|Warren Buffett, in his 47th year of running Berkshire Hathaway, has become a role model for entrepreneurs.|
He may be the master at acquisition, but Buffett is also a "tremendous motivator," says Tom Shinick, a visiting associate professor at Adelphi University's School of Business with a focus on entrepreneurship and small-business management. "Most people view him as an investor, but what they don't realize is he is a master manager, because they own all of these businesses and they're all doing well." Buffett recognizes the importance of continuity, particularly when it comes to corporate cultures, and even praises his CEOs and managers in his annual reports. It's the kind of approach that makes employees more likely to work harder, stay loyal and ensure goals are met. "
A key component to Buffett's staying power is the fact that he doesn't make uninformed decisions, observers say. While not all of his acquisitions have, at first, been home runs, none were made on a whim or without the best knowledge and information available at the time, observers say. "Diversification of a business operation through adding a new division and or product line needs to be clearly thought out and understood," says Thomas Bonney, founder and managing director of CMF Associates, a consulting firm to private equity portfolio companies and other small to midsize businesses. Great leaders such as Buffett have "stick-to-it-iveness," says Nicholas Turner, co-CEO of executive search firm Kaye/Bassman International. "Although a lot of the decisions that he has made have been questioned or challenged, he obviously has a history of making decisions
Creating what Turner calls a "bottleneck" is typically viewed negatively, as in operational nightmare, but it can also be a positive thing for a business. "A bottleneck is a consistent filter or screen," Turner says. "In Buffett's example, he is the decision-maker. All things flow through him or Charlie Munger." To be sure, this isn't the same as being a micro-manager, something Buffett is most certainly not, but when it comes to final decision-making -- that's all Buffett. "An organization can take advantage of a bottleneck through a core leader, or group of leaders, because he can make fast and finite decisions," Turner says. Or a business owner may want to slow down the decision-making process so an organization doesn't get ahead of itself. "It can create or manage the pace that a company elects to grow at or make decisions, but it can also open the floodgates to grow," he adds. 4. Surround yourself with a trusted team.
Oftentimes small businesses, particularly start-ups, make decisions based on emotion. Having a central group of trusted confidants can help smooth the decision-making process for business owners. Buffett's "core unit doesn't change," Turner says. "Few core people are let into his decision-making process. It can be construed as a negative. But I would disagree. I think that trust and experience is a key piece." 5. Admit mistakes and fix them.
Making a blind decision is not Buffett's style. "He does his own homework and he makes his own decisions," Shinick says. "He is someone that learns from his mistakes. He is not afraid to make a decision for fear of making a mistake." Buffett also allows investors and followers to see the lighter side of being a business tycoon. "When I took control of Berkshire in 1965, I didn't exploit this advantage," Buffett wrote in his shareholder letter last year. "Berkshire was then only in textiles, where it had in the previous decade lost significant money. The dumbest thing I could have done was to pursue 'opportunities' to improve and expand the existing textile operation -- so for years that's exactly what I did. And then, in a final burst of brilliance, I went out and bought another textile company. Aaaaaaargh! Eventually I came to my senses, heading first into insurance and then into other industries." -- Written by Laurie Kulikowski in New York. To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.