Structured for Success: Berkshire Hathaway
For the past few blog posts, I’ve taken a look at Warren Buffett, his investing style, and values. But one topic that sometimes gets overlooked in regards to Buffett is his company: Berkshire Hathaway.
Berkshire Hathaway has over 80 business units and has continually outperformed the S&P 500 Index under Buffett’s leadership. The company is highly decentralized as business units receive very little oversight from headquarters. This is unusual, especially for a company of this size (it’s larger than GE, GM, and IBM).
In a recent article in the Harvard Business Review, the CEOs of Berkshire Hathaway’s operating units agreed that there were 3 key aspects of the corporate structure that allowed them to be successful: autonomy, long-term orientation, and company culture.
At Volaris, we have a similar structure to that of Berkshire Hathaway. How does that structure allow both companies, though in different markets, be successful? Keep reading to find out.
Autonomy to Run Your Business
Warren Buffett gives his business units complete autonomy to operate how they see fit. As long as each unit meets its financial targets, Buffett does not interfere. That same philosophy is a core principle of Volaris.
When we acquire a company, it’s up to the seller’s discretion as to whether or not they want to still be in the business. Regardless if the founder decides to stay, the business unit leader will run the company how they want to. We will provide support and resources when needed, but will not be involved with the day-to-day running of the business.
Long Term Orientation
Buffett has no interest in the short game. He invests in companies for the long-term and asks his business unit leaders to look a few years into the horizon to plan ahead. We do the same at Volaris.
Sustainable, long-term growth doesn’t happen overnight. We want our businesses to be successful year after year so we have our leaders think about the future and look at implementing organic growth initiatives, acquiring new businesses, or entering new markets.
Strong Company Culture
The culture at Berkshire Hathaway emphasizes integrity, acting ethically, long-term orientation, and a focus on the customer. This all flows from Warren Buffett and he ensures that it is dissipated throughout the organization.
Having a strong corporate culture is extremely important to us at Volaris. We strive to put our employees first because people matter. You can have the greatest strategies in the world but if you don’t have the right people in place to execute those strategies, then it’s all for nothing. We also believe on focusing on the customer because solving their problems and listening to their needs is what drives the business forward. That, along with our long-term orientation, has created a winning culture.
Warren Buffett stays away from software companies because they are not in his circle of competence. But software is in ours. We’ve been compared to Berkshire Hathaway before and we take that as a compliment. Think you can benefit from our structure? Contact us to learn more.