“Culture Shock at Goldman Sachs.” Or, “How to Quit and Make Headlines.”

Posted on March 15, 2012 by Scott Sanfilippo No Comments

When was the last time you’ve seen an executive of a company the size of Goldman Sachs criticize his/her former employer in a major newspaper like The New York Times?

Greg Smith, an executive director and head of Goldman Sachs United States equity derivatives business in Europe, the Middle East and Africa, did just that and resigned from the company at the same time.

His op-ed piece titled, “Why I am Leaving Goldman Sachs” has taken the Internet and corporate world by storm, not because of the unique type of resignation, but because of the content contained within.

To sum it up, Smith talks about how when he signed on with Goldman Sachs a company culture existed that was based around teamwork, integrity and a mantra of doing the right thing for the clients. The culture that enticed him to the company has been replaced with one that simply revolves around making money at the expense of the client. The change in culture was what prompted Smith to pack up his office and move on.

Culture is, by far, the single most important thing within a company. It’s what makes employees want to get up in the morning and come into work. A good company culture instills a sense of pride within an employee and that pride is what drives them to succeed in everything they do for the company, themselves and their clients.

Culture is not just words written in an employee handbook. Culture is about action. Culture is about flexible policies within the organization, activities that promote creativity and team-building, empowerment to make decisions to keep clients happy, perks to make the work day more enjoyable, recognition for a job well done and making employees feel like they’re contributing to the success of the organization.

Over the years I invested plenty of time and money to create a unique culture within the companies I owned. This culture is what made people want to work for me, it’s what created long-term employees and it’s what earned one of my companies the recognition for being one of the “Best Places to Work in Pennsylvania” three years in a row.

I read Smith’s op-ed piece about his time at Goldman Sachs over and over again and what I read is something I see happening in companies day in and day out. It’s probably happening in yours, or the one you work for, right now but you’ve become immune to it. So, let’s use Smith’s letter to the editor as a test.

I’ve copied excerpts of his piece below. The words “Goldman Sachs” have been replaced with a “______”. Read it and insert your company name in the blank.

TODAY is my last day at _____. I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. _____ is one of the world’s largest [companies] to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It might sound surprising to a skeptical public, but culture was always a vital part of _____’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this [company] for many years. I no longer have the pride, or the belief.

I knew it was time to leave when I realized I could no longer look [people] in the eye and tell them what a great place this was to work.

When the history books are written about _____, they may reflect that the current [leadership] lost hold of the [company's] culture on their watch. I truly believe that this decline in the [company's] moral fiber represents the single most serious threat to its long-run survival.

Over the course of my career I have had the privilege of advising [clients]. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the [company]. This view is becoming increasingly unpopular at _____. Another sign that it was time to leave.

How did we get here? The [company] changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the [company] (and are not currently an ax murderer) you will be promoted into a position of influence.

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is _____-speak for persuading your clients to [buy] products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to [buy] whatever will bring the biggest profit to _____. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to [sell any] product with a three-letter acronym.

Today, many of these leaders display a _____ culture quotient of exactly zero percent. I attend … sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.

It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.
These days, the most common question I get … is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave.

When I was a [new employee] I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what [our products were], … , getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there.

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this [company] — or the trust of its clients — for very much longer.

That’s pretty powerful, isn’t it? If by substituting “Goldman Sachs” with your company’s name you felt like you were looking in a mirror, it’s time to make changes.

Greg Smith gave all of us a reality check and he should be commended for it.

I know I’m proud of him.

[UPDATE: Since Greg Smith's op-ed piece was published, Goldman Sachs issued a statement which can be read here. Additionally, Bloomberg is reporting that since the piece ran, Goldman Sachs has seen $2.15 billion of it's market value disappear.]

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