Introduction
In the contemporary business environment, there are numerous examples of leaders who tremendously influenced organizational practices. Warren Buffett’s leadership activities are well-recognized instances of appropriate theoretical and practical knowledge application that allow for establishing a productive organizational environment (Jensen et al., 2020). Of special importance is his use of the technique ingrained into the contemporary approaches that view leadership as a dynamic process that is pursuing a goal that is shared between the involved parties (Kızıl, 2017). This paper discusses the transformational leadership styles utilized by Warren Buffett, explaining how the situational and transformational leadership theories made him a successful leader by providing relevant examples.
The Contribution to Buffett’s Success: Contemporary Theories
Becoming an efficient organizational leader requires a thorough understanding of the theoretical principles behind leadership. In the case of Warren Buffett’s success, the types of theories that contributed to his affluence are the contemporary leadership frameworks that allow for an integrated approach to leading an organization. The leadership methods used in these approaches are aimed at improving the common good and are led by the principles of social responsibility (Jensen et al., 2020). Warren Buffett’s techniques frequently adhere to these aspects, creating an environment that is efficiently managed rather than attempted to control.
There are several traits of the contemporary leadership theories that allow for establishing a productive environment. Combining the traits of various disciplines, these techniques emphasize the importance of following the chosen values, adapting to the emerging conditions, and creating goals aimed at improving the common good (Tian et al., 2020). These aspects are evident in Buffett’s leadership, which, according to his statements, focuses on preserving the company’s values and establishing an environment that benefits the workforce (Bauman, 2018). Furthermore, given the frequent acquisition of various corporations, Buffett demonstrates the ability to transform the atmosphere in the purchased enterprise, a trait that is often regarded as Buffett’s leadership mastery (Tian et al., 2020). Therefore, the contemporary theories of leadership appear to be the key to the executive’s astonishing influence on the organizational environment.
Leadership Theories: Situational and Transformational Methods
The situational and transformational leadership frameworks are most frequently utilized by Buffett to elicit the most beneficial outcomes for his company. The situational leadership approach is a contemporary theory that is well-recognized for its versatility (Woods, 2019). This technique suggests that there is no ideal method or tactic that can be applied to a particular enterprise to generate the most advantageous results with a high degree of certainty. Contrastingly, it is proposed that to achieve efficiency, the leader should properly analyze the organizational environment and determine which approach is currently more likely to yield the needed outcomes and promote performance among the employees.
While occupying the CEO’s position at his own company, Berkshire Hathaway, Buffett employed situational theory techniques that allowed for obtaining successful outcomes. For instance, Buffett was often forced to choose between the most applicable practices when acquiring another corporation, sometimes opting to reshape his current approach based on the task at hand (Jensen et al., 2020). The relationship between the leader and the employees is a crucial aspect of a company’s performance, meaning that it was imperative for Buffett to create a connection to the newly-acquired workforce. Nevertheless, the executive was able to positively influence the company’s atmosphere and its workers, attaining positive performance indexes in a short period of time through the application of appropriate initiatives.
Another theory associated with Buffett’s organizational influence is the framework of transformational leadership. According to this approach, a successful leader is tasked with creating an atmosphere that promotes change and empowers employees to accept the upcoming alterations (Tian et al., 2020). As such, the executive must collaborate with the working teams or individual laborers, identifying the aspects that must be transformed in order to ensure the establishment of a productive workplace (Woods, 2019). In this regard, the leader is expected to demonstrate significant influence, inspiring the workers to corroborate the changes and become involved in the process.
Buffett is often depicted as an excellent example of a transformational leader due to his success in reshaping the Berkshire Hathaway enterprise. A small business that started as a clothing manufacturer is currently a large-scale corporation that consistently outperforms its opponents in the industry (Kızıl, 2017). An essential factor that drove change, according to Buffett, was the need to motivate the employees rather than force them to achieve higher outputs (Kızıl, 2017). In the transformational leadership framework, values and member commitment are extremely emphasized, and the leader is expected to promote the workers’ desire to participate rather than self-interests (Jensen et al., 2020). By relying upon these considerations, Buffett was able to improve Berkshire Hathaway’s performance considerably.
Personal Attributes Displayed by Buffett
In the leadership frameworks, the attributes of the leader are critical for ensuring that the performed practices produce the required effects. Although the initiated activities should be conducted according to the chosen approach, the leader’s personal traits also play a crucial role in successfully executing the needed endeavors and inspiring the employees. Warren Buffett is a prime example of an executive who strives to demonstrate his best qualities in the working environment, motivating the workers to follow his lead (Kızıl, 2017). However, Buffett also follows the transformational leadership paradigm, adjusting his practices according to this framework to ensure the efficacy of his actions.
