The unique culture of Goldman Sachs makes it more like a cult or a commune than a regular corporate giant, says Richard Northedge
The unique culture of Goldman Sachs makes it more like a cult or a commune than a regular corporate giant, says Richard Northedge
It is the most exclusive university in the world. It gives no degrees, but its graduates reap huge rewards and go on to hold the highest of offices. The Goldman Sachs University has provided a chairman of the BBC, the chief executive of London’s Olympic organising committee, the head of the New York Stock Exchange, Italy’s top central banker, the US Treasury Secretary, New Jersey’s Governor, numerous government advisers in Britain and America – and a host of entrepreneurs.
The university has alumni that beat any other old boys’ club. And for those who stay at the investment bank, it is a university for life. As its own prospectus states: ‘Through Goldman Sachs University we offer a wide range of growth and development opportunities. Even after you start your job, you will find courses offered on
a regular basis for analysts, associates, vice-presidents and managing directors.’
However high people climb within Goldman, the firm never stops trying to mould them in its manner or fashion them for the future. And if staff are not learning they are teaching; in the bank’s big happy family, coaching and mentoring are a vital part of the formula.
If it sounds like the worst brainwashing of a religious sect, then that may be because Goldman Sachs is seen by many as more of a cult than a bank. As a bank it is highly successful, of course. It made record profits of $9.5 billion in 2006, after distributing $16.5 billion in bonuses to its 26,000 international staff.
That’s an average of $622,000 per head – but some heads are more blessed than others. Chief executive Lloyd Blankfein received $53 million in pay, bonuses and options, and the firms’ two presidents were not far behind. Goldman tops the takeover tables with monotonous regularity.
Not only does Goldman Sachs think it is better than its rivals, it thinks it is different from them too. Indeed, as soon as new recruits are inducted into the firm, the university gives them a one- or two-day orientation programme on its unique culture. And the most important lesson is that the firm is bigger than any individual.
Karl Fowler spent seven years at Goldman running tax derivatives in the equity division in London before leaving to start his own firm. He joined from rival US bulge-bracket firm Morgan Stanley. ‘For me the culture shock was less than if I’d come from a Swiss bank or a UK bank,’ he says. ‘But it’s a very special culture and still dear to my heart. The things I learned, and the disciplines, are still something I try to adhere to.’
New recruits are handed a list of fourteen business principles setting out that ethos. It states: ‘Our assets are our people, capital and reputation.’ The four key strengths Goldman staff are told to hone are client focus, excellence, entrepreneurship, but primarily, teamwork. It is by working as a team, by pooling skills, that Goldman seeks to maintain its superiority over ordinary banks.
‘If I said Goldman Sachs is not political and backstabbing, I’d be lying,’ says one managing director who has been inside the bank for twelve years. ‘But it strikes a good balance between emulation and backstabbing. The main thing is, it has no star system. The strength is Goldman Sachs, not the person.’
Indeed, it is so anti-star that departments frequently have co-heads. Even at the top, it has co-chief operating officers. Low profiles are positively encouraged. Staff are told, in writing: ‘We have no room for those that put their personal interests ahead of the firm and its clients. We stress teamwork in everything we do.’
There is no place for eccentrics or characters at the bank, therefore, and the university aims to encourage conformity. Jan, a merchant banking associate in London, kept a diary of her Goldman experience and wrote: ‘Our work is done individually, but the team is always around and ready to help. No one is afraid to ask.’
Although the training programme has been trimmed from nine months to nearer three, its intensity makes up for the reduction. People are likely to find themselves moved between desks and divisions, not only in order to see more of that culture but also to gain a network of internal contacts that can be called on in future.
Staff might join with an Oxbridge or Harvard degree, but the training is effectively an extension of an MBA, combining the theoretical with the practical. For example, traders may be told to cold-call other staff to try to sell them a particular stock.
A protocol for handling meetings given to staff illustrates the Goldman technique. ‘Silence is our secret weapon,’ it states. ‘After finishing a sentence and making a key point, count to three.’ There is still an unofficial uniform of white shirts and dark suits with well-cut hair. Other banks may employ cavaliers, but Goldman’s staff are puritans, and hard work is the order of the day.
Nicola, an institutional sales analyst based in Goldman’s Frankfurt office, starts at 7.30am but says: ‘There are several trading accounts that stay open until the US closes and four nights a week it is my responsibility to stay on the desk until 10.30pm.’
Mitesh, a foreign exchange analyst in London, starts at 6.30am, and while he hopes to leave almost twelve hours later he admits the workday is not always over by then. ‘Sometimes I’ll take positions overnight, monitor them from home and, if necessary, call New York or Tokyo to trade.’ The bank is proud of such statements.
Unlike the City’s traditional family banks, however, Goldman has always been a meritocracy. If offices have walls they are made of glass, and staff are encouraged to talk to anyone they admire, however senior. Blankfein is proof that a working-class boy can get to the top.
And one reason Goldman people sit in so many high places is because the bank sees public office as part of its contribution to the world – though having its diaspora in the corridors of power cannot harm a bank that is so committed to networking. Note that Goldman supplies top staff to governments and other key bodies; the traffic is not the other way. The discreet charities quietly set up by many of the bank’s partners ensure those bumper bonuses benefit the community.
