BRK.A Berkshire Hathaway Inc

By Nicole Friedman 

The myriad companies of Warren Buffett's Berkshire Hathaway Inc. have run completely independently of each other for decades. That isn't always the case any longer.

Top executives from Berkshire units now gather regularly to share strategies and best practices. Some of these companies participate in purchasing cohorts to take advantage of group rates for items like travel and raw materials. Last year, employees from more than 40 Berkshire businesses met in the firm's headquarters city of Omaha, Neb., to discuss sustainability.

The rise in internal collaboration, which executives rarely discuss publicly, hints at what the firm might look like when Mr. Buffett is no longer running it as chairman and CEO.

Last year the company's subsidiary CEOs started reporting to Mr. Buffett's lieutenants, Ajit Jain and Greg Abel, rather than to Mr. Buffett. And at the subsidiary level, roughly one-third of Berkshire's business units have announced a new CEO in the past five years as an older generation of managers has retired or stepped back into chairman roles.

"Even though we're in different industries and have different business models, there's so much that connects us," said Mary Rhinehart, CEO of Berkshire's building-products maker Johns Manville. "Why wouldn't we take advantage of the talent across the Berkshire Hathaway organization?"

While many other conglomerates combine departments and seek savings when they buy businesses, Berkshire historically hasn't. Its home builder Clayton, for example, isn't required to buy bricks from Berkshire's Acme Brick. But Berkshire companies now are communicating and working together more than ever, thanks largely to efforts begun in 2013.

Starting that year, Berskhire's 60-odd CEOs began meeting yearly in Omaha to discuss common challenges like cybersecurity and hiring. Tracy Britt Cool, Mr. Buffett's former financial assistant and the CEO of Berkshire unit Pampered Chef, organized the first roundtable.

Collaboration among Berkshire companies "is grass roots," Mr. Buffett said in an interview last week. "I'm certainly glad to see it, but I don't promote it."

Mr. Buffett seeks to buy well-run companies and leave them alone, allowing Berkshire CEOs to set their own strategies, pay plans and employee benefits. Berkshire's subsidiaries employ nearly 390,000 people around the world, and before the roundtables, many Berkshire CEOs hadn't met each other in person.

"The best cooperation is voluntary," Mr. Buffett said. "That's not a change in the culture, though. It's sort of a sign of the culture. It really is people thinking like owners and exercising, in a sense, their independence."

Separate from the annual roundtables, there is also now a Berkshire Hathaway Sustainability Summit that has grown from 37 attendees representing 24 Berkshire businesses at the first summit in 2013 to about 140 participants from more than 40 Berkshire companies and their subsidiaries at last year's event. In addition, a group of sustainability-focused employees at various Berkshire companies speak about once a month to share ideas and strategies.

There are also formal networks for Berkshire CFOs and for executives in areas including human resources and cybersecurity.

The sustainability summits grew out of informal conversations among some subsidiaries, said Susan Farris, vice president of sustainability and corporate communications at Berkshire's carpet and flooring company, Shaw Industries Group Inc., which hosted the first event in 2013.

"With a group of Berkshire companies, there's a significant level of comfort that you might not have attending a broader conference," she said. "We share priorities and values."

Purchasing groups, which allow subsidiaries to take advantage of Berkshire's scale, grew out of the CFO meetings more than a decade ago, Ms. Rhinehart said.

Some Berkshire businesses overlap with each other and even directly compete for customers. Berkshire owns four furniture companies, four jewelry companies and a variety of insurance units. In addition, a number of Berkshire companies operate in the housing and construction industries, including Shaw, Clayton, paint maker Benjamin Moore & Co. and real-estate brokerage firm HomeServices of America.

"It's not as if there's a weekly or quarterly call with [housing] industry participants," said Jeff Pederson, CEO of CORT, Berkshire's furniture-rental company. "But the nice thing about the group of men and women that Warren has is they're all so very willing to lend a hand."

One aspect of Berkshire that could become more centralized in the future is health care.

Haven, Berkshire's health-care joint venture with Amazon.com Inc. and JPMorgan Chase & Co., is in its early stages but aims to reduce health-care costs for the three companies' employees. That could mean requiring Berkshire units that currently buy their own health insurance to change their strategies.

Meantime, current Berkshire executives have already tapped into the CEO network. Dan Calkins, who started as Benjamin Moore's CEO in January after 32 years with the company, called another subsidiary's manager in late 2018 to learn how that unit sets its compensation and incentives for senior executives.

See's Candies CEO Brad Kinstler, who has worked at three Berkshire subsidiaries, said last year that the annual CEO meetings have sparked new working relationships.

"It used to be more just individual contacts that you would have," said Mr. Kinstler. Now, "there's an open exchange of ideas on a number of different things, and I think it's very helpful."

Write to Nicole Friedman at nicole.friedman@wsj.com

(END) Dow Jones Newswires

April 04, 2019 05:44 ET (09:44 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.