Devoted to Managers and those that seek to improve their management skills

Warren Buffett and Secrets of Management - 26

When Buffett was starting out, he had been taught that managers that had a lot of experience had several traits; like being honest, smart and always making rational decisions. But what he learned in reality was that what he called the "institutional imperative" could alter a normally good manager and tempt them to do stupid things. He said it this way, "rationality frequently wilts when the institutional imperative comes into play."

What's the institutional imperative? To put it in its simplest form, it's the copying of other managers and businesses for no other reason than they are doing something a specific way.

How can you recognize when this is affecting your managers or leaders? Buffett recognized three things that helped him to identify it.

1. Resistance to change in the current direction the company is going.

2. Mindless support of a leader by others in the company. Many times there will be reports created to substantiate whatever the leader wants to be confirmed - whether based on fact or not.

3. The mindless imitation of what other companies are doing.

Behind all of this is a lot of insecurity and dealing with the circumstances in a way not connected to reality. That's what the institutional imperative basically does: creates a world that hides what's really happening and facing how to change it.
 
It doesn't want to deal with things as they are, so there's an artificial creating of things as they wish they were. The great problem with this is that then irrational decisions are made based upon a pretend world and circumstances that don't exist.

Decisions must be based upon realities, not imaginary worlds created to placate the existing management. Any good business leader should want quality, real information that they can then make decisions on. The "institutional imperative" is an enemy to this process. Don't let it become part of how you operate.

Other Buffett Resources:

Wisdom of Warren Buffett

Warren Buffett, investor

Warren Buffett: The trouble with being a legend

Warren Buffett: 'I told you so'

Company growth

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