Warren Buffett on Business

In his recently-posted annual letter, Warren Buffett provided his take on the best way to run a large organization -

"We tend to let our many subsidiaries operate on their own, without our supervising and monitoring them to any degree. That means we are sometimes late in spotting management problems and that both operating and capital decisions are occasionally made with which Charlie and I would have disagreed had we been consulted. Most of our managers, however, use the independence we grant them magnificently, rewarding our confidence by maintaining an owner-oriented attitude that is invaluable and too seldom found in huge organizations. We would rather suffer the visible costs of a few bad decisions than incur the many invisible costs that come from decisions made too slowly – or not at all – because of a stifling bureaucracy."

Buffett is saying that allowing managers to make mistakes is a better way to manage than a command-and-control organization where mistakes are few. The result – a lot of confidence rather than fear in Berkshire Hathaway managers. Something that most public companies aspire to, but have a very hard time achieving.

The rest of the letter was a good read... and full of the folksy wisdom and one-liners that Buffett is known for. Have a look.