Things happen so quickly these days. Yesterday morning Greg Smith was a brave whistleblower, after his extraordinary piece in the New York Times attacking his employer Goldman Sachs. By the evening, UK time, the backlash had started with ad hominem attacks and articles questioning his motives.
It is certainly a very unusual thing to do. I can’t think of anyone else from the banking world who has resigned so publicly. Unless he is very stupid, which I doubt, Greg Smith must already have decided that he was going to change career. He will almost certainly never get another job in investment banking. (It’s funny, isn’t it, that bankers who totally destroy their banks seem to find other senior level jobs with relative ease but those who merely slag their banks off in public are toast.)
Perhaps Greg Smith had already decided to follow that well-trodden path where people make piles of money in the financial sector then jump ship and re-invent themselves as critics of the system. Maybe he already has a book deal in the pipeline. Or maybe he was just fed up and wanted to go out with a bang.
Whatever his motives, there are some bits of his article that ring true and others which don’t. No doubt some of Goldman’s investors will find it all too believable that executives sat around trying to think of ways to shaft their clients. Thanks to the bank’s settlement with the SEC, we will probably never know whether, or for how much, clients were shafted.
As for clients being routinely referred to as ‘muppets’, that’s not unique to Goldman Sachs or to investment banking. I have seen similar attitudes in a number of organisations.
What I find less easy to believe is that this culture has suddenly appeared in recent years. Greg Smith’s it-used-to-be-great-but-now-it’s-crap story is at odds with most of what we know about how companies change.
As I often say to people, all organisations’ cultures change over time. You might think your corporate culture is the same as it was a decade ago but it almost certainly isn’t. As the great Edgar Schein told us, culture is based on unconscious shared assumptions and beliefs. However, organisations are also microcosms of society. If social norms are changing in society, as new people join your company, these shared assumptions and beliefs will gradually change too.
But this change is slow and almost imperceptible, which is one of the reasons why it is so difficult to spot. It’s like looking at a clock. However long you stare at it you can never see the hands moving but, five minutes later, it’s clear that they have. What organisational cultures don’t do, though, is suddenly and radically change. They don’t jump from o’clock to half past without some major corporate trauma or deliberate and far-reaching management intervention.
And, from what I can see, Goldman Sachs hasn’t had such an upheaval. Sure, the financial crisis rocked the banking world but Goldman’s share of the TARP bailout was relatively small and soon paid back. The three most senior executives are still the same as they were before the financial crisis. The COO and President was in post before Greg Smith arrived. Outwardly, not much at the bank seems to have changed.
Did the “morally bankrupt” people who “callously…talk about ripping their clients off” appear from nowhere? Are they really so counter-cultural?
Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent.
No, Greg, these leaders are the Goldman Sachs culture now – at least, they are if their behaviour is as all-pervasive as you claim.
Nothing comes from nowhere. If this really is how the organisations’ leaders now behave, the seeds of that culture must have existed in the organisation for some time. Perhaps Greg Smith just chose not to notice in his early days. Could it simply be that a subtle shift has occurred and that people feel more confident now about saying what they really think?
On the other hand, it could just be that Smith has become tired of the organisation and started to see the faults that his enthusiasm blinded him to before. Sometimes, when you have been in an organisation a long time, it starts to feel like a student party in the small hours of the morning. All the decent booze has gone, all the interesting people have left or copped off and you suddenly realise that you should have gone home hours ago.
At that point, you start to amplify your organisation’s faults and play down its good points; the exact opposite of what you did when you first arrived. Maybe this was the stage Greg Smith had got to.
Even so, a bit of organisation fatigue is hardly enough to make you go and spill your guts to a national newspaper. Something more than this must have happened to make him do something so drastic. Yet I can’t buy the story about a rapid change in the company’s culture. Corporate cultures don’t go from nice to nasty in just ten years. Some of that change must be in the eye of the beholder.
Whatever the culture is like at Goldman’s now, it must have been like that for some time. Slight differences in emphasis might have evolved over the past few years but it is very unlikely that the assumptions that underpin the firm’s culture and behaviours have changed that much. No firms, not even banks, go from honourable customer-focused institutions to cynical and rapacious robber gangs in the space of a decade.
Update: Earlier this week, a former Google employee went public about his reasons for leaving his employer, in a similar way to Greg Smith, albeit on his blog rather than to the New York Times. James Whittaker claims that the company has changed radically in 3 years. That said, he seems to put most of the blame for this on the firm’s new CEO. (Hat Tip: Phil Kirkham in the comments thread below.)
Update 2: An interesting take on the ‘burning bridges’ aspect of this from what appears to be a brand new HR blog. As its author Robert Boot says don’t try to copy Greg Smith. Well, not unless you have already made a shedload of money and/or have a book deal that enables you to throw stones at the filthy running-dogs of the blood-stained capitalist system from a safe distance.
Update 3: A class-based analysis from the ever-excellent Heidi Moore. This is, she says, about the tension between the haves and have-nots; the seriously rich bankers versus the only slightly well-off ones. As the bonus pots shrink, the class war intensifies. Greg Smith was, apparently, one of “the underclass of younger bankers and traders stymied by a lack of career mobility”. Gotta watch that restive underclass, eh? No telling what they might do. It’s a longish but brilliant piece. Read the whole thing.
Update 4: The ballad of Greg Smith from Felix Salmon at Reuters. (Hat Tip: Luis Enrique in the comments.)
Smith has been in this business for 12 years, and he’s done extremely well by it. And to a certain extent, if the people who work for him are constantly asking how good a deal is for Goldman, rather than how good the deal is for Goldman’s clients, then that’s because of the example he set. What’s missing in his op-ed is any sense of mea culpa, any sense that he was at all part of the problem.
It’s a question I sometimes ask when people are talking about their organisation’s culture: “What role did you play in creating and reinforcing this culture?” It’s funny how it often doesn’t occur to senior people that they are at least partly responsible for sustaining the cultures they disparage.