The open letter from Greg Smith, Why I Am Leaving Goldman Sachs, has generated so much interesting, important, and provocative discussion. Goldman Sachs has strongly denied the accusations made in the letter. Clients have gotten nervous, and I suspect that Goldman Sachs has some pretty serious, long-term client reassurance work to do. (If you haven’t read the full letter, published on the op-ed page of the New York Times, read it here. It is definitely worth your time).
But, let’s pretend that the letter is accurate. Just what business lessons do we learn from it? I think there are at least three:
Lesson #1 – Core values and culture really matter, and keeping the right things the right things is very difficult work.
The letter is filled with accusations that the core values have been forgotten or abandoned. For example:
It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’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 for 143 years. 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 firm 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 students in the eye and tell them what a great place this was to work.
When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.
It takes unending vigilance to maintain core values throughout an organization. If there is a shred of truth to these accusations, then Goldman Sachs has some serious work to do.
Lesson #2 – Put your customers (your clients) above all else. If there is even one employee that is guilty of calling clients “muppets” at Goldman Sachs, and it is known by a supervisor (and the accusation is that “managing directors” actually used the word), how can anyone trust that this firm puts the needs of customers/clients first?
It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.
Lesson #3 – The practioneers of today become the leaders of tomorrow… And, they will lead the way they practice. And it is here that Mr. Smith raises the alarm the loudest:
How did we get here? The firm 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 firm (and are not currently an ax murderer) you will be promoted into a position of influence.
You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.
Mr. Smith ends his letter with this:
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 firm — or the trust of its clients — for very much longer.
Question: can an organization, a company, forget its founding, core values? Is such forgetfulness and abandonment possible? Absolutely. So, whether the accusations in this letter are fully true, or only partly true, the warning is valid, and valuable for us all. In fact, Goldman Sachs should welcome the chance to reinforce its core values, within the firm, and to its clients. This is good advice for any organization. And, the final paragraph of Mr. Smith’s open letter really does set an agenda for an on-going vigilance for all of us.