There are five segments to Warren Buffett’s Management Principles:

1. Pick The Right Business: own, manage, or work for the right business, you need to work for the one with the best economics.
2. Delegate Authority: learn how to give up control safely.
3. Find A Manager With The Right Qualities: integrity, intelligent, and a passion for the business. You need to cultivate this in yourself, and in the right candidates.
4. Motivate Your Work Force: you need to motivate your managers so that they are all that they can be within your company.
5. Learn The Managerial Axioms For Different Problems: there are axioms for handling dishonest employees, and keeping costs low.

4. Motivate Your Work Force: Management motivational skills that Warren uses, you need to adapt what Carnegie has taught.

Make A Good First Impression: you should begin the encounter in a friendly way. Warren knows that first encounter should be friendly, and be light. You should start with your encounters in a friendly way, because it is the only way that pays.

The Power of Praise: William James said that the need to be appreciated is essential. Charles Schwab was the first superstar manager. What made Charles Schwab a revered manager? Charles Schwab was encouraging! You need to arouse the greatest enthusiasm, you need to appreciate and encourage. You should give people the incentive to work. Schwab noted that Andrew Carnegie always praised his employees, and was a cheerleader, and would praise his managers in private. If you praise them for the little things, they will give them better things down the line.

Give Your Employees a Fine Reputation To Live Up To: the manager worked with a longtime trusted employee, and resulting in decline of productivity. Never miss an opportunity to remind your managers about their quality contributions. You should build up the expected reputation of your managers. If you play up the importance of giving people a fine reputation to live up to, you will motivate them. So Warren has some advice for Bono: don’t appeal to the conscience of American on African aid. If you appeal to a sense of right or wrong, it will not work, because we do not want to feel guilty. Bono should speak to America’s sense of greatness. America put a man on the moon, we should turn to America to save Africa. If you give a person a fine reputation to live up to, it is more effective. Using guilt is not productive.

The Dangers of Criticism: using criticism is ineffective because it arouses resentment. Uninvited criticism is something we hate to hear. We should not provide uninvited criticism of others. Instead of critcizing managers, you need to pay attention to what went wrong, and learn from it. As long as managers are making intelligent risks. We all make mistakes, and that you should learn from your errors but not make such a mistake subsequently.

[This is a précis of Warren Buffett’s Management Secrets. More is forthcoming]

OBESSION: you should be dreaming about the business, obsession is the price of perfection. Moody’s Stock Manual was memorized by Warren Buffett. How obsessed are you about what you do? Top managers are obsessive people. You can tell how successful someone will be, if they had an early interest in business. It’s not smarts but obsessiveness that makes the manager or leader in business.

The Power of Honesty: candor benefits us as managers. A manager who is truthful with others is more likely to learn from them. When the manager ignores his own mistakes, then he will more likely lie to himself. The willingness to fuddle the numbers will mean willingness to break other rules, you should be fearful of those who make up the numbers. You don’t want to be in business with people who need a contract in order to perform.

Manage Costs A.k.a: the Good Business Manager; profit is the life blood of a business, the only way to make a profit in a business is if you a profit margin, you either make a profit or not. If you make a lot of profit, you can become rich. So you need to inspire the sales force, and you need to inspire the manufactorer and buying teams. It take two to tango and two to make a profit. You need to develop your own sales skills before leading a team of sales people.

Have an Eye for the Long-Term: being a manager makes you a better investor. You should try to invest for forever, not for short-term gains. If you are short-term motivated then you will not be successful, management is focused on the short-term, this kills long-term planning. Buffett believes in long-term planning. Managers are determined to make the short-term numbers, and they do not plan for the future so they fail. Reactive management is all too common. Avoid being a reactive manager.

The problem is that people throw good money at a mediocre business, and when management tries to get a short-sighted promise passed they spoil the long-term value of a business model. Warren studies a lot of different businesses. Warren learned that he is looking for a great investment which means great people, products, and new businesses.

