“We can afford to lose money – even a lot of money. We cannot afford to lose reputation – even a shred of reputation…It takes 20 years to build a reputation and five minutes to ruin it.”
From the comment of Warren Buffett above, you can tell that the bottom line, overall, wasn't the most valuable thing to him. The bottom line had to be taken into account of course, but there will be no bottom line if the reputation of a business suffers.
As Buffett says, a lot of mistakes can be made, which could result in the loss of a lot of money. Most businesses, relative to the amount of revenue they generate, could say the same thing. But you lose your reputation, and there will be no money being made, as with your reputation will go your customers.
This is a reason why Buffett considered it so important that those in key positions in the company reeked of integrity and capability. Those are probably the two most important areas that a reputation could be lost in.
As a result, whether buying a business, or needing to hire managment within, it was the most important process of the business to ensure their reputation would be maintained at a high level at Berkshire Hathaway (BRK-B).
This isn't complicated, it just requires determination, due diligence and patience. There is probably nothing more important than having the right leaders in place in a company. Everything is built around it.
We need to have the same attitude as Buffett in this area: don't buy a company or hire someone you're not comfortable having in a management position.
One of the key requirements for buying a company by Buffett, was being comfortable with who was managing it. If the management didn't meet his requirements, he wouldn't buy the company. The two were interconnected, and Buffett knew it.
The success of any company is based upon this reality, and we need to embrace it and live it as Buffett has and does.
Other Buffett Resources:
Warren Buffett: The trouble with being a legend
Warren Buffett: 'I told you so'
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