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The paper will explore Warren Buffet life and him being a leader. What makes him a leader and his leadership style should be mention, particularly if he used a certain leadership style or combination. It should also contain how being a leader led him to be so successful.

Please use at least 3 references, which one preferably being a book.

Answer

Title: Leadership of Warren Buffet

 

Contents

Introduction. 2

Warren Buffet’s Use of Laissez-Faire Leadership Style. 2

Development of Buffet’s Leadership Qualities. 4

Conclusion. 6

References. 7

 

Introduction

Warren Buffet is one of the wealthiest people in the world and the chief executive officer of Berkshire Hathaway. He is famous for his successful use of laissez-faire leadership, also known as “leadership through delegation”. In this type of leadership, business managers use a “hands-off” approach in their efforts to guide the actions of their employees and followers. For the laissez-faire leadership to bring about the desired outcomes, the leader must be able to identify the most talented employees and to put them in positions where they can be motivated to utilize their talents in the most productive manner. He must also have the patience to allow them to work in an environment of autonomy. It seems that Warren Buffett has succeeded in not only identifying talent but also in motivating and putting trust in those employees who possess the right degree of self-confidence. The aim of this paper is to explore Warren Buffet’s Laissez-faire leadership style and how it has led him to be one of the world’s most successful investors.

Warren Buffet’s Use of Laissez-Faire Leadership Style

Laissez-Faire leadership works mainly in situations where followers are highly skilled and properly motivated. Unfortunately, this is normally not the case. For this reason, this leadership style is not common in many corporate settings. Followers who lack the requisite skills may end up failing to complete the tasks assigned to them in the appropriate manner. A similar fate may befall skilled followers who lack appropriate problem-solving skills. Despite these shortcomings, Warren Buffet has successfully employed laissez-faire leadership to build one of the world’s largest business empires.

For Buffett to succeed in this hands-off approach, he first needed to be good at choosing highly motivated followers who are capable of thriving in results-oriented environments. He chose whom to entrust with the most demanding jobs before going to the next step of giving them autonomy to achieve the goals outlined for them. Buffet is good at delegating tasks. He is also good at empowering his executives. This ability has earned him the title of one of the leading business managers in the world. One of the issues that arise particularly for management scholars  is whether Warren Buffett delegates too many duties. This issue puts his leadership style under scrutiny, potentially positioning it as an ideal case study for leading business schools.

Although Buffet is regarded as a leading manager in the business world, he is not actively involved in the management of all the businesses under the ownership of Berkshire Hathaway. This is a paradox because it presents this investor as someone who is out of touch with the day-to-day operations of his businesses. This paradox raises the question of the extent to which a leader should delegate duties and responsibilities to his followers.

Buffett’s legitimate exercise of the power that comes with laissez-faire leadership is perhaps the reason why he stands out in a corporate world that is already crowded with successful business executives. This type of leadership has undoubtedly contributed to the emergence of a diverse range of businesses within the Berkshire Hathaway stable. These businesses have for a long time continued to stay together to achieve a common objective. This makes them profitable and sustainable entities, thereby contributing significantly to Buffett’s wealth. In all, Buffett’s businesses have employed over 250,000 employees yet the “umbrella staff” comprises of only 19 employees (Kelly, 2011). In this organizational set-up, Buffett chose to omit the positions of head office managers who would supervise operating managers. In his leadership style, Buffett chooses to allow operating managers to manage the businesses that they head all by themselves. They operate in an environment where they are free from interference from both the head office and Buffett himself.

Development of Buffet’s Leadership Qualities

Warren Buffett’s leadership style has developed through different stages to be what it is today. At first, during his early years, Buffett used to operate only as an investor. During mid-life and later-life years, he evolved to emerge as a business leader. Today, Buffett is an elder statesman. In an assessment of Buffett’s responsibility at Berkshire, one may look at him from two perspectives: as a manager and as a leader. From this perspective, it may be possible to understand how his leadership style can be situated in different leadership theories. For example, notions of character development are no doubt useful in creating a clear image of Buffett’s circumstances, personality, and the ultimate adoption of laissez-faire leadership.

