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Financial Crisis: Impact on and Response by Goldman Sachs[1]

1.        Introduction

There were five major independent investment banks on Wall Street before the most recent financial crisis, but only two of them survived: Goldman Sachs and Morgan Stanley. Though forced to become commercial banks, the survival of these two investment banks deserve some explanations (Lasher 2011, p.228). In concluding the reasons for the successful survival of Goldman Sachs, the Fortune magazine’s assessment pointed out that “the firm’s culture has kept it as nimble as a start-up” (Griffin 2011, p.94); some believe that it is the long established enterprise-wide internal risk management system that saved the company (Diebold, Doherty & Herring 2010, p.76); Grimshaw and Baron (2010, p.94) believed that it is the leadership behaviors, high ethical standard and management decisions that ensure the company is focusing on the long-term greedy strategy.

2.        Statement of research question

The research will explore the topic of “How Goldman Sachs survived the financial crisis and keeps leading the financial services industry” by analyzing the following hypotheses:

Firms with high ethical standard are likely to survive the major changes such as the global financial crisis, and this hypothesis is based on the assumption that ethical practices correlate long-term business success.

Firms could credit business success to the company culture with the special core values.

Flexible and opportunistic business model and organizational structure contribute to the companies’ competency to be able to get adapted to the fast changing business environment.

3.        Objectives of the project

Identify major impacts of the global financial crisis on the global financial service industry & individual company of Goldman Sachs

Identify the major management issues (ethical dilemma, leadership failure and etc.) reflected in the crisis

Conclude several major reasons for Goldman Sachs’s successful survival

Provide recommendations for Goldman Sachs to enhance the business success and further avoid financial uncertainties based on the analysis of the ongoing trends in the post crisis industrial and economy environment

4.        Literature review

4.1    Company culture & business success

Kotter and Heskett (1992) suggested that an adaptive corporate is a facilitator of good organizational performance. An adaptive culture encourages employees to trust each other, to take risks, to act pro-actively and to continuously seek for opportunities, improvement and change (Alvesson 2002).

4.2    Leadership & successful crisis management

The old assumptions about the distribution of power are no longer valid. An emphasis on control and rigidity serves to squelch motivation, innovation and morale is more effective and leaders share power to increase the brain power of the organizations (Daft & Lane 2007, p.7).

4.3    Business ethics & long term business success

Business may sustain greater profits in the short term without a high standard ethics code, but long- term financial performance demands an ethical image for the well-being of customers, employees, lenders, shareholders and the public (Cleveland 2002, p.242).

5.        Research methodology

Primary data collection: interview with Goldman Sachs staffs (to investigate corporate culture); email contact with management from Goldman Sachs

Secondary data collection: books, online websites, thesis, researches and surveys, data released by government and other authoritative institutions, company financial reports and other statements

6.        Anticipated structure of the project

Executive summary

Background of the study (both company background and financial crisis introduction)

Problem definition

Literature review

Case analysis

–          Impacts of financial crisis on the company

–          Management response to the crisis

–          Employee response to the crisis (interview with Goldman Sachs staffs)

–          Comparing Goldman Sachs with another investment bank

Conclusions

Challenges in the changing environment

Recommendations

–          Recommendations on company structuring

–          Recommendations on leadership

–          Recommendations on company culture

7.        Project management plan

Bibliography

Alvesson, M. 2002, Understanding Organizational Culture, London: Sage Publications

Cleveland, P. M. 2002, 50 steps to business success: entrepreneurial leadership in manageable bites. Toronto: ECW Press, p.242

Daft, R. L. & Lane, P. G. 2007, The leadership experience. Mason: Thomson Higher Education, p.7

Diebold, F. X., Doherty, N. A. & Herring, R. 2010, The known, the unknown, and the unknowable in financial risk management: Measurement and Theory Advancing Practice. New Jersey: Princeton University Press. p.76

Griffin, R. W. 2011, Management, 10^th edition, Mason: South-Western Cengage Learning, p.94

Grimshaw & Baron 2010, Leadership Without Excuses: How to Lead Accountable, Performance-driven Teams that Deliver Results, New York: McGraw-Hill Companies, Inc. p.94

Kotter, J. P. & Heskett, J. L. 1992, Corporate culture and performance. New York: Free Press

Lasher, W. 2011, Practical Financial Management. 6^th edition, Mason: South-Western Cengage Learning, p.228

[1] The subtitle will be “How it survived and keeps leading the financial services industry” if allowed.