Goldman Sachs Debacle Reminds CMOs of Brand Breakdown by Greed
In financial markets, crisis is justified as the price of innovation. And it would seem as if Goldman Sachs CEO Lloyd Blankfein and his cabal are presently hurling stones as large as themselves at the government glass house, justifications of business moves for which there are no justification. So his arguments, that crash of glass, is falling on deaf ears: Neither the government nor the American people care. All they care about is the fallout, and the effect of Goldman Sachs' actions will be a series of deafening explosions in the form of lessons to all marketers about the futility of selfish, greedy moves for financial gain.
America's insatiable appetite for everything has propelled global markets, but the world now nurtures a deep sense of insecurity; just as it's biggest economy is recalibrating (and Europe is downgrading), Goldman Sachs, a critical part in the engine of the world's economy, has now revealed it may have sought to bury it. The difference between a rut and a grave is the depth, and we shall soon see how deep.
In the past, banks like Goldman Sachs used to focus on acquiring and protecting a client's assets, lending money and making profit out of the assets they had under management.
This radically altered, however, when banks transformed to trading their own, ever more complex products and sacrificed the client. Overnight, the compensation model switched from the volume of clients managed to the money to be made by the volume of spurious bank products sold.
Reputation cracks when a brand is stretched too far.
You could just flip out the Toyota name and product-recall debacle and the replace it with Goldman Sachs and its base alloy of hypocrisy. The tragic twist is that Goldman Sachs seems to have delivered an inverted approach to all five traits for handling crisis (to make a crisis)—and there are key lessons to be learned for all CMOs.
Of utmost importance, the simplest is to act fast, learn rapidly. A company's leadership should inspect the cause of crisis and raise alarm, not expect easy outcomes from it. In this case, the unconscionable intent of Goldman Sachs management demonstrates its scandalous approach to create (not avert) crisis with military precision. If in doubt, avoid deceit. When bedlam occurs, news and social media burst, and the spectral battle begins, formal statements are rendered useless; it's all about managing the mayhem with a can-do culture and strong values of trust. Something Goldman Sachs is burning through right now.
Secondly: Hide nothing, tell all. As President Ronald Reagan once said, "facts are a stubborn thing," so Goldman would be well advised to take heed. From stock options to outright plunder, recent years have left a train wreck of corporate-brand disasters based on a simple realization that they covered up.
As Tom Clancy would tell you, "the difference between truth and fiction is that fiction has to make sense." For CMOs, marshaling a rapid-response team and a crisis plan are critical, as is weighing options for a centralized or a decentralized approach. The thing to remember is that when the crisis is an ethically related issue it should be a centralized response, and when it's a physical crisis it should be decentralized.
Third, brands are compromised through fear and lack of action—in this case, the latter: Could you be a little more vague, Goldman Sachs? Its "too perfect to fail" reputation has just experienced blunt-impact trauma (and no doubt so did its Net Promoter score). Any CMO knows that a brand's reputation comes from what it possesses, which in turn derives from what it is and what it stands for. And don't get it wrong. Most brands follow five distinct stages in their life cycle: emerge, crash, transform, dominate and reinvent. This debacle will show that Goldman Sachs is less a Gibraltar-like fortress than a stool resting on three legs—as one gets kicked out, it might need to reinvent for this next phase of its history. Lesson for CMOs: Failing to prepare is preparing to fail, and that includes fire drills and media training.
The fourth lesson: A brand's standing in the court of public opinion falls when it fails to analyze failure; in other words, not selfishly predict it with the intention of capitalizing on a tossed, mutilated, dismembered and decapitated market with monstrous greed. It's a trait that will receive the public ire and a righteous infliction of retribution, manifested by an appropriate agent, personified in this case by a disconsolate Congress. The takeaway: Know your audience. Just because you're in a specific category does not mean you have license for a semblance to normal everyday business life—just ask Ford, Johnson & Johnson or PepsiCo, for example. All the people, from Main Street to Wall Street, are stakeholders.
And finally, prior to being coaxed from its somnolence, uncompromising Goldman Sachs was heralded by the press last summer for its bold and virtuous actions, which proved no match for this must-avoid final trait of arrogance. Brands are about who you are, not what you do. Brands are undoubtedly a company's greatest asset—to which the balance sheet of the S&P 500 is testament—with more than 80% of the value made up of intangible assets, a substantial part of which is goodwill. On the bright side, studies have shown that companies that handled a catastrophe with high standards have recovered and even exceeded pre-catastrophe stock price, but that depends on whom you listen to:
Al meets his banker friend Lloyd, and exclaims, "Lloyd! I heard the market died!" "Hardly," says Lloyd, laughing. "As you can see, it's very much alive." "Impossible," says Al, "the man who told me is much more reliable than you."
Wit aside, matters have long moved on from enthusiastic to skeptical and are now at a division of deep regret. Failures of this proportion, even if it is a very specialist business-to-business operation, present an indication of that brand's future performance—and the public has a memory recall button.
Make no mistake, like many of the world's leading brands, Goldman Sachs' reach is global, its focus narrow and its impact colossal. The ensuing deluge of public attention and scrutiny will prove that in the world of brands, it's not about being dynamic; it's all about being right. As Churchill once proclaimed, "Play for more than you can afford to lose, and you will learn the game."