What Matters Most?

Organizations have enormous power to focus efforts on collective goals, objectives, issues, problems and results, if they so choose. It’s the power of an organization’s convergent effect—people coming together in a planned and organized way to accomplish something mutually beneficial for all involved. Of course, that’s what organizations do. However, when organizations fail to identify what matters most, they allow their natural converging power to diffuse and dissipate. Here’s how one well-known organization stays focused on what matters most.

By all measurements, Berkshire Hathaway’s performance has been nothing short of amazing. What’s the company’s secret? There is no doubt whatsoever about what matters most: 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/acquisition criteria further clarify what matters most: “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 is perfectly clear to Berkshire Hathaway’s operating managers, acquisition candidates, and shareholders. What about your organization? Do you know what matters most? 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, to learn more about how to clarify what matters most in your organization.

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