Professional Documents
Culture Documents
Goldman Sachs
Objectives
To assess the drivers of Goldman Sachs’s business success by studying the
firm’s history, business, strategy, people, formal organization, and
culture in order to create a development program proposal.
To address the constraint that the managers, the company most wants to
develop are among its busiest employees and most important revenue
generators for the firm. Any development program that is designed
therefore must be aligned with the everyday responsibilities and tasks
of GS managers.
To consider the basic assumptions and tradeoffs behind systematic
leadership development programs in large organizations.
To understand the challenges of developing a systematic approach to
developing leaders in an organization that has little history with such
formal approaches.
The competitive context in which GS operates also serves to illustrate,
how dramatic changes in the industry force significant adjustments in
strategy, and in turn require leaders to consider changes to the
organizational system to maintain alignment.
Leadership: Learned or Innate?
To succeed at John Kotter’s well-known definition of leadership as
the art of managing change, leaders must have skills in
interpersonal judgment, self-awareness, and learning
ability. Most such skills can be developed, though some innate
qualities, such as curiosity and cognitive ability, typically cannot.
Firms that subscribe to the theory that star leaders are born, not
made, tend to recruit high performers from competitors or simply
hope that over time, they’ll discover a few stars among their
hordes of new junior hires. But other research finds that star
performers and average workers have similar innate abilities. Stars
demonstrate superior performance because they approach their
jobs differently.
A global study found that 90% of the difference in performance
between star and average employees was due to non-cognitive
factors.
Leadership Development & Training
To develop the leadership abilities they lack, managers
must be put in circumstances where their existing skills
and perspectives are inadequate. If managers are never
forced out of their comfort zone, they will continue to
employ strategies that have served them well in the past.
Three important sources of challenge are novelty,
stretch goals, and conflict.Yet the stress of such
challenges tends to impair the ability to learn new skills.
Instead, the support of colleagues confirms the value of
developmental experiences and helps to reinforce
positive change.
Support of one’s immediate superior is critically
important. In addition to informal support, structured
formal feedback is powerful developmental tool.
Anonymous multi-rater feedback tends to provide the
most complete picture of an individual’s performance.
Training is best affected with active learning techniques. Action
learning may include case studies, role-plays, or
simulations, and stresses interactive experiences that allow
participants to practice new behaviors in a context relevant to
their work environment. Structuring these activities around
problems is among the best ways to train, because it greatly
enhances the transferability of newly acquired skills into the
trainee’s work environment.
Support for training activities is most critical after the program
has ended. Without appropriate opportunities to use new skills
and rewards for doing so successfully, it is unlikely that skills
acquired during training will be transferred back to the work
environment.
Indeed, on the job experiences are the primary route to
leadership development at many organizations precisely
because succeeding at challenging assignments has been
repeatedly linked to later success.
Building Blocks of Leadership Development Organizational
Context
• People
• Systems
• Culture
• Formal Organization
Organizational A CHALLENGE
Organization Leadership
Capabilities S
al Competencies Integrated S
S
Strategy • Organizational • Skills required Developmental U
E
• Choice of attributes Experiences P
of executives to S
markets needed for • Feedback P
develop and S
• Training O
• Positioning successful maintain M
• Job R
relative to execution of organizational E
assignments T
competitors chosen strategy N
capabilities • Mentoring
T
Individual
Differences
Source: Adapted from The Next Generation: Accelerating the • Skills
Development of Rising Leaders issued by Corporate Leadership • Personality
Council, 1997 • Work orientation
Features of organizational context defining
effective leadership
Knowledge of strategy is fundamental to effective leadership and will
leave managers prepared to understand the needs of their organization.
Next, the organization must translate strategy into specific organizational
capabilities, skills that the organization requires in order to
maintain a competitive advantage. For example, a strategy based on
international expansion might require the organization to be able to
effectively enter new markets, recruit and train a cross-cultural workforce,
or pursue joint venture opportunities. Without these capabilities, the
organization will not reach its strategic goals.
Understanding of organizational capacities can help identify the
competencies that future leaders will require. Some capacities will
require leaders able to manage conflict, promote innovation, or
communicate effectively. Other capacities require specific technical skills.
Development efforts should therefore focus on building those capacities
with the greatest potential impact on organizational capabilities.
Need for adopting a systematic approach to
developing leaders
GS had to respond strategically to its rapidly changing competitive
environment during the 1990s. As the banking industry consolidated and
commercial opportunities exploded, GS realized that it had to grow in both
size and scope in order to compete. To do this, the company:
1. Created a new class of leaders in 1996 (MDs). The company also briefly
experimented with a few senior “lateral hires” in 1996 for the first time
ever–with great caution and mixed reviews. These outsiders had the talent
and skills, but it was very difficult to align them with GS culture.
2. Went public in 1999 (to ensure a permanent source of capital to fuel
growth).
3. Grew headcount exponentially.
To manage this increasingly complex organization and to lead GS in an
increasingly complex world of complicated banking products and foreign
markets, the strategic HR challenge became growing enough leaders, and
growing them quickly enough to manage this growth without destroying the
culture that had sustained GS success for almost a hundred and fifty years.
The Congruence Model of Organizational Alignment