The most evident qualities of Warren Buffett are connected to his interest in the employees’ well-being and the desire to communicate with them openly. As such, listening to the team members’ needs and inspiring them to participate in the working processes portray Buffett as a highly socially-skilled leader who is proficient in communication techniques and understands motivational mechanisms. Empowering the workforce has always been the most significant task for the executive, and he strongly argues that motivation is a necessary factor in promoting individual and team performance (Kızıl, 2017). Indeed, the focus on motivation is one of the key traits of transformational leadership, and inspiring employees is considered imperative for the company’s growth.
Another trait evident in Buffett’s leadership endeavors is the ability to lead by personal example. In order to motivate the workforce and facilitate the desire for professional growth, Buffett often employs the strategy that demonstrates his leadership qualities and manifests his capacities to perform as the organization’s leader (Bauman, 2018). As such, Buffett accepts responsibility and appropriately reacts if mistakes were made, recognizing his role in the occurred failure (Bauman, 2018). In addition, the executive clearly explains his vision for the company’s future, defining the employees’ roles in the upcoming activities or changes (Kızıl, 2017). These aspects of Buffett’s behavior allow the executive to serve as a role model for his workforce, inspiring the laborers not only through organizational incentives and promotions but also by personal example.
Becoming a Leader: The Role of Professional Growth
Although Buffett is currently considered one of the most remarkable leaders in the business industry, his path towards leadership consisted of a great amount of labor. At the beginning of his career, Buffett was mainly relying on his inherent traits as a charismatic businessman. At a young age, the leader already demonstrated some characteristics of a potentially talented salesman, having quickly grasped the concepts of investing, acquiring funds, and salesmanship (Kızıl, 2017). Nevertheless, the majority of his inborn qualities were connected to the sphere of business relationships and economics, while the leadership capacities he had to develop over the years of gaining experience. From a theoretical perspective, a leader is expected to acquire his skills during professional growth, as the individual studies the organizational environment and determines the factors that facilitate motivation and involvement among the workers (Woods, 2019). Being surrounded by the working environment, one can acquire the proficiencies necessary for understanding the principles of motivation, as well as study leadership theory and apply its techniques in practice.
The importance of motivation as an instrument of inspiring employees was an essential piece of information that Buffett acquired during his development as a leader. Buffett mentioned that, throughout his career, he learned that motivation is the cornerstone of successful performance and that an efficient leader must consider this aspect in practice (Kızıl, 2017). Although there are many approaches to improving the workforce’s motivation, a leader must determine the most successful method through experience, ascertaining the techniques’ dynamics in action (Woods, 2019). Indeed, Buffett contributed a substantial amount of time to develop a compensation scheme used by Berkshire Hathaway today (Kızıl, 2017). This scheme is a direct example of Buffett’s leadership mastery, which he acquired over the years of professional development.
Levels of Analysis in the Organizational Environment and Buffett’s Leadership
Levels of analysis in the organizational environment are closely connected to Buffett’s leadership. Typically, two levels of analysis are distinguished, defined as macro and micro (Aguilera et al., 2021). While the micro-level refers to the individual and group dynamics in an organization, the macro-level inquiries about the organization as a whole, studying how its structure adapts to the current conditions (Aguilera et al., 2021). As such, Buffett’s leadership is connected to the employees and their teams’ involvement in the company’s processes as well as to the enterprise’s overall performance. From a micro-level perspective, the executive ensures that the workforce is motivated to complete the tasks at hand; from a macro-level perspective, as the CEO, Buffett establishes corporation-wide practices to promote growth. Therefore, the leader’s activities are not only aimed at employees’ participation but also at the productivity of the firm.
Conclusion
To conclude, Warren Buffett’s methods of implementing leadership techniques were discussed in detail in this paper, explaining how the leader implemented situational and transformational theories to promote the company’s development. By combining various approaches to leadership and executing appropriate activities, Buffett was able to incredibly improve the outputs of their companies, subsequently achieving the highest levels of success. From a variety of leadership approaches, Buffett selects a method that is congruent with the given environment and can positively impact the productivity of a company or its employees, demonstrating the knowledge of situational theory. Furthermore, the change in Berkshire Hathaway’s performance became possible due to Buffett’s expertise in transformational leadership practices. However, the executive was not born a leader, knowing how to create and implement successful leadership practices; contrastingly, he acquired this knowledge during his professional path.
References
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