Determining Salaries: You will want to pay great managers well, they are very rare. How do you measure whether a manager is good?

• Industry Comparison: If you own a business that is earning a 20% GP margin, they may not be doing all that well compared to other businesses. You need to compare the business within the industry which indicates whether or not the manager is doing a good job.
• Performance Based Pay: bonuses are paid if the manager improves the underlying economics of the business, NOT whether the manager performs well because the business is already highly profitable. You need to find tangible ways to prove whether that manager is improving a company or not. A poor manager in a highly successful startup is still a poor manager.

[This is a précis of Warren Buffett’s Management Secrets. More is forthcoming]

Warren Buffett’s Management Secrets

3: Find the Right Manager for the Job: You should hire the right manager, and that means you have found the right characteristics of a manager. Where can you find the right manager? It is time consuming, and management changes are expensive. First, you need to ask if the management changes are necessary or not. Warren looks for competent management already in place within these companies. Promote from within if possible, or look for talent elsewhere, but preferably not..

Victor or Victim: how to select a leader. Would you rather be the worlds worst lover, and have everyone think that you are the best lover, or vice versa? Managers are either true to themselves or they conform to what others want of them. A bureaucrat wants to do what you want. Warren is always going against the herd, these types of managers are the masters of their own destiny.

You Need To Determine The Internal Locust Of Control: you blame yourself when something goes wrong, and if you fail it is because it is your fault. You determine what your life will look like. When you win, you won it, and you have no one else to blame. Learn from your mistakes but do not dwell on them for too long. You need to take responsibility for your failures. Get in control of yourself.

You Need To Determine The External Locust Of Control: you blame everyone but yourself. They don’t believe they have the power to solve their problems.

Work At The Job You Love: you will not jump out of bed, if you keep taking jobs that you don’t like because it will look good on a resume. In the quest for wealth we take on jobs that we don’t like. You will one day end up doing something you enjoy doing. Sometimes the foundation is found on nothing more than greed. Work is drudgery, and destroys your spirit. The most successful people in business are doing what they love. You need to love what you do. Love what you do, and hire people who also love what they do.

Put A Wining Sales Team Together: the best sales people are those who believe in the product, and have a passion for the product. If you are very interested in that product, you need to ask what are its best uses. People who believe in the products, and love to go to work, but have managers who would rather be somewhere else are doomed. Super managers are well-enough to retire in the morning but they go to work anyway because they love what they do.

[This is a précis of Warren Buffett’s Management Secrets. More is forthcoming]

There are five segments to Warren Buffett’s Management Principles:

1. Pick the right business: own, manage, or work for the right business, you need to work for the one with the best economics.
2. Delegate authority: learn how to give up control safely.
3. Find a manager with the right qualities: integrity, intelligent, and a passion for the business. You need to cultivate this in yourself, and in the right candidates.
4. Motivate your work force: you need to motivate your managers so that they are all that they can be within your company.
5. Learn the managerial axioms for different problems: there are axioms for handling dishonest employees, and keeping costs low.

2. Learn to Delegate Within Your Company: Berkshire growth needs to be competently run. A management approach has allowed Berkshire to become a large multi-national conglomerate.

Rules for Delegating Authority: Do not try to control every event, if you are micro-managing then you will drop all aspects of your work. Delegating to a competent manager means a more thorough execution of the task. There is not enough time in the day to actually delegate, Warren delegates with rules:

1. Every business culture is unique: workers and managers have developed highly specialized skill sets, even remotely as well as he can. Employees are the experts. If you have any job as a manager; it should be to cheerlead not be a slave driver.
2. Competent Managers like to do their business as their own.  Play on the manager’s pride.
3. The managers should not only be hardworking, you should have a great deal of integrity. If they aren’t honest they will rob the company blind. Sell cheap, and tell the truth.

[This is a précis of Warren Buffett’s Management Secrets. More is forthcoming]