What Has To Happen?
Article | Accountability Insights
When organizational leaders fail to clearly identify what they want to have happen in terms of the achievement of specific, crucial outcomes, they make it much more difficult for the people in their organizations to take accountability, own problems, find solutions, and achieve the outcomes that matter most. Here, in the case below, is how leaders in one well-known organization stay focused on what has to happen.
Berkshire Hathaway’s performance has been nothing short of amazing over the years. What’s the company’s secret? There is no doubt whatsoever about what matters most and what they want to have happen: beating the S&P index by investing in the right businesses and trusting talented management with operating decisions. Berkshire Hathaway owns a diverse range of service, manufacturing, retailing and food businesses including property and casualty insurance, carpet, bricks and concrete blocks, clothing, retailing, diamonds, flight training, newspapers, candy, farm equipment, consumer finance, industrial coatings, restaurants, engineering software, furniture retailing and leasing, footwear and more. The company’s operating culture is simple, operating decisions are made by managers of the business units—Berkshire Hathaway claims to have superior CEOs running its businesses—while investment decisions and all other capital allocation decisions are made by Chairman Warren Buffet in consultation with Vice Chairman Charles Munger.
Berkshire Hathaway’s investment and acquisition criteria further clarify what matters most and what they want to have happen:
| (1) | large purchases—at least $50 million of before tax earnings; | |
| (2) | demonstrated consistent earning power—future projections are of no interest to us, neither are turnaround situations; | |
| (3) | businesses earning good returns on equity while employing little or no debt; | |
| (4) | management in place—we can’t supply it; | |
| (5) | simple businesses—if there’s lots of technology, we won’t understand it; | |
| (6) | an offering price—we don’t want to waste our time or that of the seller by talking, even preliminarily, about a transaction when price is unknown. |
Yes, what matters most and what has to happen are perfectly clear to Berkshire Hathaway’s operating managers, acquisition candidates, and shareholders. What about your organization? Do your people know what matters most and what has to happen? Can you write it down and get a majority of the people in your organization to agree? If not, join our Accountability Community at www.partnersinleadership.com, where you can review actual client case studies in detail.
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