Opinion

Jack and Suzy Welch

Goldman and the culture-killing lesson being ignored

By Jack and Suzy Welch
March 23, 2012

In the great, collective gasp that followed Greg Smith’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. Don’t exploit Goldman’s woes, he said a few days after Smith’s letter ran in the New York Times: “There but for the grace of God go us.”

Some took Gorman’s remark as an admission of sorts – as if he were saying, “Hey, Smith’s criticisms could’ve been leveled at any firm on Wall Street.” 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 don’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 company’s culture is to mean anything, you have to hang – publicly – those in your midst who would destroy it. It’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 company’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 – do we “honor” our customers or “respect” them? — to engrave on a plaque in the lobby. What nonsense.

An organization’s culture is not about words at all. It’s about behavior – and consequences.

It’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. It’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 – onward and upward.

For those with bad numbers and bad values – you’re outta here.

As for employees with good values but mediocre numbers – the stance should be, we’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 doesn’t share ideas with co-workers, who belittles customers behind their backs, who kisses up to the hierarchy but kicks down his own people – all while bringing in the numbers.

Ninety percent of the time, managers give these people a big fat pass. “I know Jim can be a real jerk,” they say, “but I just need him until the economy stabilizes.” Or “Sure, Sally’s attitude upsets everyone, but I’ve spoken to her. I think she’s going to come around.”

Actually, all Jim and Sally are doing is sending a big fat message to every other employee: Our company’s values are a joke. And the only antidote is to send Jim and Sally home, and not with the usual “They want to spend more time with their families” BS out of the lawyers and HR, but with the truth. “Jim and Sally had great numbers,” everyone needs to be told, “but they didn’t demonstrate the values of this company.” We guarantee such a public “dis play,” to put it more politely, will have more impact than a hundred “Our values really, really matter!” speeches by the CEO.

The Smith case occurred on Wall Street, but to be clear, we’re talking about a problem that exists well beyond the canyons of lower Manhattan. “Values drift” is pervasive in companies of every ilk, from sea to shining sea. Employees either don’t know their organization’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, it’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 don’t get it right, it’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

Comments
18 comments so far | RSS Comments RSS

Nice comments Jack… but in your days as “Neutron Jack” at GE you prioritized numbers over culture… How do these reconcile?

Posted by GA_Chris | Report as abusive
 

I love the idea that all Leaders are “Chief Values Officer”. Values must be lived rather than just posted on websites and posters around the office. I pointed this out to a CEO a couple of weeks ago, and he said “Culture, mmm so difficult to really get buy-in”. I didn’t but could of said – surely if senior managers don’t buy into and live the culture, they should not be in your organization!

Posted by moirad | Report as abusive
 

Corporate culture happens when managers and leaders do not do the right thing over time. A conscious reminder is needed to align the company. Profit, growth, and survival become the drivers. A major issue for the for-profit education industry. I believe Goldman still is sorting out issues at a school it owns. I hope the right thing is done to correct things.

Posted by SteveMahoney | Report as abusive
 

Culture per say is missing from every walk of life. It has been replaced with vulture of the kind; On top of all is Money culture that revolves around Money, Money & Money throwing ethics in dustbin and this is Corporate culture of the day world over barring very few companies to mark the exception. Same is the case of social culture therefore, it is culture of vulture! Examples are to be st from the top like in the House of TATA’s.

Posted by satsangi | Report as abusive
 

to GA_Chris:GE had great numbers because it had a ingrained culture — ingrained because in every evaluation people were measured for values, such as boundarylessness and candor, as well as numbers. Violators of values, regardless of their numbers, were punished and the organization knew it. Thanks for reading the column.

Posted by JackWelch | Report as abusive
 

I still can’t believe you were given the title “Neutron Jack” for making it mandatory that employees with poor values/poor performance and poor values/high performance be asked to leave GE. In my view it was the most caring thing you did for the vast majority of employees that where at GE to work hard and make a positive difference. It hurts any organization as a whole leaving those others in place!

Posted by LeeETW | Report as abusive
 

True leadership is the art of branding values into culture and behaviour.It is in it’s very essence the art of self leadership, which, in it’s essence, is ultimately about the authentic energy of respect.This branding will facilitate the growth of all participants and will ignite the sustainable emergence of collective organisational character and identity with power, viewed both from the serendipitous emergence of opportunity, creativity and innovation and from imputed and autonomous protection.If this is done with smartness then this growth will be evidenced in the appreciation of values from both an accounting and human perspective.

Posted by allencheyette | Report as abusive
 

Niccolo Machiavelli used better logic, reasoning and explained it better in his book, ‘Discourses to a Prince’ written in the early 1500s.

