While the 87-year-old “Oracle of Omaha” has tried to avoid nominating Berkshire’s next CEO, the managerial restructuring is a strong sign that this moment is much closer than markets had thought.
Berkshire Hathaway, America’s leading value investing firm, once synonymous with its legendary founder, Warren Buffett, finally named the team who will manage the public company following Buffett’s decades of consistent leadership.
Longtime senior executives Greg Abel and Ajit Jain were promoted to vice chairman January 10 and joined Berkshire’s board of directors. The investment community had been waiting for a succession plan at Berkshire; and the announcement might suggest that Abel and Jain, alone or together, might lead the company in the near future.
The company is one of America’s largest conglomerates, and its concentrated leadership—that is, Buffett’s strong personality and unparalleled track record—made it difficult to document a succession plan that would be perceived as positive. Moreover, the company’s stellar historical financial performance could be hard to achieve by future leadership in light of the current high valuations.
While the 87-year-old “Oracle of Omaha” has tried to avoid the need to nominate Berkshire’s next CEO, the managerial restructuring is a strong sign that this moment is much closer than markets had thought. The expectation had been that Buffett would look for someone who follows his management style, yet scholars and leadership specialists question this approach.
“A person might exhibit a certain style in one environment in order to succeed, even if that style doesn’t come naturally,” according to a recent paper from leadership-consultancy Spencer Stuart. “Having a more nuanced and data-based view of candidates opens up more possibilities, allowing companies to make better decisions and support the leaders they hire, as well as providing input on which natural qualities they could tap into to drive performance or change.”
In addition, several studies show that a succession plan that leads to a like-minded leadership misses the diversity required to lead to better financial and operational results as a result of exchange of information and critical cognitive analysis.
The next couple of years will show which natural qualities these new potential leaders bring to Berkshire Hathaway.