This section entails the Organization Design (OD) information collected for Berkshire Hathaway Inc., an American conglomerate holding company that is centered in Omaha, Nebraska.
Organizational Purpose
An organization’s design is intended to achieve a goal or a mission. To back the goals and the mission of an organization, a business organization upholds the observation of cultural beliefs which are in line align with their goals and mission statements (Galbraith, 2014). Particularly, Berkshire Hathaway underscores a mission statement that focuses on delivering the right parts on time. This results in the focus on accuracy and timely delivery of Hathaway’s services. The mission statement expresses the intentions of exceeding customer requirements, both internally and externally. Also, Berkshire aims to attain sustainable customer satisfaction through continuous improvement of the services offered. Additionally, these efforts are entwined with the goal of providing an organizational platform that ensures hard work, dedication, knowledgeability, and ethical behaviorism.
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Berkshire Hathaway is associated with a unique cultural orientation that shapes the beliefs entwined in the organization’s purpose. The company was created from private personal ownership and currently operates under the guidance and leadership of their Chairman and the top Chief Executive Officer’s (Millsap, 2017). Berkshire Hathaway encompasses a conglomerate organizational structure, which observes corporate culture, and ultimately exhibits communication for good leadership. Since the customer base of the organization greatly involves stockholders, there is a lot of persuasion and relationship necessitated for success. The purpose of the organization blends well with the human resource’s department mandate of creating an easy flow of information, and the integration of organizational behavior through the holdings parent company, and the subsidiaries at large.
Organizational Passage
In the present day, Berkshire Hathaway can be described as a prime business venture due to the solidity the organization has established. However, the company was molded from varying structural and operational dynamics. After acquiring control of the organization, Warren Buffet spearheaded the expansion of the business to insurance and investments industries, and later to the broader scope envisioned today on the company’s portfolio. Continually, Berkshire Hathaway has adopted a progressive strategy that promotes diversion of cash flows from the core business structure to external subsidiaries.
Mainly, Berkshire Hathaway focuses on long-term stock ownership. This is aligned with the organization’s focus on setting and achieving long-term goals, which the executives have endorsed. Additionally, on July 17, 2018, the executives of the company announced their intentions to make more flexible the stock buyback policy ( Lazonick, 2014 ). This has enabled the organization to diversify their trading options and maximize on the buyer's ability and willingness to buy. Consequently, it has led to the refinement of short-term and long-term stock holding. Berkshire Hathaway has continually minimized risk through asset diversification, with market indicators reporting a capital allocation that is lower than the financial risk ( Cyriac, Koller & Thomsen, 2012 ). Nonetheless, as the organization continues to expand, the expected risks pertain to the legal and regulatory aspects and Zeitgeist risk.
Internal Environment
Berkshire Hathaway has a well-organized internal structure which enables the smooth flow of business operations. Specifically, Berkshire management structure is essential to achieving coordination of cross functions. Having sectorial management from organizations board of directors and realtors, the president, the chief executive officer, and other subsequent operational committee and groups, Berkshire internal environment is governed in such a way that there is a smooth flow of instructions from the company’s top management to the sequential taskforces and working groups (Millsap, 2017) . This ensures that Berkshire Hathaway maintains cross-functional cooperation among its stakeholders, which is integral to the success of the company as most shareholders participate in growing the business. Moreover, the cross-functional internal environment established by the organization indicates the presence of the business’s strength. Particularly, stakeholders in Berkshire perceive themselves as owners of the organization while the executives of the company are viewed as their managing partners. While it is an open venture of investments, internal stakeholders contribute to the organization cooperation. Most directors possess significant investments in the company stock listings. This creates an urge to create wealth for the stakeholders as well as for self.
Berkshire Hathaway specializes in stock holding. Insurance and reinsurance are the optimal generators of wealth for the organization, whereby both domestic and foreign insurance subsidiaries conduct business. GEICO, Gen Re, and Berkshire Hathaway Assurance are the major insurance companies embedded on the company’s insurance process (Millsap, 2017) . Additionally, Hathaway has utilities and energy group, which is majorly represented by Berkshire Hathaway Energy. In manufacturing, service and retailing, Berkshire Hathaway indulges in clothing, building products, media, real estate and flight services.
External Environment
It is integral to note that as a multinational conglomerate holding company, Berkshire Hathaway owns outstanding stocks of other companies, and consolidates investment services within a centralized control for a preformed corporate group (Gergaud & Ziemba, 2016 . Therefore, Berkshire Hathaway is the centralized controlling venture that streamlines the businesses held between the corporate board and the investor companies. Particularly, Berkshire acts as the intermediary between stock investors and the holding corporations. Stockholders represent the organization's clients and can be listed from various locations in the globe bounded by the organizational activities and the framework in place. Specifically, since the inception of the company in 1997, Berkshire’s Immigrants center reports that the organization has served more than 9800 clients originating from 86 different countries. As of 2010, the United States had most clients for the organization with minimal representation from countries search as Senegal, Serbia, and Norway ( Millsap, 2017) .
