Warren Buffett’s Letter to Shareholders 2009
Posted on February 28, 2009 Comments (2)
Warren Buffett published his letter to shareholders yesterday. As usual, it is of great interest to anyone interested in the economic, investing and management ideas.
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Our long-avowed goal is to be the “buyer of choice” for businesses – particularly those built and owned by families. The way to achieve this goal is to deserve it. That means we must keep our promises; avoid leveraging up acquired businesses; grant unusual autonomy to our managers; and hold the purchased companies through thick and thin (though we prefer thick and thicker).
Our record matches our rhetoric. Most buyers competing against us, however, follow a different path. For them, acquisitions are “merchandise.” Before the ink dries on their purchase contracts, these operators are contemplating “exit strategies.” We have a decided advantage, therefore, when we encounter sellers who truly care about the future of their businesses.
Some years back our competitors were known as “leveraged-buyout operators.” But LBO became a
bad name. So in Orwellian fashion, the buyout firms decided to change their moniker. What they did not change, though, were the essential ingredients of their previous operations, including their cherished fee structures and love of leverage. Their new label became “private equity,”
Berkshire Hathaway is a very well run company. Warren Buffett is a great investor. He is also a great executive. He hires honest and able people and lets them do their job. He ensures managers retain constancy of purpose by focusing on the long term and not getting overly focused on quarterly results. And have you ever read an annual report that talks of so many employees with such respect (granted it is a rare situation – something similar in an annual report could well seem disingenuous if it were not Warren Buffett writing)?
Related: 2005 Annual Report from Buffett – Warren Buffett’s 2006 Shareholder Letter – Warren Buffett Webcast on the Credit Crisis – Berkshire Hathaway Annual Meeting 2008
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Tags: Investing,managers,respect for people
NUMMI, and GM’s Failure to Manage Effectively
Posted on February 25, 2009 Comments (2)
Gipsie Ranney recently sent me an article on her thoughts on NUMMI and the current problems with the Big Three car makers to post to the Curious Cat Management Improvement Library. NUMMI is the plant that Toyota and General Motors run together as a joint venture. The article is excellent.
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The most remarkable insight I gained at NUMMI came as an answer to a question from a member of the touring group. The person asked what had been learned about the reasons that management/labor conflict had been reduced so much. The tour guide answered, “The answer we get from members of the labor force is that the Japanese do what they say they will do.” This was the same labor force that had held the record for most grievances filed per year in an assembly plant in the U.S.
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The Big Three are responsible for managing their organizations wisely. I think that will take more than money. It will take a different culture and a different mind.
I agree. The problem is that management fails to manage well and has been failing to do so for decades. They have improved over the last few decades but not nearly fast or consistently enough. Gipsie worked closely with Dr. Deming and serves on the W. Edwards Deming Institute Board of Trustees.
Related: Could Toyota Fix GM (2005) – At Ford, Quality Was Our Motto in the 1980s – Big Failed Three, Meet the Successful Eight – Why Fix the Escalator? – Invest in New Management Methods Not a Failing Company (AMC) by William Hunter, 1986 – Ford and Managing the Supplier Relationship – No Excessive Senior Executive Pay at Toyota
What Managers can Learn From Open Source Project Management
Posted on February 23, 2009 Comments (1)
What managers can learn from Open Source by Murray Cumming
Although money can provide some incentive it does not provide as much. Managers who say that money is the greatest motivator are justifying their own poor performance. Managers of proprietary software, just like managers of open source software, must ensure that their developers are motivated properly. It is not enough to think that they should feel motivated.
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Open source projects have the benefit of direct feedback from users. Systems such as bugzilla and open mailing lists make it easy for customers to express their needs. That is the necessary first step to satisfying those needs. See the Structural Solutions section.
For instance, proprietary application server projects such as BEA and WebSphere seem deaf to the frustrations of their customers, but the open source JBoss project is happy to hear about those problems and avoid them in its own product.
Standards/Consensus: Open Source projects must conform to, and reuse, accepted, up-to-date standards. Proprietary projects, without the benefit of high visibility or feedback are free to make inferior decisions.
Don’t miss this great essay by Paul Graham: What Business Can Learn from Open Source. And you know what else? I don’t think open source projects use the annual performance review.
Related: Open Source: The Scientific Model Applied to Programming – Dangers of Extrinsic Motivation – What Motivates Programmers? – Open Source Management Terms
Tags: Customer focus,managers,managing people,project management,Software Development
Management Improvement Carnival #55
Posted on February 20, 2009 Comments (0)
Submit suggestions for the management improvement carnival. visit the Curious Cat Management Library for online management improvement articles.
- Cut Customer Service? You’ll Lose Customers by Scott D. Anthony – “Companies might think that innovation and survival are discrete choices. They are not. Companies that stop innovating are sowing the seeds of their own destruction.”
