Goldman Sachs - Management Analysis - Assignment Example

Goldman Sachs - Management Analysis Table of Contents Introduction 3 Managerial Decision Making At Goldman Sachs 4 Organisational Structure 4 CompanyManagement Strategy In Relation To Mintzberg, Fayol and Mayo’s 5 Recommendations and Conclusion 9 References 10 Introduction Goldman Sachs Group, Inc is an American based financial holding and bank holding company. The company tends to offer its services as an investment banker. Numerous financial services are provided by the company and tend to serve corporations, the government, the financial institutions as well as the individuals requiring the services (NYSE, 2011). It has been noted from the annual report of the company that the main focus of the company has been at four key areas. The four key areas have been the creation of the jobs as well as the overall growth of the economy, building up of the economy as well as stabilising them, enhancing the opportunities of education and thus glorification of the services as well as expertise. The main aim of the paper has been to analyse the company’s decision making with the help of the management theories. Among the several management theories such as the Taylor’s Rational Goal Theory, Fayols and Mintzbergs Internal Systems Theory, Mayo’s Human Relation Theory and Porter’s Strategic & Peters’ Cultural Theory; the research paper will make use of the two theories such as Mayo’s Human Relation and Fayol and Mintzberg’s theory. The rationale behind choosing Goldman Sachs for the purpose of the study is that during the period of Lloyd Blankfein, CEO and Chairman of the company, it was accused of fraud by the SEC (Securities and Exchange Commission) in the year 2010. It can thus be identified that the performance of the company during this period has been comparatively inferior. Therefore, through this report, it will be aimed at understanding the kind of decision that the management followed that led to such a huge turmoil. The report will try to comprehend the reasons of failure during the rein of Lloyd Blankfein. The analysis will be conducted using the various theories that have been identified and finally recommendations will be provided with regards to how the management can improve its managerial decision making capabilities. Managerial Decision Making At Goldman Sachs The main business of the Goldman Sachs has been to invest the money belonging to the large organisations as well as the wealthy individuals. It has further been identified that the firm tends to put its own funds as well at risk. Organisational Structure Lloyd Blankfein has been the Chairman and CEO of the company since the year 2006. Lloyd Blankfein by nature has been quite affable and smart. His five years tenure in Goldman Sachs can be classified into three different groups. He experienced unstable growth till early 2008. Furthermore, the financial crisis that took place because of the breakdown of the Lehman Brothers was also evident during his ruling period. The bank, further expected to recover in the year 2009, despite various regulations that was formed after the post-crisis and the fall in their reputations. The other person who has been working with the company under Mr. Lloyd Blankfein is David Viniar who has been the Chief Financial Officer and has served the company for more than ten years. Mr. E. Gerald Corrigan has been the Co-chair of the Risk as well as Global Compliance and Controls Committee. Mr. Henry Paulson was the Chief Executive of the Goldman Sachs prior to Lloyd Blankfein (Steinert-Threlkerd, 2009). Alan Cohen has been the Compliance Officer at Goldman Sachs, John Rogers has been the Secretary and Gary Cohn is the President as well as the COO (The Official Board, 2011). It has been evident that the company has outperformed in its operations in most of the areas. It has been positioned among the best three underwriters. It is because of the consistent and best performance along with the commitment of the top management towards the municipal business as well as the public sector. The company also has been expert at numerous other sectors that makes the company the market leader. It has been the pioneer in the numerous aspects of the municipal transactions such as hedging products, refinancing, securitisation and new products. The company also seems to be the pioneer in the financial tools that have been created by the American Recovery and Reinvestment Act of 2009 (ARRA) (Goldman Sachs, 2011). Company Management Strategy In Relation To Mintzberg, Fayol and Mayo’s It has been reviewed that there are number of writers who have identified the significance of the organisational structure and the inter-connection that it has with the organisation as well as the size, technology, strategy, environment along with culture of the organisation. Mintzberg has also identified the role of organisational structure (McMillan, n.d.). Furthermore, the Mintzberg’s Internal Systems Theory comprises of the six groups. They are the CEO, the line managers, support staffs, analyst, production managers and those who determine the principles of the organisation. Mintzberg states that it is the top management whose chief role is to formulate the strategy and thus analyse the success and failure of the organisation after the strategy has been chosen (Alkhafaji, 2003). Fayol states that for the purpose of creating a meaningful organisation it is not only necessary to group the people and assign them the necessary tasks and duties but is also extremely important for them to have the relevant knowledge for adapting naturally to the circumstances according to the requirement. Fayol further states that the organisation needs to identify the most suitable personnel and thus have the relevant knowledge to place him at the job where they can work with best of his capability (Lamond, 2003). It can be stated that the company was unable to adapt to the changing regulatory environment that is made apparent in the sections below. It seems that Lloyd Blankfein didn’t have the necessary knowledge to adapt himself to the changing environment because of which he can be considered as an ineffective leader. It has been noted that in the first two years of the rein of Lloyd Blankfein, things went on smoothly for Goldman Sachs. In the year 2007, when the company was