The Responsibility of Autonomy: More on Berkshire and Benjamin Moore
posted by Lawrence Cunningham
Autonomy does not mean carte blanche; its operational companion, hands-off management, does not mean abdication. The concepts entail complex relations between power and responsibility. Autonomy is an act of trust whose disappointment prompts its revocation. The saga of Benjamin Moore, about which my recent blog drew two thoughtful comments, illustrates.
Beginning in 1883, the company’s paint was sold solely through a network of small distributors operating with extraordinary autonomy, as owners of their own businesses. In 2000, when Berkshire Hathaway acquired the company, its famously hands-off chairman, Warren Buffett, assured distributors of continuation of that tradition.
As the grip of the Great Recession in 2008 stunted sales growth, however, a new CEO at Benjamin Moore (Denis Abrams) began displacing the distributorship tradition through new arrangements with chain stores (including big-box retailers). Abrams altered the distributor relationship to respond to competitive changes, including dictating tougher terms on financing inventory and charging for advertising. Distributors complained about this to Buffett, but Berkshire’s practice of vesting autonomy in its CEOs prevented direct or immediate intervention.
Ultimately, however, Abrams’s repudiation of distributor autonomy prompted Buffett to make an exception to the autonomy Berkshire usually gives Berkshire CEOs, and fired Abrams. To replace him, Buffett delegated much of the task to a new Berkshire employee, Tracy Britt Cool, a recent business school graduate he had just named chairman of Benjamin Moore. Her choice, Bob Merritt, began correcting the errors that Buffett believed Abrams had made, especially restoring distributorship autonomy.
Last month, however, Merritt was fired too. Who fired him (Buffett or Britt) is unclear and the exact reasons have not been disclosed. It may be a replay, a business disagreement about distribution or involve (per press gossip) issues of gender bias and locker room humor among company management. Merrit’s replacement, meanwhile, was chosen jointly by Britt and Buffett.
So there are several marks on the long winding story of autonomy in the Benjamin Moore saga. The distributors had autonomy, which Berkshire promised they would keep, yet Abrams impaired; distributor complaints to Berkshire first met resistance in the name of CEO autonomy until Berkshire lifted its usual deference to that practice; Buffett gave Britt considerable autonomy to choose Merritt, who ran with it until he didn’t have it anymore; and, most recently, she enjoyed far less autonomy in the case of selecting his successor.
People claiming that Buffett is a hands-off manager or gives his CEOs extraordinary autonomy are right, so long as they appreciate how that entails a strangely awesome burden. People who are trusted, and who are trustworthy, often excel and avoid problems precisely because autonomy is a huge responsibility.