- End Game at Wiremold by Kevin Meyer – “The Wiremold story shows how lean thinking can completely transform a company into a competitive powerhouse… and how quickly the success can be demolished by the return of a traditional mindset.”
- Gemba-Based Leadership – Not Just for Chief Engineers by John Shook – “Here’s what lean practitioners do: grasp the situation, look for facts at the gemba, as opposed to analyzing data removed from it in time and place, and go through the Deming management cycle.”
- Where Did Value Stream Mapping Come From? by Jon Miller – “Like any tool it’s success lies in how we use it. Stakeholder maps are essential tools of change management but only as useful as what you do with the findings.”
- Agile Management with Chris Sims webcast interview by Wayne Turmel – “”
- Helping Employees Improve by John Hunter – “A manager should be enabling their employees to perform. That means taking positive steps that help them perform.”
Applying Disruptive Thinking to the Healthcare Crisis
Posted on February 19, 2009 Comments (3)
The Innovator’s Prescription: A Disruptive Solution to the Healthcare Crisis
The push for widespread healthcare reform must come from employers, who in spite of their declared intent to cut healthcare costs also know “they profit when their employees are healthy and productive.” Affordable healthcare, he concludes, “doesn’t come by expecting high end, expensive institutions or expensive caregivers to become cheap, but by bringing technology to lower cost providers and venues of care, so they can become more capable.”
Clayton Christensen is the rare management thinker that I feel real provides profound insights into thinking about management. There are many other good management thinkers that offer valuable idea, just most of them (in my opinion) really are presenting material in ways that offer managers a good way to take action on all the long known good management ideas that we fail to adopt successful for decades.
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Zara Thrives by Ignoring Conventional Wisdom
Posted on February 18, 2009 Comments (0)
Zara Thrives by Breaking All the Rules
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Wages are higher at Inditex—its factory workers in Spain make an average of $1,650 a month, vs. $206 in China’s Guandong Province. But the company saves time and money on shipping. Also, Inditex’s plants use just-in-time systems developed in cooperation with logistics experts from Toyota Motor (TM), which gives the company a level of control that would be impossible if it were entirely dependent on outsiders.
In addition, Inditex supplies every market from warehouses in Spain. Even so, it manages to get new merchandise to European stores within 24 hours, and, by flying goods via commercial airliners, to stores in the Americas and Asia in 48 hours or less.
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As a result, the chain doesn’t have to slash prices by 50%, as rivals often do, to move mass quantities of out-of-season stock. Since the chain is more attuned to the most current looks, it also can get away with charging more than, say, Gap. “If you produce what the street is already wearing, you minimize fashion risk,”
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For rivals hoping to mimic Inditex’s results, analyst Luca Solca of Sanford C. Bernstein has a bit of advice: Don’t follow the Zara pattern halfheartedly. “The Inditex way is an all-or-nothing proposition that has to be fully embraced to yield results.”
Very true. Processes work well within a system. You can’t copy from one system to another. You can learn about what has been successful and figure out how you can adapt to take advantage of the ideas within your systems.
Related: Lean IT Systems – Not ERP – Systemic Thinking – What Kind of Management Does This? – Making Suits in the USA – Curious Cat Management on Lean Thinking
Tags: Europe,Innovation,lean manufacturing,Lean thinking
$60 Million Bonus – For all Staff
Posted on February 15, 2009 Comments (1)
This is similar to a story I posted last November: Family Business Gives $6.6 million in Bonuses to Workers. I both cases long time owners sold their company to a foreign buyer and then gave a significant amount of the proceeds to long time employees.
Miami banker gives $60 million of his own to employees
For longtime employees, the bonus — based on years of service — amounted to tens of thousands of dollars, and in some cases, more than $100,000.
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Sharing the wealth with staffers came naturally. Abess and his wife, Jayne, have long been big contributors to local organizations, such as the Greater Miami Jewish Federation and Mount Sinai Medical Center. In 2006, the Abesses gave $5 million to the University of Miami to promote environmental studies.
But he also wanted to reach out to his staff. ”I wonder if I did enough,” he recently mused.
”I knew some of these people since I was 7 years old. I didn’t feel right getting the money myself,” said Abess, who was concerned that their 401(k) plans had taken a beating in the downdraft on Wall Street last year.
Both these actions demonstrate respect for employees, rather than the hollow words many companies profess.
Related: People are Our Most Important Asset – Find Joy and Success in Business – How Downsizing is Handled When Management Respects People
Helping Employees Improve
Posted on February 12, 2009 Comments (2)
One aspect of managing people is to provide positive feedback and show appreciation. Doing so is important. People benefit from encouragement and reinforcement. In addition to just telling them, take action to show your appreciation.
The Dilbert workplace is alive and well. And even in above average management systems there is plenty of resistance faced by those looking to improve systems. For those employees that are making the attempt to improve the organization go beyond saying thanks: actually demonstrate your appreciation. Do what you can to help them achieve.