On the other hand, Berkshire Hathaway holding company has listed conglomerates in various business and investments sectors. These conglomerates encompass the insurance and reinsurance industry, utilities and energy group; manufacturing, service and retail, Finance and financial products, and Investments. As at 2017, Berkshire Hathaway fully owned subsidiary companies such as Lubrizol, Fruit of the Loom, GEICO, NetJets, Helzberg Diamonds, Long & Foster, Pampered Chef, and Flight Safety. Additionally, Berkshire partly holds variant percentages of stock from different business organizations (Gergaud & Ziemba, 2016). This ownership includes 38.6% of Pilot Flying, 9.4% of the Coca-Cola Company, 26.7% of Kraft Heinz Company, 17.6% of American Express, 2.5% minor stake of Apple, and 9.9% of Wells Fargo.
Structural Dimensions
The company is led by an overall board of realtors and directors. This board is seconded by the president and the Chief Executive Officers who hold the top positions in the directive and administrative positions respectively. The president together with the vice president, the treasurer, the secretary, and the past president are in charge of the North, Central and South councils. On the other hand, the CEO coordinates the Multiple Listing Service Coordinator, member services, temporary staff, finance committee, professional standards, RCS committee, Governments affairs, Grievance committee, and the task forces and Workgroups ( Jenkins, & Williamson, 2015 ). Additionally, internal coordination on the organization's investment listings is effected by the Multiple Listing Service Board of Directors comprising a president’s committee and a defined directorship for every financial year.
Importantly, Berkshire’s management is decentralized, and less oversight does emanate from their headquarters. The company thrives on the leadership and the corporate culture developed by Warren Buffet. It is essential to note that Warren Buffet possesses 30.71% of aggregate voting power in the organization, and economic interest of 16.45% (Kedia, Rajgopal & Zhou, 2017 ). The keys aspects that allow the success of Berkshire Hathaway are encompassed in the autonomy entailed in the business management structure, the long-term focus of developing business and investments, and the company’s culture. Additionally, as a parent company to over 80 business units, Berkshire organizational structure is embedded in the warm relationship created between the parent and the subsidiary companies. This is in relation to the governing principles and the guidelines exhibited by the subsidiary administration, and the level of control that is beholden to Berkshire on the listed company.
Contextual Factors
Initially, Berkshire Hathaway was developed as a textile manufacturing company. This history relates to Oliver Chace’s Valley Falls Company that was established in 1839 in Rhode Island (Millsap, 2017) . Valley Falls Company merged with Berkshire Cotton Manufacturing Company in 1889 to form Berkshire Fine Spinning Associates that was set up in Adams, Massachusetts. Later, Berkshire Fine Spinning Associates merged with Hathaway Manufacturing Company in 1955. Despite operating successfully in the first years of the merger, the textile industry was affected by the World War I and recovered significantly after the great depression. It was in 1962 when Warren Buffet began buying stocks in Berkshire Hathaway and agreed to an oral tender of $11.5 per share of the company in 1964.
In a 2017 report, Berkshire Hathaway had 377,000 employees spread through the various departments of the organization, within and without the organization’s headquarters. Forbes Global 2000 lists Berkshire Hathaway as the third largest public holding company in the world. Additionally, Berkshire Hathaway is the ninth largest conglomerate in terms of revenue globally. Notably, as at 2017, the company reported revenue of $242,137 million, a net income of $44,940 million, total assets of $702,095 million and total equity of $348,296 million (Kedia, Rajgopal & Zhou, 2017) . In Market capitalizations records, Berkshire Hathaway is positioned below Apple, Alphabet, Microsoft, and Amazon, but it is essentially the top performing holding company in the United States.
References
Cyriac, J., Koller, T., & Thomsen, J. (2012). Testing the limits of diversification. McKinsey Quarterly , 2-5.
Galbraith, J. R. (2014). Designing organizations: Strategy, structure, and process at the business unit and enterprise levels . John Wiley & Sons.
Gergaud, O., & Ziemba, W. T. (2016). Great investors: their methods, results and evaluation. World Scientific Book Chapters , 175-212.
Jenkins, W., & Williamson, D. (2015). Strategic management and business analysis . Routledge.
Kedia, S., Rajgopal, S., & Zhou, X. A. (2017). Large shareholders and credit ratings. Journal of Financial Economics , 124 (3), 632-653.
Lazonick, W. (2014). “Profits Without Prosperity: Stock Buybacks Manipulate the Market and Leave Most Americans Worse Off. Harvard Business Review .
Millsap, L. (2017). Management, Warren Buffett, and Optimal Firm Performance.
