Warren Buffett Leadership Styles, Early Life and Successful Leadership Skills
Leadership refers to responsibility aimed at achieving a particular end through the application of human and material resources and ensuring a coherent organization process (Kinsley & Clarke, 2009, p.26). A leader influences individuals within an organization to achieve a common goal. Studying leadership theories and styles helps people to learn different leadership approaches that may drive to their success. Developing the awareness of techniques and theories contribute to developing individuals’ leadership approach. The determination of the study project is to determine the styles of leadership used by Warren Buffett in managing Berkshire Hathaway and evaluate the reasons for his success or failure.
Kinsley and Clarke (2009) state that leadership styles refer to the techniques applied by leaders to motivate their team. They show the capability of ensuring cohesiveness within an organization and inspiring the attainment of goals. They also help in building goal oriented and motivated teams. Transactional leadership style refers to a leadership style where individuals agree to obey their leaders before accepting any form of a vacancy in an organization. The leader has the responsibility of punishing employees when they work against the standards set by the organization. In autocratic leadership style, leaders possess ultimate power over their employees (Kinsley & Clarke, 2009, p. 28). The employees become hindered from making suggestions that may be of the best interest of the organization. Autocratic leadership style enhances quick decision making and the decisions made by the leader can begin immediately. However, autocratic leadership style lowers staff morale because of lack of inclusion in making critical decisions in an organization.
Next, in bureaucratic leadership style, the leaders use formulated rules to ensure that staff member follows the set rule. The method becomes inefficient in organizations and teams that rely on creativity and flexibility. Participative leadership style engages team members in the critical decision-making process. The style encourages innovation and creativity. Employees become motivated of their involvement in leadership (Kinsley & Clarke, 2009, p. 26). However, the style may be ineffective in organizations where efficiency and speed become essential. In charismatic leadership style, expectations are set for employees and leaders to inspire them when handling coordination duties. Employees become motivated because this leadership style ensures that workers focus on the objectives of the organization. However, charismatic leadership style is slow and may be inefficient in organizations that require speed. Finally, in laissez-faire leadership style, leaders give team members the opportunity to make decisions, work standards and deadlines on their own. Workers possess complete freedom when doing their duties. The leaders provide advice and resources to the organization. Laissez-faire leadership style motivates employees but may be ineffective when team members mismanage their time, lack knowledge and motivation skills.
According to Buffett and Cunningham (2001), Warren Buffett was born in Nebraska on 30th August 1930. After 26 years from birth, Warren Buffett formed Buffet partnership and became the leader of Berkshire Hathaway in 1965. He was both an investor and a businessman. In his early life, Warren Buffett served as a United States congressman and as a stockbroker (Buffett, & Cunningham, 2001). Warren Buffett developed business and mathematical financial skill in his childhood through adding large numbers. He began investing in business when he was 11 years old by buying three shares worth $114 at Cities Service Preferred. Despite the drop in the values of a share of Cities Service Preferred by $11, Warren Buffett did not withdraw his shares but waited until the shares value rose to $40.
Warren Buffett learned from mistakes. He regretted selling shares at $40 instead of waiting longer because the Cities Service shares rose to $200 per share. At the age of 13, Warren Buffett started his first business of selling horseracing sheets. In 1942, he went to Wilson High school and started pinball business. Warren Buffett studied business at the University of Pennsylvania. He graduated and got his Master’s degree from the University of Columbia. Buffet partnership became successful under Warren Buffett leadership. However, Warren Buffett dissolved the firm and maintained his focus on Berkshire Hathaway through expanding the business by buying assets from insurance, oil, and media (Kinsley & Clarke, 2009, p. 31). Warren Buffett became the director of Coca-Cola between 1989 and 2006. Also, he worked as a director in Citigroup Global Market.
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Warren Buffett was a successful leader. First, he led by examples. He was a role model to his employees and his employees learned their duties from him. Moreover, he trained as a team with his employees. Warren Buffett focused on all departments. He kept his workers informed. He had outstanding communication skills when addressing issues in the organization such as problem-solving. According to Buffett and Cunningham (2001), after gaining experience through leadership in his partnership and seeking self-improvement in schools, Warren learned how to formulate sound decisions. He planned organizations duties and judgments promptly. He used an open channel of communication that allowed constant sharing of information. Warren Buffet believed in avoiding sugarcoating mistakes. He admitted mistakes in public and accepted correction from members of his team. Warren was a responsible leader through ensuring shareholders’ money never got lost. He formulated rules and ways to achieve goals to ensure team members worked within the focus of the company’s goals.
Buffett and Cunningham (2001) stated that Warren Buffett employed bureaucratic leadership style in ensuring that individuals within Berkshire Hathaway followed the set rules that governed leadership within the organization. For instance, he set standards and educated the members of Berkshire Hathaway not to lose any of their shareholders’ money by setting goals and ensuring team members focused on them. During employment, Warren used transactional leadership to make sure that he only employed individuals who agreed to obey his decisions. Warren encouraged participative leadership style to motivate people within his organization by allowing them to take part in important decision-making procedure. He admitted his mistakes publicly and stayed humble to be corrected. For instance, Warren admitted in his letter that Heinz performed better under the Chairman.
According to Sims (2000), Warren used charismatic leadership style in inspiring team members and motivating their focus towards attaining goals of Berkshire Hathaway (65). Warren sent praising letters to investors several times informing them about his appreciation for their hard work. Not only did Warren praise senior leaders but also potential successors, such as Ajit Jain. He used the theory of Y to form an emotional bond and encouraged workers to identify themselves with the business and establish a more active commitment. Warren employed leadership styles that adapted and fit well to Berkshire Hathaway.
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To conclude, leadership styles best suit an organization if they adapt to situations, groups and individuals within an organization. Suitable leadership style preserves and creates sustainable development and safeguards success over time. Also, sustainable leadership styles develop diversity, human and material resources within an organization. Modern trait theory suggests that people become better leaders when handling various tasks. Personality plays a significant role in developing the sense of responsibility in the team. Modern character and behavioral theory explain how Warren Buffett gained his leadership skills through experience and personality respectively. Bureaucratic, charismatic and participative leadership style help in motivating employees and ensuring they focus on the objectives of the organization.