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.

Donald E. Graham: learning the business from all angles

Donald E. Graham is the Chairman of the Board and Chief Executive Officer of the Washington Post Company.  He is highlighted in the Warren Buffett biography, The Warren Buffett Way by Robert Hagstrom (Hoboken, John Wiley & Sons, 2005).  Donald Graham is the son of Katherine and Philip Graham, the long time and well established publishers of the Washington Post.  Even though Donald had a future in senior management at the family run company, he still gained a broad range of experience before going into senior management.

• Drafted in the Army during Vietnam
• Joined the Washington Metropolitan Police and walked a beat
• Worked as a Metro reports in Washington
• Worked as reports for Newsweek in the Los Angeles Bureau (Newsweek is owned by the Washington Post)
• Worked as assistant managing sports editor at the Washington Post

Many companies that Warren Buffett invests in have company cultures where senior management works day to day and often started from the bottom.  This often is a great way for managers and leaders to develop.

Donald E. Graham biography at the Washington Post Company Website:  http://www.washpostco.com/phoenix.zhtml?c=62487&p=irol-govHistBio&ID=27428