My man Warren Buffett turned 89 at the end of August. Over
the last 78 years of his life – he bought his first share at 11, he has been
building Berkshire Hathaway. The record though, shows he has been CEO of the
biggest financial services company in the world since 1970.
Judging by his age, his is a long story. A 900-page tome
about his life – “The Snowball: Warren Buffett and the business of life” was
published a few years ago and should be essential reading at all business
schools and for all business leaders.
Over the last 20 or so years he has kept not a few millionaires
on tenterhooks about what his succession plans are for the $350b company he has
cobbled together over the last half century.
Last year he appointed two vice chairmen Gregory Abel and
Ajit Jain, a signal to the market that he had narrowed it down to two
candidates to take over in the event that he gets “hit by a bus”. By the way he
co-chairs the company with Carlie Munger, who will turn 96 in January.
"Buffett has had the luxury of longevity to mull over who he will hand the baton to when the time comes. Most business owners unfortunately, have mortality knocking at their door much sooner....
In the last few weeks two of our own businessmen have come
face to face with this reality. For one it has been forced upon him and into
the public domain, with an embarrassing family court battle and for the other,
through the planned commemoration of the 25th anniversary of his
flagship enterprise.
Mohan Kiwanuka, who has over the last 30 or so years built a
conglomerate of his own, had to fight off a court challenge from his son, who
believes that Kiwanuka might not be in charge of all his mental faculties and
as a result, doing things detrimental to the health of his company. The court
ruled against the son in a family drama that we might not have seen the end of.
Sikander Lalani on the other hand was able to reflect in the
company of friends and family, at a dinner to commemorate a quarter century of
his Roofings Ltd, about his life journey and his plans for his enterprise
beyond himself. If there were any differences of opinion about his plans within
his family, there were nowhere in evidence.
The challenge of passing it on is never an easy one because
it is psychological more than anything.
We often start our businesses as a way to make a living for
ourselves and family. Depending on how it goes, the business is either dead
within five years or progresses along the exponential curve – all the ups and
downs smoothed out mathematically, that characterizes all successful business.
But in the early days when survival is key, there is never any time to think about the long term. It is there that the seeds of eventual bad blood are sown...
The building of the company has been a labour of love for the
founder. He lives and breathes his organization. Why things are done one way
and not the other, is often buried deep in his subconscious, inaccessible to
even the closest family or partners. The vision for the company is not only
never shared, but is a moving target in the founder’s mind. And then to
compound it all the founder has a desire that the enterprise should continue
after him just the way it is, preferably run by a blood relative.
And who can blame them. We have the same challenges with our
children.
We want them to grow up and complete our unfinished
business. You want him to follow in your footsteps into medicine, the law or
engineering, never mind that he has no inclination towards any of that. And when
he finally puts his foot down and chooses his own path, it is a crisis.
They suggest that in bringing up our children we should
focus on giving them the building blocks – education, health and values, that
will help them navigate life away from our protective, the kids would say,
domineering, ways. Easier said than done.
Same with a business, the easier said than done part
especially. Owners from as early as possible should prepare the business for
the day when it will not be theirs.
"This conscious, psychological separation may on one hand mean, the business owner may be unable to lay down his life for his life’s work, during those times when the business is suffering existential threats. During these times the only difference between its survival or death is the sheer will power of its founder...
On the other hand, the step back is what will allow the
owner to deliberately build systems that will ensure the business’ continuity
after himself and more importantly will throw up some capable leaders, credible
candidates to run the company when the founder steps aside.
That still leaves the issue of its ownership. We refer back
to Buffett.
Given his longevity and surprising good health, surprising
because he lives on soda and burgers, his children who were never directly
involved with the business have charted their own paths and their taking over
the running of the business is not an option.
In the aforementioned account of his life, he intends to
give away all his interest in the company to charity, mostly through The Bill
& Melinda Gates foundation, which may very well end his family’s interest
in the business.
This would be anathema to most founders who would like to
see their legacy live on in their businesses controlled by their children.
Buffett’s example is a classic case of separating himself
from the business and ironically gives it the best chance of living on well
after he has stepped down.
"With interests from everything from insurance to railways, furniture to food, paint to private jet leasing Buffett has not been a hands on boss, focusing more on choosing and overseeing good managers who can work under minimum supervision...
So while it has been a challenge to finger his successor the
business has been prepared to run without him for the last fifty years.