Berkshire Hathaway, the business empire that Buffett has built, deals in diverse areas ranging from finance and insurance to commodity and retail business. As of July 2010, Berkshire had a capitalization of $192 billion, making it one of the largest corporations in the world (Kelly, 2011). Warren Buffet has been running this business since he bought it in 1965. Since then, the turnover of top management officials has been noticeably low. For a business to stand out for that long, something about the leadership style of its leader must be worth emulating.

From a theoretical perspective, many insights have been developed from Buffett’s success. For instance, the constructive-developmental theory has been used to highlight the transformations that this business leader went through in terms of meaning-making to become the laissez-faire leader he is today (Kelly, 2013). Without an elaborate process of development, Buffett could have found it extremely difficult to create the leadership culture that currently exists at Berkshire. By examining the process of Buffett’s development from a theoretical perspective, researchers can examine how other leaders may be encouraged to develop as well in order to turn around their companies and lead them in the direction of profitability and sustainability.

According to Kelly (2013), Buffett’s transformation towards becoming a leader developed through seven stages. The first stage was that of becoming an opportunist. Next, Buffett was transformed into a diplomat before becoming an expert and later on an achiever. This was followed by efforts to become an individualist, after which he metamorphosed into a strategist and finally an alchemist (Kelly, 2013). In understanding this transformation, focus should be on two things: horizontal development (what a person knows) and vertical development (how a person knows it (Kelly, 2013).

Over the course of Warren Buffett’s business career, he changed the way he used power. During the early days at Berkshire, he used transactional leadership (Kinsley & Clarke, 2008). After developing gaining business expertise and becoming an achiever, he started using transformational leadership (Kinsley & Clarke, 2008). With the continued progression into the world of business success, Buffett gradually started acknowledging the value of using mutually transforming power and duly started using it. Preference for transactional leadership during the formative years of Buffett’s business arose because of preoccupation with his preoccupation with his own beliefs and a one-dimensional view of the world in the quest to focus on success in a highly competitive business world. Through self-awareness, Buffett gradually learnt how to give his followers autonomy to exercise their own beliefs and convictions, hence the emergence of laissez-faire leadership.

In 1956, Buffet took a majority stake in Dempster Mill, a farm equipment company. His core objective at this time was finances. During this time, he seemed to use “unilateral power” and a one-dimensional approach to business to ensure that he always got what he wanted (Kinsley & Clarke, 2008). In 1983, Buffet bought Nebraska Furniture Market. At this time, Buffet adopted a more transformational approach to the exercise of power and was willing to examine the deal from multiple perspectives rather than just finances. Other factors that Buffett put into consideration included long-term business partners, family relationships with the seller, and contribution to the sustainability of Berkshire. In a third example, Buffet acquired Burlington Northern Railway in 2009 (Reader, 2013). In this acquisition, he integrated multiple perspectives, including business knowledge, confidence about sustainability, and multi-dimensional assessment of time. Most importantly, his knack for laissez-faire leadership surfaced in his pursuit of mutual transformation of his own self as well as that of the Berkshire business.

Conclusion

Today, Warren Buffett is famous for his successful deployment of laissez-faire leadership. However, insights from constructive-developmental theory  show that it is not possible that Buffett adopted this type of leadership since his first day in business. He started by being a transactional leader who looked at things from a one-dimensional view. As multiple dimensions became important owing to business experience, Buffet became a transformational leader. As the need to focus on the past, present, and future of Berkshire arose, he slowly started adopting mutually-transforming power. It is in the pursuit of this type of power that Buffet ultimately became heavily reliant on laissez-faire leadership.

 

References

Kelly, E. (2011). Exercising Leadership Power: Warren Buffett and the Integration of Integrity, Mutuality and Sustainability. From Critique to Action: The Practical Ethics of the Organizational World, 22(7), 295-316.

Kelly, E. (2013). Transformation in Leadership, Part 1: A Developmental Study of Warren Buffett. London: Macmillan.

Kinsley, M. & Clarke, C. (2008). Creative Capitalism: A Conversation with Bill Gates, Warren Buffett, and other Economic Leaders. New York, NY: Simon & Schuster Paperbacks.

Reader, C. (2013). Summary of The Sages: Warren Buffett, George Soros, Paul Volcker, and the Maelstrom of Markets-Charles R. Morris. London: Primento Press.

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