Company behind the brand matters
Came across an illuminating research report by Stanford Business School, Trust and Consequences: A Survey of Berkshire Hathaway Operating Managers, by David Larcker and Brian Tayan. They surveyed the CEOs of approximately 80 Berkshire Hathaway subsidiaries. It’s an ingenious idea because how often have business people wondered what it would be like to work for the renown Berkshire Hathaway? Is all that reported independence as true as reported? Clearly it is.
Turns out that this highly successful and revered company is what it is said about it…it is hyper-decentralized and focused on long-termism. The research asked what it would take to get Warren Buffett and Charlie Munger riled up enough to place a phone call in this highly independent and hands-off conglomerate.
According to one CEO, the main messages that come from HQ are the following:
“1. Never lose reputation for the Berkshire Hathaway brand or the company’s brand;
2. Run your business as if it is the only family asset for the next 50 years; and
3. Integrity comes first.”
And what would it take to get Buffett and Munger “very” or “somewhat involved.” Apparently there are no requirements about communicating among the subsidiaries and it is fairly infrequent at best. The authors reveal that there are two scenarios where they believe Buffett and Munger would pick up the phone and ask what’s up:
“First, if an event impacts the parent company’s reputation;
second, if the company were to issue a severe restatement of previously reported financial results.”
If the parent brand matters this much to the most famous CEO in the world –Warren Buffett– it should matter to most other companies as well. This has been very much on my mind today because a colleague asked me for some stats and examples for how the company behind the brand makes a difference. Like never before, consumers are empowered and want to know that the company they are dealing with and buying from is honest, ethical, has integrity and cares about its customers. Not really a lot to ask for, is it? Berkshire Hathaway is a prime example of the inextricable link between caring about your corporate name and financial success. Shouldn’t we all follow Berkshire Hathaway’s lead?