If you haven't heard the story or read about it by now, one of Goldman Sachs' VP's quit the company and went out swinging with a letter in the New York Times - 'Why I am leaving Goldman Sachs"
In essence, Greg Smith, accuses Goldman of milking its own clients and made public a now infamous term "muppets" - a term used to refer to clients as nothing more than puppets for making money (perhaps that's where the 'm' comes from - money + puppets = muppets). Or perhaps it's merely an irreverent referral to the actual muppets.
Either way, Greg Smith's opinion piece in the New York Times was a massive hit to Goldman's already lacklustre brand.
From a PR perspective, when your employees start speaking out against you in the press, it's a serious problem. It happened at RIM a while ago when an employee wrote an open letter to blackberry bosses.
The reason these communications draw such attention is because people inherently recognize the cost said person who wrote the letter will pay. Not only do they burn their bridges with their employer, but with future employers as well. Very few companies want someone on staff who might go to the press with negative details about operations.
Greg Smith lashed out at Goldman's immorality without hesitation:
It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.
But Goldman didn't do this.
Why you might ask, give from a PR perspective it's fairly clear this was the best course of action.
Once again, the answer is probably fairly simple. From Goldman's perspective their culture is what it is and they don't mind that (after all, if they did mind it, it probably wouldn't be what it is right?)
As crazy as that might be to understand, try to think of sports teams.
What is said in a locker room is most likely not very politically correct. If the public were aware of it you'd probably see negative opinions towards it (and various athletes might find their personal brand tarnished).
While the sports team might apologize to simmer down the negative press, it likely would have no real interest in addressing the issue because 'locker room talk' is just the way things are. The sports team doesn't care what their players are saying, they care about whether they are scoring touchdowns.
You see this with steroids in sports, despite the problem athletes continue to use steroids because they operate in a culture where winning is everything.
Similarly, with Goldman Sachs, calling clients 'muppets' is far down the list of concerns in comparison to generating profits for the company.
Ergo, GS releases a memo which basically is tantamount to saying: "We care about our clients so let's just get back to work and ignore this drivel in the media."
As you can imagine, not exactly the best message to be sending to clients who suddenly are concerned about how their interests are being managed.
At the end of the day if you don't manage your culture - if you don't LIVE your brand - then this kind of thing eventually happens. Employees are human beings and when put in a position that conflicts with their sense of ethics will eventually blow the whistle (or at least one or two of them will).
Instead of seeing this as a negative, organizations should see it as an opportunity. Just as employees will blow the whistle, they will also sing the praises of an organization that they believe in. And that's how GS should have responded to this situation, to emphasize that their goal was to once again become an organization where employees and clients sing their praise.
On a more humorous note, here is a funny video synopsis of the whole story:
In essence, Greg Smith, accuses Goldman of milking its own clients and made public a now infamous term "muppets" - a term used to refer to clients as nothing more than puppets for making money (perhaps that's where the 'm' comes from - money + puppets = muppets). Or perhaps it's merely an irreverent referral to the actual muppets.
Either way, Greg Smith's opinion piece in the New York Times was a massive hit to Goldman's already lacklustre brand.
From a PR perspective, when your employees start speaking out against you in the press, it's a serious problem. It happened at RIM a while ago when an employee wrote an open letter to blackberry bosses.
The reason these communications draw such attention is because people inherently recognize the cost said person who wrote the letter will pay. Not only do they burn their bridges with their employer, but with future employers as well. Very few companies want someone on staff who might go to the press with negative details about operations.
Greg Smith lashed out at Goldman's immorality without hesitation:
It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.
How did Goldman respond to this crisis?
Their CEO, Lloyd Blankfein, put out a memo in which he basically says that clients are happy, that Goldman has a client-focused culture, and that it's unfortunate that one employee chose to express his feelings in the New York Times (but that it is, after all, just one person's feelings not reflective of GS as a whole).
While the memo was better than nothing, it's far from effective. The stain Greg Smith managed to spill on Goldman's brand remains and the term 'muppets' lives on and is more referenced than ever.
What should Goldman have said in it's memo to control the damage?
Once again, it's not that complicated from a PR perspective - take some sort of concrete action that reinforces your brand as a client-centric operation (because keep in mind, any and all communication taken is really being read by your clients. Even an internal memo ultimately ends up in the hands of clients.)
So in their memo what Goldman should have emphasized was the following:
- Referring to clients as 'muppets' is a terminable offence moving forward (ie. a zero tolerance policy)
- He should have sat down with the New York Times and given an interview explaining how GS is not a company that rips its own clients off
- He should have articulated that he understands the company has a brand-image problem and that he is dedicated to regaining the trust and goodwill of both clients and the general public
- Lastly, he should have been very clear as to what Goldman's mandate is regarding clients and their track record of success (effectively dispelling the myth that doing business with Goldman means you are nothing more than a patsy who will be taken to the cleaners).
But Goldman didn't do this.
Why you might ask, give from a PR perspective it's fairly clear this was the best course of action.
Once again, the answer is probably fairly simple. From Goldman's perspective their culture is what it is and they don't mind that (after all, if they did mind it, it probably wouldn't be what it is right?)
As crazy as that might be to understand, try to think of sports teams.
What is said in a locker room is most likely not very politically correct. If the public were aware of it you'd probably see negative opinions towards it (and various athletes might find their personal brand tarnished).
While the sports team might apologize to simmer down the negative press, it likely would have no real interest in addressing the issue because 'locker room talk' is just the way things are. The sports team doesn't care what their players are saying, they care about whether they are scoring touchdowns.
You see this with steroids in sports, despite the problem athletes continue to use steroids because they operate in a culture where winning is everything.
Similarly, with Goldman Sachs, calling clients 'muppets' is far down the list of concerns in comparison to generating profits for the company.
Ergo, GS releases a memo which basically is tantamount to saying: "We care about our clients so let's just get back to work and ignore this drivel in the media."
As you can imagine, not exactly the best message to be sending to clients who suddenly are concerned about how their interests are being managed.
At the end of the day if you don't manage your culture - if you don't LIVE your brand - then this kind of thing eventually happens. Employees are human beings and when put in a position that conflicts with their sense of ethics will eventually blow the whistle (or at least one or two of them will).
Instead of seeing this as a negative, organizations should see it as an opportunity. Just as employees will blow the whistle, they will also sing the praises of an organization that they believe in. And that's how GS should have responded to this situation, to emphasize that their goal was to once again become an organization where employees and clients sing their praise.
On a more humorous note, here is a funny video synopsis of the whole story:
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