Goldman and the culture-killing lesson being ignored
In the great, collective gasp that followed Greg Smithâ€™s blistering public resignation from Goldman Sachs, one reaction struck us as particularly prophetic. It was a comment from James Gorman, CEO of Morgan Stanley. Donâ€™t exploit Goldmanâ€™s woes, he said a few days after Smithâ€™s letter ran in the New York Times: â€śThere but for the grace of God go us.â€ť
Some took Gormanâ€™s remark as an admission of sorts â€“ as if he were saying, â€śHey, Smithâ€™s criticisms couldâ€™ve been leveled at any firm on Wall Street.â€ť Others took Gorman at his word when he explained that he meant all companies are vulnerable to a disgruntled employee who joins forces with a simpatico media outlet.
But we have a third interpretation that, to our minds, is far scarier than either of those takes. The Greg Smith case is a harsh reminder that most companies donâ€™t face up to one of the most immutable rules of business: Your soft culture matters as much as your hard numbers, and if your companyâ€™s culture is to mean anything, you have to hang â€“ publicly â€“ those in your midst who would destroy it. Itâ€™s a grim image, we know. But the fact is, creating a healthy, high-integrity organizational culture is not puppies and rainbows. And yet for some reason, too many leaders think a companyâ€™s values can be relegated to a five-minute conversation between HR and a new employee. Or they think culture is about picking which words â€“ do we â€śhonorâ€ť our customers or â€śrespectâ€ť them? — to engrave on a plaque in the lobby. What nonsense.
An organizationâ€™s culture is not about words at all. Itâ€™s about behavior â€“ and consequences.
Itâ€™s about every single individual who manages people knowing that his or her key role is that of Chief Values Officer, with Sarbanes-Oxley-like enforcement powers to match. Itâ€™s about knowing that at every performance review, employees are evaluated for both their numbers and their values, and that only four outcomes exist.
First, for employees with good numbers and good values â€“ onward and upward.
For those with bad numbers and bad values â€“ youâ€™re outta here.
As for employees with good values but mediocre numbers â€“ the stance should be, weâ€™ll give you another chance with more coaching. Your behavior has earned you that.
Which leaves the type of employee who most commonly brings companies to their knees: the one with the great numbers and crummy values. The employee who doesnâ€™t share ideas with co-workers, who belittles customers behind their backs, who kisses up to the hierarchy but kicks down his own people â€“ all while bringing in the numbers.
Ninety percent of the time, managers give these people a big fat pass. â€śI know Jim can be a real jerk,â€ť they say, â€śbut I just need him until the economy stabilizes.â€ť Or â€śSure, Sallyâ€™s attitude upsets everyone, but Iâ€™ve spoken to her. I think sheâ€™s going to come around.â€ť
Actually, all Jim and Sally are doing is sending a big fat message to every other employee: Our companyâ€™s values are a joke. And the only antidote is to send Jim and Sally home, and not with the usual â€śThey want to spend more time with their familiesâ€ť BS out of the lawyers and HR, but with the truth. â€śJim and Sally had great numbers,â€ť everyone needs to be told, â€śbut they didnâ€™t demonstrate the values of this company.â€ť We guarantee such a public â€śdis play,â€ť to put it more politely, will have more impact than a hundred â€śOur values really, really matter!â€ť speeches by the CEO.
The Smith case occurred on Wall Street, but to be clear, weâ€™re talking about a problem that exists well beyond the canyons of lower Manhattan. â€śValues driftâ€ť is pervasive in companies of every ilk, from sea to shining sea. Employees either donâ€™t know their organizationâ€™s values, or they know that practicing them is optional. Either way, the result is vulnerability to attack, from inside and out, and rightly so.
Look, itâ€™s Management 101 to say that the best competitive weapon a company can ever possess is a strong culture. But the devil is in the details of execution.
And if you donâ€™t get it right, itâ€™s the devil to pay.
Jack Welch was the CEO of General Electric for 21 years and is the founder of the Jack Welch Management Institute at Strayer University. Suzy Welch is an author, speaker and the former Editor of the Harvard Business Review.
PHOTO: A Goldman Sachs sign is seen on at the company’s post on the floor of the New York Stock Exchange, January 18, 2012. REUTERS/Brendan McDermid