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Bruce McAlpineLeadership

Principles Centred Leadership: Examples from Warren Buffett

By April 19, 2023No Comments

In today’s society business leaders are increasingly challenged to find a way to lead effectively, as they deal with a multi-generational, multi-cultural, multi-ethnic  and mixed (full-time, part-time, contract and temporary workers) workforce in a hybrid or virtual workplace setting.

Warren Buffett is CEO of Berkshire Hathaway, which owns a large number of companies which in turn employ over 300,000 people.  Many years ago he found that, with that many companies and that many employees, it was almost impossible to manage by rules.  Instead, Warren Buffett manages by principles, and leads by example.

Jim Cunningham picked up on this leadership trait in an interview with Warren Buffett in 2015.

He quotes Warren Buffett as saying “Every two years, I write (my direct reports) a very simple letter. It’s a page-and-a-half. I don’t believe in 200-page manuals because if you put out a 200-page manual, everybody’s looking for loopholes basically.

Warren Buffett believes that reputation is a hard currency to acquire, and an easy one to lose.  So he clearly states this principle with the phrase “We never will trade reputation away for money.”

He recognizes that his direct reports are the guardians of his reputation.  “I want them to not only do what’s legal obviously, but I want them to judge every action by how it would appear on the front page of their local paper written by a smart but semi-unfriendly reporter who really understood it to be read by their family, their neighbours, their friends.”

An example of how Warren Buffett lives this out in practice can be found in the classic “The Leadership Moment”. Author Michael Useem invests a full chapter to examine Buffett’s handling of Salomon Brothers, a century-old investment bank in which he was a significant share-holder, and which ran into serious regulatory issues in 1991.  He did 4 things well:

  • He took immediate action.
  • He communicated his principles to the entire staff of Salomon Brothers and (using the analogy of a tennis match) he told them “I don’t want anything around the (foul) lines. There’s plenty of money to be made in the centre of the court.”
  • He laid out his expectations: “You are each expected to report, instantaneously and directly to me, any legal violation or moral failure on behalf of any employee of Salomon” and he gave them all his personal phone number.
  • He instilled in them a mantra from J.P. Morgan: “First class business is a first class way.”

At the end of the day, most leaders do practice “principles-based leadership” without realizing it.  What really matters is what your principles are, as Stephen Covey expanded on in his book “Principle Centered Leadership”.  In a world full of politicians and business leaders who make decisions based on the principles of expediency and personal agendas, it is refreshing to find great and successful leaders who make decisions on the principles of morality and personal integrity. 

Three questions flow logically from this brief overview:

  1. On what principles do you consciously or unconsciously base your decisions as a leader?
  2. What are you doing to formalize, document, and describe these principles in acceptable behaviours for your subordinates to observe and internalize?
  3. As you hire new team members, how are you consciously assessing and evaluating candidates in line with these principles during your interview process?

Whether you realize it or not, your principles define the values of your organization, which in turn define the culture and behaviours of your employees.  On what principles do you consciously or unconsciously lead your organization?

About the author: Bruce McAlpine is President of Fulcrum Search Science Inc., a Toronto-based executive search firm solving Mission-Critical hiring challenges throughout North America for over 50 years.  He is also a Past President of the Association of Canadian Search, Employment & Staffing Services and a Past President of the Royal Military Colleges Club of Canada.  He can be reached at 416.779.8505 or .