Buffett on Business Management

In The Warren Buffett Way, Robert Hagstrom lists the three management tenets that Buffett uses to evaluate companies.

1. Is management rational?
2. Is management candid with the shareholders?
3. Does management resist the institutional imperative?

In the case of institutional imperative, there are a few more details which Buffett looks for.

• The organization resists any change in its current direction.
• Just as work expands to fill available time, corporate projects or acquisitions  will materialize to soak up available funds.
• Any business cravings of the leader, however foolish, will quickly be supported by detailed rate-of-return and stategic studies prepared by his troops.
• The behavior of peer companies, whether they are expanding, acquiring, setting executive compensation or whatever, will be mindlessly imitated.

 Robert G. Hagstrom, The Warren Buffet Way, Second Edition, (Hoboken, John Wiley & Sons, Inc. 2005), pp. 81-96.