This past week, veteran Goldman Sachs employee Greg Smith submitted his resignation via the New York Times, due to the “toxic culture” that now permeates the organization.
“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…. 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. “
Smith explains that his loyalty to Goldman Sachs was directly tied to his unshakable belief and support in the organizational culture, which he described as the “secret sauce” of the company:
“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. “
He directly holds the executive leadership accountable for the disintegration of the culture with this statement, and predicts that the demise of the culture will equate directly to the demise of the company:
“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….
“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…Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. “
Finally, he issues a warning to the company’s remaining leadership and Board of Directors that client requirements – rather than profit – must be the guiding force of the company, and that morally bankrupt employees willing to compromise their clients’ best interest to ensure maximum profitability will bring down the company:
“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.”
This situation reinforces three essential cultural and leadership lessons that apply to all companies regardless if you’re a start-up or an international financial organization:
1: Leaders own the culture. The entire cultural responsibility starts with the C-suite and flows down from there.
“The only thing of real importance that leaders do is to create and manage culture.” “If you do not manage culture, it manages you, and you may not even be aware of the extent to which this is happening….Organizational cultures are created by leaders, and one of the most decisive functions of leadership may well be the creation, the management, and – if and when that may become necessary – the destruction of culture.” ~Edgar Schein, professor at MIT Sloan School of Management
2: Employees will not support an organization that contradicts their personal value system.
3: Core organizational values and culture are completely interwoven and interdependent. Once the core values start to decline (example: shifting from making the customer a priority to making profits the priority), the culture will quickly follow suit.
“The thing I have learned at IBM is that culture is everything.” ~Louis Gerstner, former CEO of IBM
Financial Impact
Whether you agree with Smith’s tactics is irrelevant. The genie is out of the bottle, and it’s not going back in.
His public resignation hit the company’s bottom line HARD. The company more than $2 billion in the trading hours that followed the letter’s publication. http://www.nydailynews.com/news/money/goldman-sachs-shares-tumble-chris-smith-op-ed-rocks-finance-world-article-1.1039520
“Culture eats strategy for breakfast. “~Peter Drucker.
Here is a link to Smith’s entire resignation letter, as published in the New York Times:
http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?_r=3&pagewanted=all
How’s your culture today?
