There is a special report in this week’s Economist magazine (issue dated April 29-May 5th 2006) on Goldman Sachs. It is essential reading for anyone who is interested in professional businesses.
The summary quote from Goldman’s CEO, Hank Paulson, is a brilliant insight. “Goldman”, he says, “is a hard place to be hired, a hard place to be promoted and a hard place to stay.” As the Economist’s writer observes – “And if you want an explanation of how Goldman endures, that, perhaps, is the best explanation of all.”
The article is rich with details of the intensive hiring process (a vice-chairman had to endure 150 interviews before being hired), the tough promotion process and, the enforcement of high standards even among the firm’s most senior people. The article says “Often enough, someone important is asked to leave. This is one of Mr. Paulson’s most critical roles.”
What all of this proves is that, in professional businesses the essence of strategy, the keys to ongoing success, are not primarily the choices of which markets to compete in and which services to offer. Such decisions, important as they are, are secondary to having processes in place which force the firm, and the people within it, to live at (and to) higher standards than the competition.
Goldman does not preach different philosophies than most other businesss would preach – commitments to client servoice, teamwork, being a place for the best and the brightest -it just has THE DISCIPLINE and the COURAGE to achieve consistently higher standards on those principles, with fewer compromises.