Warren Buffett Motivational Theories

G.) Describe two theories of motivation that the individual primarily uses in motivating others As with many other things with Mr. Buffett, his motivation methods are somewhat of an anomaly. Much like the motivation that fuels Mr. Buffett, it is often difficult to categorize his motivation tactics into one theory. Instead he implores portions from many of the theories and also tends to develop some of his own.

Even as a young boy Warren was fascinated not only with numbers but also money. This fascination was demonstrated by early business ventures such as his gum stand in which he sold Chiclets to passersby on his family’s sidewalk or the lemonade stand set up on the busier street near his friend’s house. Later on it would lead to his pinball machine business with Donald Danly. With all of these ventures Warren was his own boss. He enjoyed working and he enjoyed money. His goal in life was never to manage the financial juggernaut know as Berkshire Hathaway. His goal was to continue doing what he loved, which was investing.

Warren never saw himself as a manager in the traditional sense of the word. In fact he often tried to avoid such management duties. This type of laisez-faire attitude toward managing is best demonstrated by his purchases of Berkshire in which he made Ken Chace president of the company. Warren wanted no part of the day to day business tasks; he just wanted to be in control of the money. He was only concerned with profit as a percentage of the capital invested and left Chace to control everything else.

Many of the relationships which Warren had with his various employees mimicked that of a teacher/student or mentor/pupil relationship. Warren, by trying to be a mentor, would often inspire his employees. He would compel his employees to achieve not by close supervision but by just the opposite, by trusting them. In this aspect Warren’s motivational tactics most closely resemble the Self-Efficacy Theory of motivation.

Self-efficacy motivational theory refers to an individual’s belief that he or she is capable of performing a task. He instilled a sense of confidence in the employees that ran the day to day activities of his various businesses. Warren bestowed his trust in his employees and in turn his employees didn’t want to disappoint. In connection to the self-efficacy theory Warren also clearly communicated his expectations of his managers. In this sense he was connecting the self-efficacy theory with the goal-setting theory.

As mentioned earlier, Buffet judged each investment on one yard-stick, the profit as a percentage of the capital invested. Because he was so clear and consistent with this measure, his managers knew exactly what was expected of them. Warren is quoted as saying “I would rather have a $10 million business making 15 percent than a $100 million business making 5 percent”. Because of this rule, his managers knew that in order for Buffet to invest more capital into their business they would have to create this higher return on investment.

Although Buffet is somewhat of an anomaly when it comes to motivational tactics, it is hard to argue against his effectiveness as a manager. He is certainly a great example of what a great business leader is in today’s world.