How did Warren Buffett become not only the manager whom other managers want to emulate, but the second-richest man in the world? By following some simple yet highly effective management principles that any leader can use. Here are a few, as outlined in Warren Buffett’s Management Secrets: Proven Tools for Personal and Business Success, a book by Mary Buffett (Warren’s ex-daughter-in-law) and Nebraska entrepreneur and author David Clark.
- Encourage others to come up with the right ideas. Buffett is famous for hiring people and then not telling them what to do. Instead, he lets them set their own goals and standards. Invariably, they set the bar higher than he would have. Buffett’s silence induces his managers to imagine that he expects a lot, and this becomes the reality that drives performance.
- Admit mistakes quickly and emphatically. Buffett believes that when people are wrong — including himself — they should be up-front about it. To do otherwise would give the impression that we are trying hide something, or that we have neither the courage nor the integrity to admit our mistake. Managers who don’t admit when they are wrong slowly cause a festering distrust among employees, who then become less respectful, less willing to follow and more suspicious of management’s recommendations and guidance.
- Avoid surrounding yourself with “yes people.” Leaders love to be loved, and therefore sometimes surround themselves with “yes people.” Every business has sycophants, creeping around the corners, sucking up to the boss and reinventing the truth. Currently, Wall Street is littered with the remains of CEOs who let their yes men convince them that their companies could manage the risk of derivatives. Buffett’s solution to this issue is to surround himself with as few people as possible; he often has said that his idea of a group decision is to look in the mirror.
- Bank on the tried and true. Innovation is great, but Buffett has learned that the best business ideas are the ones that are tried and true. By studying successful businesses, we can get dozens of great ideas about how to do something right, and by studying unsuccessful businesses, we learn how easy it is to do something wrong. Miles Davis, the great jazz musician, once remarked, “Lesser artists borrow, great artists steal.” In some ways, the same can be said of great business managers.