pursuing a business model to a formality. diversified and simple integration to the application of non-interventional management methods. Both of these businesses were founded and developed by talented managers who have left their mark on each company.
Critics were wrong to predict that the Marmon Group would completely collapse at the end of Pritzker's time. The company continued to grow and successfully merged more than 100 member enterprises. In 2008, Marmon Group officially became a subsidiary of the Berkshire family as a result of the similarity in core values.
In 2003, from the position of department head, Frank Ptak became the chief executive officer of Marmon Group. And since then, the company has continued to thrive as it did when Jay and Robert Pritzker were in office.
Although not entirely certain, we can learn many valuable lessons from the case of Marmon Group. If it always upholds its own core values, Berkshire will continue to exist and develop even when Buffett is no longer in power.
Conclude
Price sensitivity, reputation and strong family ties are key to the success of Berkshire Hathaway, a multibillion-dollar conglomerate managed by self-made people. industry and is guided by a non-interventional approach. By maintaining a good reputation in many industries, promoting prudent investing, and a simple business approach, Warren Buffet has built a policy that will help Berkshire survive and thrive even after he steps down.
Lesson learned
Use your business name to represent its core values.
Berkshire has proven that the most effective way for employees to remember and follow core values is to embody it right in the business name. For example, in BERKSHIRE the letter "B" represents price sensitivity. That way, you'll find the keys to growing the company.