successful at earning profits of $11.6 billions, Mr. Blankfein was provided with a bonus that was worth $68 million. He had been the maximum paid Chief Executive on Wall Street. However, during the financial crisis the company invited hedging positions. It had challenged the property market of the America to decline and most of the American firms would close as a result and thus Goldman Sachs would benefit because of this. After the failure of Goldman Sachs competitors such as the Lehman Brothers and Bear Stearns, it was capable of taking the benefits from the US treasury of the cheap credits that was available. It was further stated by the admirers of Lloyd Blankfein that he has the capability to manage the tough situations. One of the strategies, as followed by the company, for the purpose of protecting the wealth was to withdraw with the insurer AIG many billion Dollars, related to swap position. It protected itself from default on composite derivatives. During the period of credit crunch, Goldman Sachs made a plan to make a security call against AIG and thus Goldman Sachs was accused of being the main player in the breakdown of the insurance empire. Lloyd Blankfein found it difficult to understand the reason behind the public criticism against the prosperity of Goldman Sachs. According to a senior executive, the bank had just tried to become a cleaver investor on the financial market that had been leading to liquidity with its unclear derivatives and also helping its customers in the USA to raise the funds for the purpose of the investment. However, the Securities and Exchange Commission had accused Goldman Sachs for the frauds caused by it. It has been apparent that because of such accuses the reputation of the company was ruined to a greater extent for deceiving its own customers. In this regard, Lloyd Blankfein stated that it thus happened because of the negligence and bad behaviour that needed to be sorted and fixed out soon (Clark, 2010). Considering Mayo’s theory, it can be noted that the performance of the employees tends to improve if the relationship between the management and the employee is good. He further stated that if the management paid special attention towards the employees and treat them with respect then the workers are more likely to perform well (Lucas, n.d.). By reviewing the performance of the CEO of the company, Mr. Blankfein it can be stated that, in terms of managing the firm, the profits and revenues of the company and the risk management, Lloyd Blankfein has outperformed in his operations. However, since he is the CEO of a public company on the Wall Street, the roles and responsibilities of the managers become even higher and doesn’t just limit to managing the firm or the profitability as well as the risk of the company. Lloyd Blankfein was unable to manage the image of the company. The reason behind the damage of the image of the company has been the ideas and strategies that he followed to manage the company. Although, he showed that the investment bank has the capability to adjust with the changing environment, however, it has been evident that the company has failed to comply with the regulations. Thus, it can be stated that, it has not been able to adjust to the changing environment (Basar & Wright, 2011). Recommendations and Conclusion The management of a company tends to determine the effectiveness and success of the company. An organisation comprises of the human resources that leads to achievement of the goals. The productivity of the human resource is directly related to the motivational level and the satisfaction level of the employees. If the employees tend to be motivated then an organisation can expect greater output. Conversely, if the employees are not satisfied or motivated to work, then they tend to show negligence towards their work. It has further been noted that it is the CEO’s strategic direction that can lead an organisation towards the achievement of the desired goals. Therefore, Goldman Sachs needs to reorganise its organisational structure so that the organisation can achieve its desired objectives. The reasons behind the wrong decision making by the CEO needs to be identified and thus right direction needs to be taken so that the strategies can be corrected and thus it can be prevented from reoccurring. The company needs to pay due attention towards the internal systems of its organisation and thus strive to develop the existing systems. The consideration of all these factors will help the organisation to survive in the long-run. References Alkhafaji, A. F., 2003. Strategic Management: Formulation, Implementation, And Control In A Dynamic Environment. Routledge. Basar, S. & Wright, W., 2011. Happy Fifth Anniversary, Mr Blankfein. Financial News. [Online] Available at: http://www.efinancialnews.com/story/2011-05-30/lloyd-blankfein-fifth-anniversary [Accessed July 01, 2011]. Clark, A., 2010. Lloyd Blankfein. King Of Wall Street Defiant Under Siege. Business. [Online] Available at: http://www.guardian.co.uk/theobserver/2010/apr/25/profile-lloyd-blankfein-goldman-sachs [Accessed July 01, 2011]. Goldman Sachs, 2011. Overview and Organisational Structure. Search. [Online] Available at: http://www2.goldmansachs.com/services/financing/muni-finance/overview.html [Accessed July 01, 2011]. Lamond, D., 2003. Henry Mintzberg vs Henri Fayol: Of Lighthouses, Cubists and the Emperors New Clothes, Journal of Applied Management and Entrepreneurship. Lucas, E., No Date. Elton Mayo. Content. [Online] Available at: http://www.stfrancis.edu/content/ba/ghkickul/stuwebs/bbios/biograph/mayo.htm [Accessed July 01, 2011]. McMillan, E., No Date. Considering Organisation Structure and Design from a Complexity Paradigm Perspective. Abstract. [Online] Available at: http://www.ifm.eng.cam.ac.uk/mcn/pdf_files/part5_5.pdf [Accessed July 01, 2011]. NYSE, 2011. Goldman Sachs Group Inc. Company Description. [Online] Available at: http://www.nyse.com/listed/gs.html [Accessed July 01, 2011]. Steinert-Threlkerd, T., 2009. ZDNet Undercover: Goldman Sachs Group. Whitepaper. [Online] Available at: http://i.bnet.com/whitepapers/ZDNet_GoldmanSachs_SR_2.pdf [Accessed July 01, 2011]. The Official Board, 2011. Goldman Sachs. Org Chart. [Online] Available at: http://www.theofficialboard.com/org-chart/goldman-sachs [Accessed July 01, 2011]. Read More