But having battled to join this bank rather than rivals, staff like the culture, including the child-care centres, the nutrition counselling, and the weight-management courses. Lunch is gym-time; sandwiches are brought to the desk so as to deter bankers from leaving the building. One veteran banker says: ‘It’s like a family. They know my wife’s name, my kids’ school, my brothers, my strengths and weaknesses. Money is not everything.’
Yet with so much money being earned, it counts for something, and the higher up the ladder staff climb, the more exponentially the rewards grow. Promotion is thus important, if only because missing out on it sends a signal of failure.
Although Goldman stopped being a partnership when it floated on the New York Stock Exchange in 1999, it retains the term ‘partner’, and the ambition for every freshman in the bank’s university is to become a partner managing director. There are about 1,000 managing directors worldwide, though only around 300 of them are partners, and new ones are chosen by a mysterious process every two years.
It is this group that shares the bulk of the bonuses and enjoys the perk of being invited to co-invest their own money in company deals. The pressure to be chosen is enormous, but lobbying meets with distinct disapproval.
Not surprisingly, most of the partner managing directors are rainmakers rather than administrators, but adherence to the corporate culture is as important as profits. It takes the most part of a year for the firm to select its chosen few – a delay that ensures the alpha males work even longer hours and squeeze their deals even tighter while the process is underway.
Candidates are reviewed not only by their line managers but also by partners from other parts of the firm. This cross-departmental assessment is intended to put an individual’s strengths into a corporate context, but it involves taking soundings not only from the candidate’s seniors but from subordinate staff too.
The process is as much a personality test as a performance review and the pressure is intense. As one who passed the test says: ‘They take a long-term view of people.’ Those who fail might be reconsidered two years later, but many look elsewhere. Indeed, Goldman is such a good training group, and the phrase ‘former Goldman banker’ such a door-opener, that many willingly leave to exploit the entrepreneurial skills encouraged by the bank.
Since flotation, Goldman has been happier to risk outside investors’ money in ways the partners did not risk their own. As well as broking commissions and management fees, it now relies heavily on proprietary trading, and as a bank that once spurned hostile bids it now champions them. In the past year, London has led bids for ITV, Associated British Ports, and BAA.
Nicolas Sarkis, who spent thirteen years running Goldman’s French private banking operation, says: ‘Goldman is such a fantastic training group for entrepreneurs, it’s not surprising that they leave.’ That is exactly what Sarkis did in late 2005, setting up AlphaOne Partners in Mayfair with former colleagues.
‘We think rich people want something that is different and we are different from Goldman and all the others,’ he says. But if Goldman suppresses stars and relies on the strength of its brand, isn’t it difficult for a niche player like Sarkis to go it alone? ‘Size is the enemy of performance,’ he states.
‘Some banks are so big they find it difficult to create wealth. I’m much better off today being able to buy the funds of whoever I deem the best, rather than being obliged to buy the funds of Goldman Sachs.’
Sarkis must now sell himself rather than rely on a global brand, but in the world of ultra-high-net-worth, the minnow can be more exclusive than a bank whose name is known to the general public. The truth is that some niche players are bound to perform better than the bulge-bracket average, if only because big banks are too large to be able to exploit small-company or small-fund situations.
Gavyn Davies, the bank’s former research chairman (and whose beard was distinctly non-Goldman), chose to set up Fulcrum Asset Management in 2004 after he resigned as BBC chairman.
More than half his 30-strong staff are ex-Goldman, including the two co-founders, equities specialist Andrew Stevens and the former proprietary trader Christian Siva Joth. ‘They are all people who we have worked with in the past,’ explains Steven. ‘They are a mix of the chief economist and other economists and people from asset management.’
One trait transferred from Goldman is the wish for a low profile. Stevens is highly reluctant to discuss his firm, but Fulcrum is known to have more than $1 billion of funds under management, mainly from high-net-worth individuals but also now from pension funds and other institutions. Not all of the alumni have been so successful though, with some finding hedge funds harder to run outside of the bank’s protective walls.
Other Goldman bankers have diversified into non-financial trading however. Michael Sherwood, co-head of Goldman Sachs Europe, backed the £17 million private-equity purchase of Smythsons, the royal stationer, and has no reason for regrets. Karl Fowler, the equities specialist, now runs his own company offering tax and investment advice to successful sportsmen and others.
But despite the success of Fowler’s Kraken group in property and hedge funds, he has also expanded into television and film, producing the Sky series in which rugby star Martin Johnson and England goalkeeper David James compared their sports with American football. Fowler sold it to 30 countries, keeping control of the advertising and merchandising, and has now pre-sold a show to the US Fox network with American footballers examining UK clubs.
He also has an even more entrepreneurial sideline. Fowler has produced mammoth books celebrating the successes of America’s NFL and Manchester United and plans to publish three or four more titles a year for the next five years, starting with Arsenal, Celtic, and Formula 1 this year.
These are no ordinary books, however. The ManU opus – as he calls it – sells for £3,000 a copy with a specially signed edition priced at £4,250.The Manchester United opus is being published in several languages including Chinese, and he claims to have sold around 4,000 of the planned 10,000 copies so far.
In the pipeline are tomes celebrating Disney, Hollywood, Nasa and… the Vatican. ‘That’s going to be our first opus where 100 per cent of the content will never have been seen before,’ he boasts. ‘It’s all coming from the private library of the Vatican.’ And so far, even the Goldman Sachs University has failed to place a graduate at the top of that establishment.