There’s a growing desire for business to be held accountable to a broader set of values.
Why, one can only wonder, does the resignation of a lower ranking executive at one of the world’s leading banks make international business news?
That’s what happened with the resignation of Greg Smith at Goldman Sachs who cited the loss of a moral compass at the firm and its “toxic and destructive” culture as no longer tolerable.
So what? Whitney Tilson, founder of hedge fund T2 Partners LLC has responded: “The argument that Goldman has become increasingly profit- driven, sometimes at the expense of clients’ best interests, and that some employees use vulgar and disrespectful language, is hardly news”. And from the Editors at Bloomberg: “If you want to dedicate your life to serving humanity, do not go to work for Goldman Sachs.” And then Moneyweb’s Felicity Duncan also weighed in this week.
But a critical point is being missed. It is never okay for any business to view, speak about or treat its clients or customers as an exploitable resource existing purely in the pursuit of profit – “muppets” as Goldman Sachs directors are alleged to have called them. The attention Smith has received reflects a growing desire for business to be held accountable to a broader set of principles than shareholder value. One need only examine the prescriptions of King III to confirm that there has been a very clear evolutionary shift in what society expects of business. It clearly is falling far short of these expectations as reflected by the fact that about half of informed people believe business and their executives cannot be trusted.
The Goldman Sachs behaviour is a sad throwback to the “greed is good” era of some decades ago, and while it is certainly not unique in a profit driven business world, its callousness will fuel greater general distrust. Trust today is based on far more than simply delivering a sound bottom line and not breaking the law. When people like Allan Greenspan (“My theory of the world was wrong”) could be fooled by the motives and machinations of people he trusted, then principles like caveat emptor are simply no longer germane.
Bloomberg’s response itself is a throwback to a dying era – also a bit strange given Michael Bloomberg’s own belief in the need for “a moral compass”. The satirical “one imagines Goldman bankers spending their days delivering fresh flowers to elderly shut-ins and providing shelters for abandoned cats” reflects a rather disdainful understanding of the importance of general public trust in all business institutions. But they are also being nothing short of mischievous in presenting profit and benevolent purpose as being mutually exclusive. It is not simply a case of “profit or charity”. There is a very profound principle of generosity that underpins all transaction: it is that supply exists to serve demand. Behaving that way with transactional correctness guided by natural laws of supply, demand and price is the ultimate guarantee of sustainable success.
The issue is really simple: do you serve because you make a profit, or do you make a profit because you serve? If they are NOT mutually exclusive but indeed mutually supportive, where do you place your sincere emphasis? We have had decades of profit emphasis very often at the expense of service, and where has it got us? The world is demanding something different.
The real tragedy is that we have not given enough credence to those giants in business (recorded extensively by Collins and Porras) who have consistently argued that profit did not rank above meaning and making a difference in their business models. Bill Kellogg’s definition of the purpose of business as being “to add value to people’s lives” is scoffed at as being smug and insincere.
Sincerity is easily tested. There is a good Afrikaans idiom that says: “Waar die hart van vol is, loop die mond van oor.” It means simply that we talk most about what is dear to us. If you want to check what companies are really about, be a fly on the wall at board, executive and management meetings. I have not been privy to many at board level, but certainly to executive, senior management and levels below. The higher up you go, the more they mostly echo what Greg Smith found at Goldman Sachs: “I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients.”
Yet, there are many where that is not the case. There are many top entrepreneurs who literarily “effervesce” with enthusiasm when they talk about their markets, customers, products or service. I have written about them before and will not repeat it here.
Credibility lies at a deep level. Conflicting messages arise at different levels of discussion in the absence of common purpose and common fate. This starts at the very top, with mission and strategy. The purpose of the collective may be defined in the mission statement as a contributory one, but to determine the real motives behind the purpose all one need do is attend the regular meetings of functionaries.
The topics of discussion are the ultimate reflector of motives. The income statement is the driver, and the driver of the income statement is maximisation of profit. So the mission may be a benevolent one, but the motive is the opposite. Already at this level the “serving” message becomes distorted. The information that flows from the board to management contains the same language the board was preoccupied with: profit and cost.
This gets broken down into greater detail so that it permeates all discussions as the information cascades downwards along the hierarchy. Accountabilities are affected and often the most fundamental message of all, that we are here to serve our customers, becomes blurred. The responses I had as a consultant from employees, and even middle and senior management, were an overwhelming confirmation of this feature: “They profess one thing but do another.”
The first and most important task is to change the dialogue and information content flowing in companies. To do this one must assess and perhaps even partly dictate the agenda of all operational meetings. This is where communication really happens – regularly and one-on-one. It simply cannot be replaced by non-personal means.
It is indeed possible to make things dear simply by talking about them. It’s a habit worth cultivating.