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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, its still The Partnership. Goldman partnerscurrently about 470 of the firms roughly 35,000 employeesget a share of the profits and what the New York Times identifies as investment opportunities not offered to other employees. They remain among the firms chief owners, and they still make up its highestlevel 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 companys assets for the long term. Goldman Sachs has always epitomized a highrisk, highreturn culture, but its history shows that heavily vested senior executives tend to value the difference between highrisk investing and overly risky adventuring. Since the mid1970s, 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. . . . Youll be immersed, she promises, in one of the worlds most competitive environments. . . Doing a good job will get you nowhere. Doing a superb job will get you noticed, but you wont make much progress at all unless youre willing to demonstrate a resolute commitment to upward mobility. You have to win every headtohead contest with everybody else in the company who wants what you want, butand heres one of those troublesome contradictionsnothing will derail you faster than not being a team player. Charles D. Ellis, a businessstrategy consultant whos worked with Goldman executives for 30 years, attributes the companys 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 firms core strengths: the loyalty of its employees and its approach to recruiting. Liz Beshel, the firms global treasurer, agrees with Ellis: You constantly feel theres more you can do at work, she says, because thats the kind of people Goldman hires were 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 companys 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 firms strategy, he suggests, is based on the theory that if you come from a workingclass background, youll 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 t was in no danger of going under, nervous investors began selling off shares until the companys 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 holdingcompany bank. Its now able to take deposits and buy other banks, but its also subject to much stricter federal regulation. It isnt nearly as profitable, and it no longer enjoys the agility and creativity that fostered a highrisk, highreturn 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 Goldmans selfengineered 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 its 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 millionthe largest ever assessed by the SEC against a financial services firm.

Case Question (110)

1. Which factors from the external environment will influence the business processes of Goldman Sachs most in recent times?