Effective Leadership

ABSTRACT

Leadership is a process a person motivates a group of people to achieve a certain organizational goal. There are different types of leaders, and some are perceived to be better than others. However, after studying about different leaders, it does not benefit anyone to pass judgement on them. Instead, we should look at different qualities of the leaders and learn from their strengths and avoid their weaknesses.

In this report, I will compare 2 great business leaders of our time – Warren Buffett and Bill Gates. They have built up billion dollar companies and are personally worth billions of dollars. What were some of their qualities that made them who they are? A point by point analysis will be made of the 2 leaders.

At the end of the report, having compared the 2 leaders, a conclusion is made as to who, between them, was the more effective leader?

Introduction

A leader, a manager and an entrepreneur – each have certain distinctive qualities but there are also overlapping qualities shared by the three. Their inter-relationship may be summarized by the following figure.

Leaders are usually focused on their goals and have the ability to lead and motivate their followers to achieve that goal. The goal could be a desirable one such as scaling the peak of Mt Everest, or undesirable ones such as suicide bombing missions. Managers on the other hand work within the constraints of a system and ensure the efficient operation of the organisation. An entrepreneur is someone who is willing to take certain risks to enhance the financial well being of his venture.

Purpose

The purpose of this report is to evaluate the effectiveness of two business leaders, and finally to conclude as to who was the more effective leader.

Scope

Leaders have followers and act differently under different situations. As such, these 3 are intertwined and ultimately lead to the success or failure of a leader. The relationship is as shown in Figure 2.1 of Hughes (2009), page 26.

Qualities of a Successful Leader

There are several qualities that are attributed to a successful leader which have been listed on page 196 of Hughes (2009). Some of the attributes are:

• Dynamic
• Decisive
• Foresighted
• Excellence Oriented
• Ambitious
• Trustworthy
• Team Builder
• Confidence Builder

People

This report evaluates 2 business leaders – Warren Buffett and Bill Gates.

Warren Buffett

Warren Buffett was born in 1930 in Omaha, Nebraska (www.wikipedia.org). He is a successful investor and businessman, and a philanthropist. He is synonymous with Berkshire Hathaway of which he is the CEO and Chairman. His personal worth as of 2008 was US$62 billion.

During the early part of his career, he was mainly an equity trader and investor. During the later stages, he bought not only stocks but whole businesses. The uniqueness of Berkshire Hathaway is that, despite being a huge holding company of many businesses, Warren Buffett does not manage any of the companies. Warren Buffett buys over businesses with the condition that the current CEO or owner continues to run the business.

As such, Warren Buffett can be described as a great motivator – he has to motivate people who are already successful and rich, to continue working (J. O’Lourghin, page 60). He does not manage the businesses but provides direction. This has paid off for the company as the CEOs in charge do their best to produce the best results in their capacity (J. O’Lourghin, page 77).

Warren Buffett is an expert in his field, i.e. business valuation. He uses the same methodology whether he is buying stocks or whole businesses. He will only buy businesses that he fully understands, which are within his “circle of competency” (J. O’Lourghin, page 18). He is a decisive person and is famous for taking 5 minutes to buy billion-dollar companies.

He is ambitious and has set a target annual rate of return of at least 15%. He also has an unwavering confidence in himself and buys huge amounts of stocks when everyone else is dumping them (last demonstrated during the recent financial crisis). He also does not follow the herd and avoided getting burnt by the dot.com bubble.

He is trustworthy. During his annual shareholders meetings, he will often criticize himself for the mistakes he made, e.g. paying too high a price for China Petroleum. He is also a great teacher. His letters to shareholders don’t just rant off a list of figures but they provide a lot of information on his thoughts behind certain activities.

Bill Gates

William Henry "Bill" Gates III  was born in 1955 in Seattle. He is co-founder and Chairman of Microsoft, as well as the largest single shareholder with 8% of common stocks (www.wikipedia.org).

He is a firm believer in the future of technology and drives his company to accomplish his beliefs. He has made it possible for the personal computer to be a household item. He is dynamic and sets a very high standard for himself, which his staff and managers try to emulate (Thomas J. Neff & James M. Citrin, page 130).

He is a great leader who does not manage day to day operations, but lets his managers run the company. Even though he was the CEO and Chairman, nobody reports directly to him (www.newsweek.com). He is highly energetic and constant innovator, constantly producing newer software to enhance previous versions. Even though he stepped down as CEO, he continues to be the Chairman, and created the post of Chief Software Architect. This demonstrates his expertise in this field.

He pays great attention to detail as accounts of his rebuttals during his meetings with managers forces them to think in detail their proposals (www.wikipedia.org).

He has turned Microsoft into a dominant market leader in the PC industry to the extent that anti-trust suits have been filed against him. However, he continues to come up with new products relentlessly.

Compare and Contrast

Who was the more effective leader? Both contributed significantly in their respective areas: Warren Buffett in the field of business valuation and Bill Gates in the field of software. Both are great philanthropists but in different ways. Bill Gates set up his own foundation, whereas Buffett encourages his shareholders to nominate a charity of their choice for the company’s contribution to charity.

Bill Gates has stepped down from Microsft after 4 years of succession planning. Warren Buffett does not openly declare that he has a succession plan but insists that the mechanisms put in place in Berkshire Hathaway will ensure that the company will function as well without him.

I feel that Bill Gates is a more effective leader as he has touched lives not only in his field of expertise (i.e. software), but also through his foundation. He has helped, whether directly or indirectly, billions of lives which no current political leader can claim to have achieved.

Conclusion

No two leaders are alike but they have some common traits. Both Bill and Buffett manage huge corporations (which are worth more than some small countries), but they do not get involved in the day to day operations. Instead, they focused more on providing vision and direction, but of course made critical decisions when required.

Even though in my opinion Bill Gates is the more effective leader, Warren Buffett has made no smaller contribution, and still continues to do.

                                                                                                               

References

1.      Hughes, R., Ginnett, R. and Curphy, G., 2009, Leadership: Enhancing the Lessons of Experience, 6^th Edition, McGraw-Hill Irwin, New York

2.      Donald F. Kuratko, 2009, Introduction to Entrepreneurship, Eighth Edition, South-Western Cengage Learning, Canada

3.      James O’Loughlin, 2003, The Real Warren Buffett: Managing Capital, Leading People, Nicholas Brealy Publishing, Maine, USA

4.      Thomas J. Neff & James M. Citrin, 2000, Lessons from the Top: In Search of the Best Business Leaders, Penguin Books, Middlesex, England

5.      http://www.wikipedia.org

6.      Steven Levy, June 30, 2008, Microsoft After Gates. And Bill After Microsoft.,  http://www.newsweek.com/id/142672