BLG Leadership Insights Features

George Steinbrenner & Goldman Sachs

George Steinbrenner’s recent passing coupled with Bethany McLean’s Vanity Fair expose on Goldman Sachs’ changing corporate culture raises an important question for those thinking about stepping down and handing the reins over: How do I maintain the narrative I’ve worked so hard to create? In the various eulogies of the “Boss” what stands out the most is his commitment to winning. Everything about the Yankees from the overpriced hot dogs to the “no facial hair” policy reflects this goal.

Steinbrenner relinquished day-to-day control of the team in 2007 and entrusted his sons, Hank and Hal, to run the business. By all accounts, Hank and Hal are more reserved than their father and are more content to remain in the background and sign checks. Undoubtedly, since the brothers took over the Yankees the team has become a more corporate entity that uses its storied name to roll out a regional sports network and other numerous licensing and merchandising agreements.

As last year’s championship illustrates the Yankees remain committed to fielding a world class team. Still, the  championships are no longer pursued with the insulated goal of winning. Instead, championships seem to serve the revenue machine. The narrative, dedicated to winning at any price, that Steinbrenner created has given way to a “money first” culture.

Conversely, a similar shift has occurred at one of the nations most storied and reviled financial firms, Goldman Sachs. As Bethany McLean writes: “As Goldman grew, it developed a unique culture, characterized by impossibly hard work, loyalty, secrecy, and a lack of flashiness. Senior executives there–unlike those at other firms do not have palatial offices with private bathrooms. In the late 1970s, John Whitehead then managing partner put what are still Goldman’s 14 Business Principles on paper. The first: ‘Our clients’ interests always come first.'”

As current CEO Lloyd Blankfein rose to power a new culture overtook the firm. In the words of one managing director, “If the old Goldman made its money taking Ford public the new Goldman made money hedging the cost of platinum for Ford.” One would be hard pressed to imagine Sidney Weinberg’s firm defending itself from allegations of improper trading activities.

Leadership transitions are under-realized opportunities to reflect on organizational culture. In the case of the Yankees and Goldman Sachs the dominant corporate culture has changed with a new management team in place. Firms must change in the face of differing circumstances, this much is certain. However, change must be negotiated with past successes in mind. These two iconic groups are where they are because they ingrained employees with a winner’s mentality. Time will tell whether these changes are for the better, but I think we can all agree that something has been lost, something that is much harder to regain: mystique.

Picture Credit: Wally G

BLG Leadership Insights

Leadership & Moral Purpose: Siegmund Warburg

The most successful organizations, over time, are those in which people act consistently and decisively while innovating and building high-quality relationships. The task of leadership is to stimulate these kinds of actions, reliably and continually.

Pragmatic leaders deploy in some iteration a motivational tool that moves a team or an organization forward. This tool can, in cases, be refereed to as a  “moral purpose” according to Nikos Mourkogiannis in his article, The Realist’s Guide to Moral Purpose.

Mourkogiannas defines moral purpose as a value “that, when articulated, appeals to the innate sense held by some individuals of what are right and what is worthwhile.” For example, by all accounts, Sam Walton was an incredibly shrewd businessman, but at Wal-Mart, making money was secondary to another moral purpose: selling high quality products at the lowest possible price. He made his team feel that their work was worthwhile, by emphasizing the social benefits of families having more money to save and spend.

Moral purpose also allowed Siegmund Warburg to build his financial firm, S.G Warburg, into one of the top merchant banks in Europe after World War II. When Warburg molded his firm he tried his best to teach his employees with five pillars of good business: support pioneering advances, possess moral standing, earn a reputation for efficiency and high quality brain work, and make connections with personnel and organizations.

His emphasis on service and loyalty over pure profit spurred him to pioneer open-plan offices and create a corporate democracy. S.G. Warburg & Co. would take on a client only if every senior executive agreed. This moral purpose helped inspire great loyalty at S.G. Warburg. So much so that Warburg bankers worked longer hours than their rivals (at Warburg & Co. the work day began promptly at 8am…the crack of dawn for investment bankers in those days).

Mr. Warburg’s referred to his manner of business as “haute banque.” He strove for heroism directly inspired by the writings of Friedrich Nietzsche and possessed the moral purpose of creating an aristocracy of elite financiers who would bring, as he put it, “the diverse potentialities of the human being to their highest possible level.” The drive to provide efficiency and stability gave him and his firm capabilities that their competitors could not even begin to emulate

Warburg’s bank thrived by sustaining its morals and reputation. In today’s age when Goldman Sachs and their ilk pursue profit at the risk of damaging client relationships and at a time when bankers and legislators contemplate the future of “high finance,” they would be well advised to follow Warburg’s five principles, and remember it’s not always about the money.