March 19, 2012
Goldman Sachs's "Tylenol Moment" — Examining the Long-Term Impact Of Greg Smith's Op-Ed
In the spotlight: John Hellerman, Co-Founder, Hellerman Baretz Communications
It's been just a few days since New York Times published the op-ed heard around the world. Goldman Sachs's name and reputation has once again been smeared in all the media headlines, and the firm saw some significant market share evaporate within hours of the appearance of Greg Smith's article. Here, John Hellerman, a former PRNews Agency Executive of the Year, crisis-communications consultant to professional service providers and co-founder of Hellerman Baretz Communications, answers the most pressing questions regarding the impact of the op-ed:
The op-ed is headline news now, but what is the long-term significance of this piece to Goldman Sachs?
It's difficult to overstate. This is Goldman Sachs's Tylenol moment; it's something that could affect the firm's reputation for years and imperil a lot of its business. First, the fact that the attack is coming from inside the firm makes it appear extremely credible. Second, while similar charges have been raised against Goldman Sachs in connection with the credit crisis — very publically so, through an SEC lawsuit and Congressional testimony — those were complex stories.
Here, the message is simple: "I'm quitting because I can't stand the greed anymore." It crystallizes the worst charges against Goldman Sachs and puts them in a form that anyone can latch onto, from sympathizers of the Occupy movement to Jerry Maguire fans to Goldman Sachs's own clients.
Were you surprised that the New York Times published this inflammatory piece?
Yes, incredibly so. But still, media outlets have been influenced by the rise of blogs, which even in the professional realm can have a more gossipy, confessional orientation. There is a huge appetite for that material, and I think the publication of the letter — without a contemporaneous reaction/comment from Goldman was a watershed moment in journalism and especially the New York Times. I think this will open the floodgates for other media to go more salacious generally.
What is the biggest threat to Goldman Sachs posed by this op-ed?
Losing more talent and losing clients. There are a lot of firms to do business with on Wall Street, and many clients might feel safer going to one that isn't being accused in the New York Times of picking their pockets. The factor most helpful in the retention of existing clients is their relationships with individual Goldman representatives. In any client-firm relationship, the only "brand" the client really knows and cares about is the person handling their account. If those individuals have formed trusting relationships with their clients, Goldman has a chance to come through regardless of what is being said about the larger institution in the press. The clients' reactions will say a lot.
On the talent side of things, this is very troubling because the op-ed provides an opportunity for departing employees to agree with it without the responsibility of owning the criticism. In other words, Goldman is going to have a hard time labeling each subsequent complaint as sour grapes from a disgruntled employee. Ultimately, the employees know the truth about whether the culture of the firm is how Goldman describes it or how Smith does.
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The Pros and Cons
This is an interesting topic, first because the New York Times agreed to run it, and second because of what Greg Smith wrote. I don't doubt the validity of what Greg wrote. We've all worked in places where there was a culture shift and it seems the bad guys took over where the good guys left off.
But here are the issues that come to play in this situation. Number One - Goldman will not be hurt if it continues to make money for clients. This is fluff in that sense because in the financial world, smart people do business with anyone who will help them make money without breaking laws. I know Greg questioned the ethics of Goldman but he didn't elevate his case to whistleblower status accusing Goldman of doing anything illegal. And there's enough regulation to tap if Goldman was doing something substantively wrong.
Issue Number Two - Why did the Times run the story? In the past 100 years, that paper has had thousands of opportunities to help disgruntled employees slam the objects of their scorn, but most likely out of a sense of professionalism and not wanting to get involved in a "domestic" between the former employee and the employer, decided not to involve itself. This time, the paper bit.
There's only one reason. Greg's allegations of corporate greed fit the current narrative of the paper's news and opinion philosophy - making money for yourself and not the government is selfish, greedy and evil. Of course, Greg did not exactly say that, but his op-ed can and will be used by the Times to advance its own agenda.
And all of it will serve its part to help position an incumbent running on that platform to win the White House again. Everything the Times does this year is political and partisan. Oddly enough, Goldman finds itself getting bit by a so-called "friend" in the Times.
REALLY??
This comment is what one would expect on Huffington Post. Make it political, blame the media, tie it to the Obama campaign.
Really??
If this Goldman Sachs person had written this op-ed a year ago, it would have been published.
If he had written it under a Republican president in a non-election year, it would have been published.
Of course the Times has an editorial position -- although I find them very often at odds with Obama -- and they certainly publish letters and op-eds highly critical of the president. They also haven't endorsed a candidate for president yet -- although it's hard to imagine any major paper endorsing any of the dueling troika of GOP "leaders" at this point.
When a senior staff member at ANY major company that's been in the news for several years for ethical issues finally can't stand it and departs, while telling what he sees as the major failings of the firm, it's news. (Witness Wendell Potter at CIGNA or the ousted CEOs at other firms.)
But it's interesting here to see the typical political spin used to comment on this story -- don't address any of the issues raised (and they are serious), just blame the truth-teller, blame the media and wrap it up with a bow by saying it's all about Obama.
Really??
The underlying message...
The underlying message of the Goldman Sachs imbroglio remains the same as the underlying message about all the reputation management foul-ups that have taken place over the past decade, most conspicuously in the financial services sector.
These companies have made conscious decisions over the past decade to deliberately avoid building reputations with the journalists who cover them. Whether through arrogance, egotism, or simply not caring about the public perception of their activities (Commodore Vanderbilt's famous, "The public? The public be damned!" quote comes to mind), these companies have failed to enlist public support that could have been a bank of goodwill when critics attacked them.
These firms systematically liquidated highly skilled and seasoned communications professionals who they believed cost them too much and replaced them with interns and junior people content to get a fancy title on a business card in return for merely reading scripts back to reporters, blocking access to executives, and even just not returning journalist phone calls, ever.
Goldman has always been one of the chief offenders in this vein. For decades they never talked to the press at all. You cannot operate in a vacuum like that any more.
Companies continue to think they can control what is said about them by not speaking to the media. This is a vain, egotistical, false, and ultimately unsuccessful approach to public relations. You cannot expect to extract money from the public and have so much disdain for them that you do not engage in an ongoing relationship with the media who are your best hope for explaining your actions to that public.
Steve Lubetkin, APR, Fellow, PRSA
Managing Partner, Lubetkin Global Communications LLC
steve@lubetkincommunications.com
www.lubetkin.net
Past National Board Member, PRSA (2003-2005)
Senior Fellow, Society for New Communications Research
Disgrunteld Former Employees Are Just That
Greg Smith comes across as a disgruntled former employee. It's that simple. It doesn't matter his title. When you become a "DFE" your credibility wanes unless, as Anonymous mentioned, you are indeed a whisleblower and this could actually lead somewhere.
I could have written the same thing about former employers and clients, but out of a sense of professionalism, I just wouldn't do it publicly like that. He has a right and I don't begrudge him that, but I certainly don't think highly of him for doing this.
Unrelated to the article but.... Anonymous II, you deserve a "Really?" for somehow thinking that on this planet the Times would even consider endorsing anyone BUT Obama. They may not have announced anything yet, and they do run a few token letters and even bury a few stories that may not flatter the president, but they are in the bag so deep for him, you have to at least admit it.
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