Leadership and Organisational Behaviour Essay #2 (Essay Sample)

Leadership and Organisational Behaviour
The Purpose
The purpose of this paper is to review the key personal attributes of Warren Buffett, examine his style, approach and context of leadership and evaluate the relationship between Buffett and his context of leadership. The paper relies on research and theory from credible sources.
Introduction: Who is Warren Buffett
Warren Buffett is one of the most famous U.S businessmen and a financial investors with an estimated net worth of USD 44 billion. He is rated among the best entrepreneurs in U.S and ranked as the third wealthiest individual in the world. Buffett’s business skills date back to his childhood where he did small businesses and made an estimated five thousand U.S dollars from his small businesses by the time he was graduating from high school. He has earned reputation for good leadership and entrepreneurial skills that make him a unique businessman.
Buffet was born in 1930 in Omaha and went to University of Pennsylvania’s Wharton Business School where he studied for two years before proceeding to the University of Nebraska at Lincoln. In 1951, he graduated from Columbia University with a Master in Business. According to Angelov, Hoomans and Teng (2009), Buffett’s education was motivated by Ben Graham; an influential investor who instilled in him the concept of intrinsic business value and how to separate the real worth of a business from the stock value that comes with it. This knowledge enabled Buffett to invest in different businesses. In 1956, Buffet partnered with a few other people to create Buffett Associates Limited. Through his partnerships and focused investments, he became a millionaire by 1962 (Angelov, Hoomans and Teng, 2009). Buffett bought Berkshire Hathaway as his first private investment in 1966 and has continued to invest in varying stocks and commodities since then. He is the owner and the CEO of Berkshire Hathaway Inc which owns subsidiaries that engage in diverse business activities including insurance, rail and freight transportation, finance, utilities and finance, retailing and manufacturing services (Berkshire Hathaway, 2011). His personal attributes and business leadership approach have contributed to success of Berkshire Hathaway.
Key Personal Attributes of Warren Buffett
Buffett is a good listener and a good communicator. He is enthusiastic about what he does and leads by examples. He is intelligent and focused on his organizational mission and vision. Guided by his believes and personal attributes, he chooses his business investments wisely. Buffett believes that businesses that are productive and meaningful to society are the best ones to invest in because the society appreciates meaningful contributions made by such businesses to the people. He also believes that businesses with strong cash flow are more viable to invest in because they seem to be more sustainable. He prefers investments that have a proven track record of their performance and avoids investing in online business companies because it is not easy for the investor to predict if the stocks in the field will have decent values in future (Cunningham, 1998). Buffett argues that a business that is relatively easy to run is the best one to invest in and advises investors to always figure out how well they can operate their business rather than focusing on complicated points of running the business (Kilpatrick, 1994). He advocates for concentration in business rather than diversification. He further urges investors to make their own decisions and look at market fluctuations as their friends rather than their enemies. Evidently, Buffett approaches business decisions with caution and considers the consequences of such decisions before implementing them. He gives attention to people, puts effort to understand and make sense of his partners and shows empathy to his employees. He is loyal to his employees and his business partners and is considered to be a self motivated leader.
Leadership Style, Approach and Content of Leadership
Berkshire Hathaway owns 79 subsidiaries and has a total of 246,083 employees. The Company’s success has been achieved through Buffet’s optimal functioning of the team as well as his leadership skills. His leadership approach is based on respect for his managers, ability to maintain effective communication with managers and other employees and a reward system that motivates the employees to feel as part and parcel of the organization. Buffett sees managers as stewards of shareholder capital and believes that the best managers are the ones who reason like owners when making business decision (Cunningham, 1998). He values employees who are honest, able and hardworking as active participants in company’s management team and perceives employee honesty, ability and hard work as more valuable tools that should be nurtured rather than designing hierarchies and classifications of who reports to whom and what times. Buffett can therefore be described as a transformational leader.
Buffett’s transformational approach to leadership has earned him reputation and reduced employee turnover since he is able to win, train and retain the best talent thus cutting down on employee recruitment expenses. Furthermore, employees leave organizations in search for better opportunities when they find themselves disconnected with organizational culture and when they feel that their talents are under-utilised. Stewart (1991) reiterates on the importance of developing good working relationships with employees in order to achieve high rates of employee retention. Buffet’s leadership approach reinforces good upward and downward communication skills to clearly communicate the organizational expectations and encourage employees to execute their tasks effectively. He is considerate of his employee’s needs and genuinely acknowledges the work done by employees while making them feel as part and parcel of the organization. This depicted by the organization’s ability to build a flexible work environment that offers employees an opportunity to aspire to work for the Company. A flexible work environment enables the employees to balance their personal and professional lives thus increasing productivity, lowering turnover and reducing the rate of employee absenteeism.
Buffett’s approach to subsidiaries and portfolio companies is that of partnership. He sees the shareholders of these companies as owner-partners and also sees himself and other Berkshire Hathaway managers as managing-partners (Angelov, Hoomans and Teng, 2009). He therefore prefers to give managers of Berkshire Hathaway subsidiaries considerable freedom to carry out their business activities and sees this as a better approach for running the business rather than running the people who do the business. Moreover, the earnings of these managers are determined by performance of their subsidiaries rather than the overall performance of Berkshire Hathaway. This approach motivates managers to work hard and achieve better results to increase their earnings. Angelov, Hoomans and Teng (2009) note that Buffet’s leadership approach has made the managers of Berkshire Hathaway to feel proud to be affiliated with the company. They feel valued as individuals and are motivated to freely communicate openly and honestly with Buffett. The company has therefore retained the best managers who are committed to organisational growth and are loyal to Buffett.
Relationship between Buffett and the Context of his Leadership
Buffett is a transformational leader who inspires his employees to excel in business performance.
Howell & Frost (1989) argue that transformational leadership is based on the assumption that people will follow a visionary and passionate leader who inspires them. It further assumes that injecting enthusiasm and energy to people is the right way to get work done. The proof of existence of transformational leadership is the ability for leaders and followers to make each other advance to a higher level of moral vision and motivation through the strength of their vision and personality. This is exhibited by Buffett’s ability to give his managers the freedom to run their affairs while inspiring his employees to advance professionally.
Transformational leaders are able to inspire followers to change their expectations, perceptions, and motivations in order to work towards common goals. Avolio, Waldman and Einstein (1988) descri...