Managing Expectations
To me, one of the most under-appreciated and misunderstood management skills is in managing expectations. I'm not talking about using the old under-promise and over-perform strategy ... although that's legitimate. I'm talking about truly understanding the marketplace, growth and the psychology of working with people and knowing how to communicate expectations on a level that is real.
Buffett has always been a master at this. People always talk about how he says in his yearly shareholder letter that the current years' profits offer no guarantee of future performance. And while a lot of people do the little wink and jab in the sides while they laugh at this comment because of overall long-term performance, for Buffett it is real and he means it.
Another thing Buffett does in reference to expectations is to use intrinsic per-share value as the key-metric through which performance is measured.
What needs to be understood is that there is a system in place that measures results, along with a long-term outlook that keeps expectation of shareholders in a realistic place. It has been a powerful tool of Buffett and his managers throughout the years to run a company that refuses to give in to decisions made for only short-term results.
It helps those whose fortunes and interests are tied up in those of Berkshire Hathaway (BRK-A) to stay in the game and reap the rewards of holding long-term based upon knowing over the long haul there expectations are pretty predictable.
Other Buffett Resources:
Warren Buffett: The trouble with being a legend
Warren Buffett: 'I told you so'
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