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.