What Would Warren Buffett Find If He Bought Your Company?

When Warren Buffett asked David Sokol to take over NetJets from founder Richard Santulli, Sokol discovered Santulli had built a bloated, dysfunctional management team.

"When [Santulli] started to disagree with his chief financial officer, instead of dealing with it head on, he hired a chief financial adviser -- they hated each other," Sokol said describing the dynamic between NetJets' competing moneymen at the recent Fortune Growth Summit.

Sokol described his first job as CEO of NetJets: to dismantle the complex management house of cards the company's entrepreneurial founder had created among his 14 direct reports.

As entrepreneurs, I think we're often guilty of building overly complex organizational structures instead of dealing with loyal employees we may have outgrown. It's easier to hire someone adjacent to a struggling employee rather than face the fact that both of you would probably be better off if you parted ways.

In my events business, we started producing our annual conference with the help of a scrappy individual whose resourcefulness made up for his lack of polish. At the time, with just 32 attendees, we needed a manager who was long on chutzpah and short on the need for a formal management structure.

As the conference grew to 100 or so delegates, we parted ways with that first manager and brought in someone more organized who had experience dealing with hotel contracts and event marketing.

Once we grew the event to more than 400 attendees, we outgrew our second manager, who was struggling to adapt to the complexity of hosting larger conferences. We brought in a professional events manager who had knowledge of union rules for loading and unloading large events, sophisticated audiovisual systems and the like.

All three people were great at their jobs when our company size matched their skills and interests. The professional events manager would have been bored with our 32-person event, and our scrappy first employee would have drowned in the complexity of our events as they grew.

So how do you make sure you're not building a management house of cards? Instead of just writing an annual plan, Sokol's advice is to also write a 10-year plan for your business allowing you to thinking strategically about your company. This 10-year horizon also forces you to evaluate the strengths of your team and their ability to take you where you want to go.

Are the people who brought you to the dance also going to be able to take you home?

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