This is an excerpt from an Opinion Piece that appears in today’s New York Times. The writer, Greg Smith is resigning as a Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa. His article explains why he’s resigning.
Greg Smith NYT 3/14/12
TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — 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. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance 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 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.
. . .Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. 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 firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave. . .
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. . .
I attend derivatives 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 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. . .
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 from junior analysts about derivatives 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. Now project 10 years into the future: 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.
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.
Why should any of us care that Greg Smith is resigning? Well, we should care because he’s written an extraordinary “resignation letter” and he’s doing what countless people, especially in the financial world, want to do and yet are not able to do. For many, resigning from their morally bankrupt company would place their family in financial jeopardy. For many others resigning from their toxic environments demands a courage that they don’t yet have. I write that last sentence not as a judgment. Life is very messy. And, yet, perhaps what’s most challenging about Smith’s letter is that he reminds us that life doesn’t have to be as messy as we make it out to be.
I’ve no doubt that Greg’s article will be commented upon and debated by pundits of every stripe in the days and weeks to come. And so I’ll here toss in my own two cents.
One of the things that makes his piece so startling is that he states just basic truths––truths so basic, so truthful, that we tend to forget how core they are to our individual and collective well-being.
Earlier this week I was hired to conduct a one-day workshop in August on “Leading and Motivating Employees.” In some respects, Smith has done my work for me in that his essay lays out what a leader needs to do. He takes just six sentences to describe the responsibility of a leader (not just at Goldman Sachs):
1. Leadership used to be about ideas, setting an example and doing the right thing.
2. Make the client the focal point of your business again.
3. Without clients you will not make money.
4. In fact, you will not exist.
5. Weed out the morally bankrupt people, no matter how much money they make for the firm.
6. And get the culture right again, so people want to work here for the right reasons.
It’s this “simple.”
I’m going to be reflecting on Smith’s article in the days to come and if you read the entire article, I think you will, too.
The question I’ll be asking myself, and that you might ask yourself is this:
what kind of toxicity am I tolerating in my life and why am tolerating it? What price am I paying and is it worth it?
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