The truth of Mr. Smith’s statements about Goldman Sachs is supported by the testimony given to the Congressional Committees, by SEC and DoJ investigations, numerous legal actions against them settled out of court; the latest being filed in Federal Court this month. Their financial results plus their culpability in offering investments bonds deemed safe then corporately, shorting the same bonds plus stock trading records by Goldman Sachs demonstrate the values held by The Board, CEO and senior management.

In the last several years It has become evident to any rational person that Goldman Sachs intentionally and deliberately adopted and allowed a business model of deceit and deception that put corporate profits and employee compensation above all other considerations.

It is also quite evident that they planned their corporate political donations and lobbyists efforts to evade and escape both government oversight and legal accountability for their actions; which so far has been successful.

Posted by JBltn | Report as abusive
 

“Do as I tell not as I do” – the luxury of a CEO. Who is to fire the CEO that falls into the “Number/No Values” matrix when most Boards are an assemble of like natured personas?

Posted by rissey | Report as abusive
 

“An organization’s culture is not about words at all. It’s about behavior – and consequences.” — Yes. Exactly. If a person is not a good fit, then s/he must go; staying is bad for everyone. This is even true when the culture may be vilified as being soulless and profiteering bc even that is a culture in and of itself.

Good read. Alternate take.

@GlobalJackie
http://www.theglobalroundhouse.com

Posted by GlobalJackie | Report as abusive
 

Culture is a description of how people act and treat each other. It is the common values that actually occur and not what is simply claimed. However, the Progressive Liberals have been busy removing any “morals” from our culture. What is left is simply what is legal and what isn’t.

That is further enhanced by the big government approach where the govt tells everyone what to do because it knows so much more. Of course no amount of laws can cover every circumstance so people go looking for “loopholes” (intentional or not) to exploit and claim that they’ve done “nothing wrong” because it wasn’t illegal. We’ve replaced any moral interpretation of actions with strict legal definitions.

To worsen the situation, we then lose sight of “right and wrong” when those same Progressive Liberals talk about “social justice” which is simply politically favoring one group at the expense of another. At that point, we have neither morals nor laws guiding us, just what the current political masters let us “get away with”.

That is true in companies and corporations, it’s true in government and it’s true in larger society. How people behave doesn’t change when they’re at work, it’s how they were raised.

Posted by iq160 | Report as abusive
 

If the organization’s culture is sincerely values based, wouldn’t the organization initially want to coach the employee and use firing as measure of last resort if the employee hasn’t learnt/understood the error of their way through consistent displays of untoward behavior, where the company’s values culture is concerned.

Posted by KevinChanLee | Report as abusive
 

Very well said IQ160. Neutron Jack knows this too. He is a very smart and wise man. I still think he is a 20th century relic too that should just be content with his island retreat. But people like him can’t stay out the lime-light, so we have to put up with him. So, I have to agree with GA_Chris too. Jack is a kingpin in the corporate world, hence should not be trusted at all. He is a master at manipulation, graft, and the sophist guile. The reality of our corporate cultures is you don’t get to be a high ranking global leader unless you are a master sophist.

Posted by tmc | Report as abusive
 

The obsession with Greed, Money, Power & Corruption are a world wide epidemic.
Ever since we Homo sapiens (humans) evolved into a intelligent species, we have been obsessed with money, power & the possession of wealth. One would think that by now, after millions of years of evolution, we would have been civilized. Ethics, has been nothing more than a philosophical game ever since Plato & Aristotle.
Why is it that not a single school has a mandatory class in ethics ? Who are we ?
I love & respect animals more than humans.

Posted by GMavros | Report as abusive
 

Jack
Again your history of good management and thoughtful analysis shows just how important those tenets are to a business. In spite of some poor choices in the finance side the GE manufacturing body thrives in good times and makes money in bad times.
For those who doubt just how corrosive “big hitter/nasty guy” folks are to your business, take a look at those corporate collapses, such as Enron, where the bucks were the only measured scale of performance. If any organization is not abiding by decency and respect for all contacts, customers, vendors, workers, and sales, they inevitably fail. My own experience in Wall Street proved this beyond doubt, somewhat to my regret.

Posted by SailorBob | Report as abusive
 

Just a public service here:

@moirad: no such thing as “…could of.” You’re trying to say the contraction for “could have,” which is “could’ve.”

@satsangi: the latin phrase is “per se,” not “per say.”

Not trying to be a jerk — your points are well made; but grammar/spelling mistakes make it too easy for someone to dismiss the substance of your comment.

Posted by Welred | Report as abusive
 

‘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 doesn’t share ideas with co-workers, who belittles customers behind their backs, who kisses up to the hierarchy but kicks down his own people – all while bringing in the numbers.’

This sounds like a description of the C levels and the board. No one is going to fire them, unless they end up in jail, which would be a good start.

Posted by lhathaway | Report as abusive
 

This sounds like a description of the C levels and the board. No one is going to fire them, unless they end up in jail, which would be a good start.

Posted by hangbaobei | Report as abusive
 

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