Warren Buffett’s Talent Criteria

The world’s top investor favours businesses that use data to drive continuous improvement and demand actions with consequences — and he tolerates a degree of tough love if that’s what is required to create value.

Warren-Buffett

About a year ago Warren Buffett paid $37 billion for Precision CastParts (PCP) Corporation, a highly successful company that makes complex parts primarily for the aircraft engine industry. Buffett praised and celebrated the CEO of this company at his recent annual meeting in Omaha. This generated a lot of press articles about the controversial nature of that CEO who has generated a culture at PCP that’s best described by one of the employees as “in your face, full body contact.”

This behaviour is on full display as this CEO holds quarterly business reviews at its major manufacturing plants. In those reviews, he requires a set of standardised to charts be filled out and the meeting consists of him drilling in on these metrics dealing with productivity, earnings, market share, fixed costs for employees, etc.

As one financial analyst put it, in those meetings “he is intimidating, showing little restraint with his words. His yelling can be so loud that sometimes staff avoid that portion of the office during the reviews.”

One employee reported that the CEO threatened to rip an employee’s arm off so he could hit the person with the bloody stump.

Related: How to Give Every Employee Customised Leadership Advice

Stepping back, there is good news and bad news in this situation. The plusses are: First, while he is tough, many employees say they really respect him. Their point is that when you don’t measure up, it’s appropriate to have a discussion as to why and how to fix it.

Second, many employees celebrate this leader because the company has done extremely well. Its generous stock plan allows workers to benefit from the company’s soaring share price.

The minuses are fairly obvious: First, some talented people simply can’t take that kind of confrontation-oriented culture, and they self-select out. Second, there is no doubt that the very aggressive behaviour of this CEO can cause ideas to not be forwarded to him for fear of being punished for having a dumb idea. So what should a leader take from this example?

Here are three points that strike me:

1. Get the Data and Pay Attention to It

This leader has perfected a set of exhibits that are used universally by all PCP facilities so that he can gauge where excellence is occurring and leverage good ideas in other facilities. Standardised data is powerful.

Related: Create a Culture of Learning

2. Demand Action with Repercussions

People know that this leader wants to see things happen and to have improvement occur. They also know that if they don’t perform, there will be serious consequences. Frankly, there is nothing wrong with that.

3. Be Humane But Firm

Here’s where the PCP leader could learn a few things. There is no reason to be as rude as he tends to be. You can be firm without being obnoxious. There are many examples of great leaders doing that.

Warren Buffett seeks out leaders with the first two characteristics; but is clearly willing to give a bit on the third.

Share