An Urban's Rural View

When a 91-year-old vice chairman names the finalists to succeed an 84-year-old chief executive officer, people notice. That's especially true when the octogenarian CEO is Warren Buffett, the Oracle of Omaha, and the nonagenarian vice chairman is Charlie Munger, Buffett's sidekick at the helm of the sprawling conglomerate Berkshire Hathaway.

In a "next 50 years" letter in Berkshire's 2014 annual report (http://tiny.cc/…), Munger gave the world a story, quickly dubbed the "Jain and Abel" story. Ajit Jain is Berkshire's top insurance executive, Greg Abel its top energy executive. Talking of possible CEO successors, Munger praised both as "world-leading." Analysts had no doubt he was spotlighting them as rival heir-apparents (http://tiny.cc/…).

Buffett didn't join Munger in naming names, but in his annual-report letter he narrowed the race down to one. "Both the board and I believe we now have the right person to succeed me as CEO -- a successor ready to assume the job the day after I die or step down," he wrote. "In certain important respects, this person will do a better job than I am doing."

An obsession with succession is something many American farms and Berkshire have in common. No farm, to be sure, comes remotely close to the conglomerate's $195 billion in revenue or 300,000-plus employees. But farms face a similar challenge, and for similar reasons: graying leadership.

The 2012 USDA census (http://tiny.cc/…) put the average age of American farmers at 58.3 years. "Established" farmers, those working their farm for more than 10 years, averaged 61.4 years. Of the 679 million acres whose operators described farming as their "primary occupation," 434 million were farmed by folks 55 or older (http://tiny.cc/…).

It's no surprise, then, that seminars on estate planning and succession planning show up on farm-conference agendas. A 2,000-acre corn-and-beans farmer, like the CEO of a Fortune 500 company, must worry about the transition to the future.

For some farmers the broad outlines of the transition, if not how to execute it, are clear: A child or children will step in when mom and dad step out. The problem is more complicated for those without a family member in line to take over.

Warren Buffett has this problem -- sort of. Berkshire's stock is publicly traded and his sons haven't worked for the company; Buffett is looking outside the family for the next CEO. He has, however, slated his son Howard to succeed him as "non-executive chairman." His reasoning will, at least in part, make sense to farmers doing their own succession planning.

Howard Buffett, age 60, is well known in agriculture circles as an Illinois farmer and no-till advocate. He is currently a member of Berkshire's board. If and when he takes over as chairman he won't, his father says, receive any pay or spend more time on Berkshire than any other director.

Ostensibly, his role will be to make it easier to replace a future CEO who needs replacing, something Buffett says he's learned can be difficult from serving on 19 public-company boards. "He will," Buffett wrote, "simply be a safety valve to whom any director can go if he or she has concerns about the CEO."

As much as a check on mediocrity, though, he wants his son as chairman "to further ensure continuation of our culture." That emphasis on culture, also known as values, is the critical point.

Berkshire's values revolve around things like the kinds of companies Berkshire invests in, how it manages the companies it owns and how it rewards its executives. A farm's culture might center on whether it's focused on yields or profitability, how it treats its employees and its stewardship of the land.

Succession planners cannot predict all the challenges a company or farm will face or how a future leader will respond. What they can do is establish that a potential successor shares the organization's values. If succession planning means anything, it means, as Buffett puts it, ensuring "the continuation of our culture."

The other way for a leader to continue an organization's culture is to keep on living and working. At 84, Buffett loves his job and shows no signs of slowing down. His secret for staying healthy? The Oracle told an interviewer that he drinks five 12-ounce Coca-Colas every day and sometimes has potato sticks or ice cream for breakfast (http://tiny.cc/…).

"I checked the actuarial tables, and the lowest death rate is among six-year-olds. So I decided to eat like a six-year-old," he explained. "It's the safest course I can take."

Urban Lehner

urbanity@hotmail.com

(CZ)

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