A manager should be enabling their employees to perform. That means taking positive steps that help them perform. This is even more appreciated than saying thanks. And has the added benefit of helping the organization by helping along their good idea. It is win, win, win. They win, you win and the organization wins.
Thoughts on: Rewards and Recognition
Related: Keeping Good Employees – Respect for People Requires Understanding Psychology- People are Our Most Important Asset – Motivation – Incentive Programs are Ineffective
Management Improvement Carnival #54
Posted on February 10, 2009 Comments (0)
In the webcast, Corey Ladas discusses lean thinking in software development, Deming and quality, customer pull vs Kano model and gemba.
- 7 Practical Ways to Respect People by Ron Pereira – “Some think that to be respectful you can never disagree. This is ridiculous. My old boss at Nokia used to tell his management team that if all 8 of us agreed he had 7 too many people in the room. So true.”
- Is Brainstorming a Waste of Time? by Mark McGuinness – “For Sutton, the problem isn’t with the technique but the way it’s applied: ‘when brainstorming sessions are managed right and skillfully linked to other work practices, they can promote remarkable innovation.’”
- The Remarkable Chief Engineer by John Shook – “So the Chief Engineer has no choice but to lead by the soft skills of true leadership. By soft skills, I am referring to the suite of skills written of in books about leadership or management books and taught in leadership training – characteristics such as ‘leading through influence’ or ‘servant leadership’ or ‘win-win negotiating’.”
- Yet another form of muda by Dan Markovitz – “You’ll learn, among other things, that making an ironclad commitment to spend 15 or 20 minutes each day with your assistant is essential. Your assistant is there to extend your reach and capability to effect change in the organization.”
Lean Thinking in Minnesota Government
Posted on February 8, 2009 Comments (1)
The Office of Governor Pawlenty issued a press release on Minnesota’s Drive to Excellence effort:
“Lean Thinking” as its preferred process improvement tool. So far, 18 agencies are actively
involved, with 302 staff members participating in 38 Kaizen improvement events. These
events have yielded significant improvements in the delivery of state government services,
from issuing duplicate birth certificates to processing State Soldiers Assistance requests.
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The Drive to Excellence includes 15 specific projects for reforming state government, ranging
from strategic procurement to a Lean continuous improvement effort and the reform of state grants
management. The projects focus on improving quality and customer service and reducing costs in
the delivery of government services to citizens.
Read about more public sector management improvement efforts on my Public Sector Continuous Improvement Site.
Related: Six Sigma In New York Local Government – Transformation and Redesign at the White House – The Georgetown Kentucky Way – Public Sector Management
Hire People You Can Trust to Do Their Job
Posted on February 5, 2009 Comments (3)
How great companies turn crisis into opportunity
The right people don’t think they have a job: They have responsibilities. If I’m a climber, my job is not [just] to belay. My responsibility is that if we get in trouble, I don’t let my partner down.
The right people do what they say they will do, which means being really careful about what they say they will do. It’s key in difficult times. In difficult environments our results are our responsibility. People who take credit in good times and blame external forces in bad times do not deserve to lead. End of story.
I think he makes a very good point, but may overstate it just a bit. The right people do need management to do their job: to provide guidance, to work on improving the organizational system, to coach employees when needed, to plan for the future, to determine where to focus the organizations resources… But they don’t need to be micro-managed. They can be expected to do what is needed when the proper conditions are set, including a clear understanding of what is needed, communication of current conditions and changing needs, a shared understanding of roles (for people and organizations)…
Also, just to be clear, it can be the right thing to closely manage someone as they are learning. This is true when a new employee starts with the company. And also when they take on new responsibilities. I would have no problem with a company tightly managing a new supervisor. In my experience the exact opposite problem is much more common, moving people into supervisory roles with little support, to sink or swim on their own (well perhaps sinking those around them too). At both times they should get the support they need and the freedom they need to work effectively.
Related: Keeping Good Employees – Flaws in Understanding Psychology Lead to Flawed Management – People are Our Most Important Asset – posts on managing people – The Joy of Work
Tags: coaching,hiring,jobs,Management Articles,managing people,training
Failure: Honda’s Secret to Success
Posted on February 3, 2009 Comments (2)
Related: Honda has Never had Layoffs and has been Profitable Every Year – Inside Honda’s Brain – Curious Cat Engineering Blog
Management Improvement Carnival #53
Posted on February 1, 2009 Comments (0)
Shaun Sayers is hosting the Management Improvement Carnival #53 on the Capable blog, highlights include:
- The correct sequence for doing 5-S? – by Jon Miller. “Why would people alter the order and still call it 5-S instead of my version of 5-S?”
- Cost of Changes vs. Risk and Uncertainty by Darth Sidious. “… as the project matures, cost of changes sky rocket, and stakeholder influence drops off quickly”
- Quality – the Men-Tai approach by Shaun Sayers. It’s quality – with noodles
Submit suggestions for the management improvement carnival.
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