Goldman Sachs Banks on Cultural Capital The investment bank Goldman Sachs went public in 1999, but to

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Goldman Sachs Banks on Cultural Capital
The investment bank Goldman Sachs went public in 1999, but to many people on Wall Street, it’s
still “The Partnership.” Goldman partners—currently about 470 of the firm’s roughly 35,000
employees—get a share of the profits and what the New York Times identifies as “investment
opportunities not offered to other employees.” They remain among the firm’s chief owners, and
they still make up its highest‐level management teams. They reap the biggest rewards when the
company is managed at the highest level of profitability, and they stand to lose the most when it
falters. As a rule, they tend to invest their own money in Goldman for decades, and, not
surprisingly, they manage the company’s assets for the long term. Goldman Sachs has always
epitomized a high‐risk, high‐return culture, but its history shows that heavily vested senior
executives tend to value the difference between high‐risk investing and overly risky adventuring.

Since the mid‐1970s, says Lisa Endlich, a former trader and VP at Goldman, there has been “no
greater prize on Wall Street” than a Goldman Sachs partnership. She adds, however, that “rising
through the ranks at Goldman Sachs is one of the steepest and most challenging corporate climbs,”
and getting to the top means mastering a culture “which on its face is rife with contradictions. . . .
You’ll be immersed,” she promises, “in one of the world’s most competitive environments. . .
Doing a good job will get you nowhere.

Doing a superb job will get you noticed,” but you won’t make much progress at all unless you’re
willing to demonstrate a resolute commitment to upward mobility. You have to win every
head‐to‐head contest with everybody else in the company who wants what you want, but—and
here’s one of those troublesome contradictions—“nothing will derail you faster than not being a
team player.” Charles D. Ellis, a business‐strategy consultant who’s worked with Goldman
executives for 30 years, attributes the company’s “decisive advantage in management” to “the
speed, accuracy, and extent of communication inside the company. . . . Goldman Sachs culture
works,” concludes Ellis, because it thoroughly integrates two of the firm’s core strengths: the
loyalty of its employees and its approach to recruiting. Liz Beshel, the firm’s global treasurer,
agrees with Ellis: “You constantly feel there’s more you can do at work,” she says, “because that’s
the kind of people Goldman hires— we’re all perfectionists.” Ellis observes that Goldman recruits
only the top 5 percent of job candidates in the industry and typically lands most of them, mainly
because the company’s top executives get involved in the process. “By and large,” adds Ellis,
“Goldman Sachs people . . . do not come with silver spoons. . . . They are upwardly mobile with a
drive to succeed.” The firm’s strategy, he suggests, is based on the theory that if you come from a
working‐class background, you’ll be hungrier for the kind of success that a job at Goldman makes
possible.
Unfortunately, Goldman has recently been forced to cut more than 3,000 of its coveted jobs, or
about 10 percent of its workforce. What happened? Ultimately, Goldman got caught in the
undertow of the global financial crisis, and although executives tried to reassure stakeholders that

it was in no danger of going under, nervous investors began selling off shares until the company’s
stock price had fallen about 50 percent from a peak of $247.92.
In September 2008, Goldman succumbed to the pressure and announced that it was transforming
itself from an investment bank into a holding‐company bank. It’s now able to take deposits and
buy other banks, but it’s also subject to much stricter federal regulation. It isn’t nearly as profitable,
and it no longer enjoys the agility and creativity that fostered a high‐risk, high‐return culture. “No
matter how good it was,” muses a Wall Street executive, Goldman “was not impervious to the
fortunes of fate.” One analyst, however, sees Goldman’s self‐engineered transformation as another
sign of the agility that has helped it to survive seven decades of ups and downs in financial markets:
“They change to fit their environment,” he observes. “When it was good to go public, they went
public. . . . Now that it’s good to be a bank, they became a bank.”* * In April 2010, the Securities
and Exchange Commission charged Goldman with creating and selling a mortgage-based
investment that was secretly designed to fail. Three months later, the bank agreed to pay a penalty
of $550 million—the largest ever assessed by the SEC against a financial services firm.

Case Questions: (4*5= 20 marks) (Total word limit not more than 700-800
words)
1. Which forces in Goldman Sachs’s external environment have accounted most for “the fortunes
of fate” that the company—indeed, the investment banking industry— has experienced since
2008?
2. Explain the roles of Goldman’s partners, both as owners and as employees, in forming and
managing its internal environment.
3. Which factors from the external environment will influence the business processes of Goldman
Sachs most in recent times?
4. In 2008, citing Goldman as one of the “Top 20 Most Admired Companies” in the United States,
Fortune magazine characterized the firm’s culture as “an impossible‐to‐replicate mix of extreme
aggression, deep paranoia, individual ambition, and robot‐like teamwork.”† Judging from our
case, how valid do you regard this characterization? If you were a top manager at Goldman, how
would you deal with the apparent conflict between “individual ambition” and “robot‐like
teamwork”?