NEW YORK: Industry experts said this week that Goldman Sachs should enhance its communications with employees following the public resignation of executive director Greg Smith.
Smith, a 12-year Goldman veteran, wrote an op-ed for The New York Times about why he left the firm, criticizing the company's culture and lack of “moral fiber.”
Goldman needs to examine Smith's criticisms to determine whether any of them are valid, and if so it should fix them, says John Hellerman, cofounder of Hellerman Baretz Communications.
“Goldman is a function of the reputation and integrity of its professionals,” he says. “It remains to be seen what its professionals do [after this crisis].”
The firm's employees will either “defend the institution” or they will take calls from headhunters, Hellerman adds.
Goldman's management has defended the company from Smith's criticisms on its website.
“In a company of our size, it is not shocking that some people could feel disgruntled,” explains Goldman CEO Lloyd Blankfein and president and COO Gary Cohn on the company website. “But that does not and should not represent our firm of more than 30,000 people. Everyone is entitled to his or her opinion.”
While Goldman can call Smith a disgruntled employee, Hellerman notes that the company may have difficulty legitimizing that claim if a similar situation happens again. He adds that the Times may have created a “watershed moment for journalism” by publishing Smith's op-ed because it has “opened the flood gates” for other traditional media outlets to publish similar pieces without the reaction of the other involved party.
Goldman had worked with Hill+Knowlton Strategies predecessor Public Strategies. Representatives from H+K did not respond to calls or emails about its relationship with Goldman.
Ben Boyd, global corporate practice chair at Edelman, also says Goldman needs to look at the incident from an employee-engagement standpoint. It should focus on “the breakdown between executives and employees and the importance of employee communication and engagement in terms of driving business forward.”
On Wednesday, Smith's op-ed received massive traditional and social media attention, and Goldman's market value dropped by $2.15 billion as its share value decreased 3.4% in trading that day.
“The level of dialogue around it speaks to the fact that they already had a reputational issue, and the question is, ‘What do they do going forward?'” says Boyd.
He adds that Blankfein must determine what the financial institution needs to change internally, what it should communicate internally and externally, and what new endeavors it should take on to rebuild trust with clients, employees, and consumers.
Goldman has reportedly hired Richard Siewert Jr. as global head of corporate communications and managing director, replacing Lucas van Praag. Goldman representatives did not respond to numerous inquiries about Siewert.
Goldman's reputation has been under siege for a long time, but this situation is different because past attacks had come from outside sources, notes Andrew Goldberg, EVP at Makovsky & Company.
“This is the first time that an insider has come out and said that there is something fundamentally wrong with the culture,” he explains. “That creates a different type of threat because when insiders stop believing in the culture, that tends to be what scares clients away.”
Goldberg adds that companies, especially investment banks, have to adjust to the fact that social media has changed reputation management, giving employees more opportunities to “go confessional” or be “impacted by the perceptions of others.”
Goldman's board and senior management must make focusing on its employees their top priority, says Goldberg. However, the way they address the issue is key, he adds.
“It's likely that this one individual is reflective of a generation of mid-level Goldman employees who do feel that culturally things may have changed substantially for the firm,” he says. “[Goldman is] going to have to do a number of things to demonstrate to these employees that they can somehow correct what is perceived to be an insensitivity to client interest and fair-trading practices.”
Goldberg adds that it may be beneficial for Goldman to invite Smith to its office without any threat of reprisal and listen to his opinions on the company's culture because it could send a positive signal to employees who are losing faith in the firm.