What Warren got right
Finally, someone got it right. After a string of high-profile successions in recent years that have been anything but smooth--first Bank of America, then HP and now, potentially, AIG (its fifth CEO in five years has cancer and all the board has in place to replace him, if needed, is an interim director?)--the oracle of Omaha is working his magic on management, too. The sage investor has named Todd Combs, a manager at a small hedge fund in Connecticut, to succeed him.
I know very little about Combs, the 39-year-old The Wall Street Journal calls a "surprise appointment." That's probably because Combs currently manages just $400 million in assets; Berkshire Hathaway's investment portfolio is $100 billion. Combs also has experience as a Florida bank regulator and working in the pricing department of the insurer Progressive, but he's likely been picked for his style as much as his background. Chuck Davis, the chief executive of a private-equity firm that helped Combs start his fund, told the Journal that Combs "reads 500 pages a week and does his own deep-dive research," a quality the thorough Buffett is sure to respect.
But what Warren got right isn't necessarily the pick. It's the approach. For one, he's actually naming someone before he gets too old or too infirm to carry out the job. That may seem obvious, but so many companies don't get the simplest of all succession rules down. All too often, succession planning is something that happens after lightning strikes--be it performance woes, an embarrassing boardroom scandal or an unexpected illness or death.
Second, he's bringing Combs on early, starting him small and letting him grow into the role. Buffett told the Journal that Combs will not "take over the whole investment function as long as I'm around" and will stick with a size he "feels comfortable with" and "scale up until he has a chance to get fully invested" in the coming months. No matter how much a CEO-in-training has spent time in second-in-command jobs, taking on the entire role at one time is overwhelming. That's particularly true when the successor is an outsider, who must not only learn the job but get to know the company's customers, shareholders and culture.
Finally, and more important, he isn't trying to force someone else to follow in his impossible-to-replace shoes. No one could ever be Warren Buffett, no matter how hard they try. Instead, he is revamping the role, splitting his CEO and chief investment officer responsibilities into two jobs. Combs is a candidate for the latter gig, while the former is widely expected to be filled by David Sokol, an Omaha native who is chairman of MidAmerican Energy Holdings and CEO of NetJets, both units of Berkshire.
Most successors struggle when trying to follow in the footsteps of iconic chief executives or well-known entrepreneurs. By redesigning his job for the future, Buffett is giving them a fighting chance.
Disclosure: Buffett is the lead outside director on The Washington Post Co. board and has been a longtime adviser to the company.
October 26, 2010; 10:45 AM ET |
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