Goldman Sachs has had a string of ugly news headlines lately over its dealings with Libya’s sovereign wealth fund, its role in the collapse of a British retailer and its ties to an investment fund in Malaysia embroiled in a corruption probe.
But this post is not about those things.
It is easy to conclude from these headlines that Goldman is mired in crisis or that little has changed to interrupt the nearly constant parade of scandal by Wall Street firms.
Yet two announcements by Goldman that received far less attention suggests the firm is taking risks and making real changes at a time when the banking sector is facing huge challenges – lower returns on capital, more regulation and aggressive new competition for clients and talent.
First, Goldman said it would end on-campus recruiting for undergraduate hires and replace it with an online video application. The step will introduce more standardization into the interview process and make it easier to reach promising students who aren’t in the elite schools Goldman has drawn from in the past. And with more than 300,000 applicants each year, technology can play an important role in finding the best talent for the firm.
On the business side, Goldman is moving into new areas in financial services, including some that didn’t exist a few years ago. It soon expects to start making small-dollar (well, small by Goldman’s standards) consumer loans through an online platform and mobile app. The strength of the Goldman brand will be a plus.
Both moves stand in sharp contrast with the things that seem to occupy Goldman’s rivals right now. Rather than develop new businesses or overhaul recruiting practices, they are stuck in neutral, making minor changes that seem unlikely to have much of an impact.
J.P. Morgan for example unveiled a new dress-code policy to comfort those who struggle between pinstripes and khakis and to attract newcomers who prefer the tech sector’s casual vibe. Morgan Stanley meanwhile announced it would dispense with numerical rankings in its staff evaluations in favor of adjectives – an outcome that seems certain to produce more confusion and fewer lawsuits. This is not progress, as our earlier post on this topic observed.
So give Goldman credit for innovating when others are dithering. It is responding with imagination and risk-taking to the forces bearing down on investment banking. And its innovations could deliver big long-term benefits to its shareholders and employees –and perhaps some glowing headlines, too.