Google, Buffett and Succession - Making It Work

As I've written about before, succession planning is a key aspect of how you should be spending your time.  

Since writing the previous pieces, a lot of things have happened at two of the companies I find most interesting in this regard:  Google and Berkshire Hathaway.

At Google, Larry Page officially took over as CEO from Eric Schmidt.  At Berkshire, David Sokol, the 'prince in waiting' left the company under a cloud - and created an even larger cloud over Warren Buffett.

And, even with that, both companies continue to do an excellent, far-seeing job of dealing with succession - which makes it worthwhile to take a look at how.  We'll start with...
Google was on the way to losing its creative steam.  Not only that, it was losing people - mission critical people - at way too fast a rate.

Why?  Because it became just a bit too grown up.

When Google hired Eric Schmidt to be an "adult" it was the right decision.  Neither Sergey Brin nor Larry Page, the co-founders, knew how nor was ready to run an organization of the size and complexity that Google was becoming.  And that was ten years ago.

Now, however, two things have happened.

First, Schmidt's management style is no longer optimal for the company's next stage.

Schmidt is an 'organization guy.'  They's why he was brought in.  He needed to take an amazing technology and a lot of potential and build a working enterprise designed to design, deliver and grow.

That's exactly what he did.

Over time, however, it became too bureaucratic.  Even with its famous 20% Days (the pure R&D time given to each engineer each week), the decision-making became too bogged.  Especially in a larger culture - specifically the Silicon Valley - that not only prides itself but exists in many ways only because it's so nimble.

The company was losing that - right at the same time that Twitter and Facebook came on the scene. And there went the Googlers.

Second, over the past ten years, the co-founders have honed their skills and grown to be ready to take the company to what's next.

With Page having taken over as CEO, the culture of a start-up is being actively re-energized.  He began that process by restructuring the company so that there are now fewer layers between him and the product/service eco-systems he wants created.

Decision-making will be faster and the speed to market of innovations will increase substantially.

Brin, working to his strengths, is driving and overseeing those new technology developments.  And Schmidt, as Executive Chairman, is working to his strengths in all the outreach for future M&A, government relations at a time when the company is under particularly close scrutiny and building other external relationships the company needs.

This was well thought out, well planned and well executed.  It is succession at its best.

Which leads us to...

Warren Buffett is 80 years old.  He's in great shape but no one lives forever.  Buffett is not only aware of that for himself, but he also takes it very seriously when it comes to his company.

For years, in every Letter to Shareholders, Buffett has alluded to - and eventually directly addressed - the succession issue.  He had to.  It was what he owed his shareholders.

And, at $125K+ per share and a company sitting on, minimally $10bn+ in cash at any given time, I'd say that he was right in deciding it deserved his attention.  Wouldn't you?

In recent years, not only his thinking but also the specifics have been consistently brought to the fore.  In his case, one man cannot take on all the jobs he continues to successfully perform.  So, he's divided up his responsibilities into three (at least) positions.

Moreover, the company's Board is ready to move on whatever needs to be done as soon as the moment arrives - which they all hope will be years from now.

Best of all, in his most recent Letter, he included a memo that he biennially sends the CEOs of all the companies Berkshire Hathaway owns.  In that memorandum he specifically asks them to inform him, personally, of who they want to take over in case something happens to them.

Bravo, Buffett and the BH Board.  Bravo, Schmidt, Page and Brin, as well.

Succession is something you never leave to chance.  There are too many people's lives and livelihoods depending upon your fearlessness in addressing an issue no one ever wants to consider.

Take it on - and then, Bravo, you.

Resources


Letter to Shareholders 2010 (Berkshire Hathaway)