The Goldman Touch

I am surprised by the worldwide brouhaha – at least among the B-school folks – over “Why I’m leaving Goldman Sachs,” Greg Smith’s op-ed piece in the New York Times of March 14. It is a well-written, highly readable piece. It is also unusual because it is rarely that someone who quits an organisation tells the world via a newspaper column why he did it. But is there any idea in it that should cause a collective tut-tut? I don’t think so at all.

The core idea that Greg Smith presents is that the environment within Goldman Sachs has become “toxic and destructive” because “the interests of the client continue to be sidelined in the way the firm operates and thinks about making money.” And about promotions within the company, he has this to say, “Today, if you make enough money for the firm (and are not currently an axe murderer) you will be promoted into a position of influence.”

What is special? This is what EVERY commercial firm does. Their focus is on themselves. They want to succeed. They want to make money, and lots of it, because that is how success is measured in the world of business.  If you can get away with a markup of 500 percent, your peers envy you and try to copy you. The client or the customer is an inconvenience, and necessary evil, providers of goods and services have to put up with in order to make money. This is as true of sellers of carbonated drinks as of doctors in the life-saving business.

Where then does customer worship come in? Can a company survive, let alone thrive, without taking customers along and making them feel happy? “Without clients you will not make money. In fact you will not exist,” says Greg Smith emphatically. Goldman Sachs’s spokeswoman also echoes the same sentiment: “In our view, we will only be successful if our clients are successful.”

What's the problem then? Where is the disconnect?

The question is one of perceptions. Customers have to perceive that they are getting value. If they don't and if they have a choice, they will abandon you for other providers of goods and services. That is why companies go out of their way to frame everything they do as customer-centric. When they want to get rid of something, they offer it to you at a discount and convince you that they are helping you save money. Their slogan for public consumption is, “Customer is king.” They say they want to go beyond merely satisfying customers to delighting them. Wow! Who wouldn't like to be pampered?

If there is a change in the Goldman Sachs culture, it must be that employees at all levels are now openly talking about ripping off the muppets instead of doing it with their mouths shut.

Are clients going to abandon Goldman Sachs in a hurry? Very unlikely. What will persuade them to stick around in spite of being told by an insider so publicly that they are being ripped off? The Goldman touch. The GS guys are smart enough to make obscene amounts of money for their clients while helping themselves to obscene amounts of the same stuff as bonuses. They are also smart enough to recognise that even the daftest fish will not bite a bare hook.

Perhaps you and I are the losers.

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