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The background of the story depicts crisis in the economic status of the US. This was caused by subprime mortgage challenges in 2006. At first the effect of the subprime mortgage problem was bearable as evidenced in the five largest United States investment banks withstanding the storm. However, the situation got severe by 2008 resulting to Merrill Lynch being acquired by North Carolina based Bank of America. In addition, the collapse of Lehman Brothers and Bear Stearns followed. This shows very harsh economic turmoil where only few investment banks survived. The period was characterized by difficult financial times when the world had been hit by global financial meltdown. This was further worsened by the failure of the subprime mortgage market.
Goldman’s structure was flat. This meant that it had relatively fewer layers. According to the case study, Goldman Sachs bank was run by a “concentric series of coinciding committees.” Managing Directors and partners constituted a standing committee that made every decision. The bank lacked a strict hierarchical structure. The top- bottom chain of command was short and its control had a wide span. During the time of crisis they were able to muscle through due to the speedy nature of the decision making process. This structure also gave way to flexibility in the management, greater communication, heightened team spirit, and less bureaucracy. Fewer layers in the management played a vital role in cutting down costs and this saw Goldman Sachs find its way through the storm (Lisa, 1999).
Goldman’s top level management team was comprised of partners. The success or failure of the bank directly affected them. This was as a result of the bank’s rule for them to invest their own money. The bank’s tradition was that of high- risk and high- return investments. The partners were a bunch of overachievers which created a need diligence in the bank’s undertakings. Team spirit was highly influenced by the owners strive for full commitment towards common goals and sacrifice of personal time for the sake of the bank. The owners’ hunger for achievement created a culture of highly ambitious individuals who viewed the bank as a family business and treating it as their own. This complicated the banks replication of practices, deep paranoia, individual ambition, and robot-like team work. The partnership conceived a culture where major decision making processes were done through common consensus. For example, the IPO decision was reached through a mutual understanding of the owners. This took a remarkably long time but was eventually successful (Charles, 2008).
One model that Goldman Sachs Bank adopted is the value based management approach specifically aimed at increasing consistency corporate culture, corporate communication, and corporate governance. Coordination of activities in the bank got less formal since their organizational structure was flat. This was characterized by a less strict organizational structure in which the owners became the partners and the top managers. Decision-making had to be done by the partners in unison with the managing directors. The decision-making strategy was not quick but had been designed in a manner to avoid managerial blunders at an individual level. The success of the bank could also be attributed to the clear objectives and the three core strengths. These were: loyalty of its employees, its approach to recruiting, and its command structure. Goldman had its way of motivating employees to pursue the objectives of the bank. They were encouraged to think of the firm as a family and to be perfectionists in their job. They also focused on long-term terms of employment and promotions up the corporation ladder. On top of this, the bank compensated them well as one of the employee motivation methods the bank had adopted.
Works cited
Charles D. Ellis. The Partnership: The Making of Goldman Sachs. New York: Penguin Press, 2008.
Lisa, Endlich. Goldman Sachs: The Culture of Success. New York: Arnold A. Knopf, 1999.
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