A recent Washington Post article reported on a debate between Nobel Laureate economist Robert Shiller and Vivek Wadhwa of Stanford University. They were debating the value of Goldman Sachs and Google to society.
Wadhwa said, "What is often missing from the finance industry is the moral purpose. It is the dearth of this that led to the asset bubbles... It is only the addition of a moral purpose that will fix the finance industry's image problem and allow it to regain its stature as a force for good rather than greed and evil."
A Crisis of Confidence
Books released this fall ponder this very question. "The Firm" by Duff McDonald observes the international consulting firm McKinsey & Co., and asks the question "Who are we?" The answer requires the firm to turn "Inwards." Its managing director during the 1990s, Rajat Gupta, is now in jail for insider trading.
A firm that was founded during the Great Depression on a core value of doing the right thing is facing a stunning crisis of confidence. "McKinsey's main asset continues to be the trust its clients have in the firm, an unquantifiable, intangible thing that is constantly being tested. The consultant's secondary assets — their trust in each other and the internal culture of the placehave likewise come under stress."
Getting the (Undesirable) Drift
The second book, "What Happened to Goldman Sachs," by Steven Mandis portrays the most powerful investment house in the world, a firm started in the 1800s with a culture built on integrity and bonds among the employees, but which some say has lost those core values.
Sidney Weinberg, the first non-family member to lead the firm (in 1930) "saw right and wrong clearly, with no shades of gray." But recently Goldman Sachs was a big player in knowingly packaging subprime mortgages and selling them in the market, scarring its reputation and inflicting damage upon society.
The author suggests Goldman is drifting away from its higher ethical standards. He defines this drift as "a process whereby an organization's culture... slowly moves, carried along by pressures, departing from an intended course in a way that is so incremental... that it is not noticed." He adds, "The signs may indicate that there aren't changes, such as return to shareholders... but slowly the organization is losing touch with the original purpose meaning of its principles and values as it responds to various pressures and its environment."
Have we drifted? Is there a question mark on how we have reacted to pressures and the financial and regulatory environment? Whether your credit union is experiencing some of the same pains as McKinsey or Goldman must be asked. Now is the time to ask the question "Who are we?" and "How do we want to be perceived?"
Are we focused on our members or our bottom line? Don Keough, past-president of Coca-Cola Co. and author of "The Ten Commandments of Business Failures," expresses concerns "that the goals and tactics that organizations implement to improve their bottom line in the short run replaced the focus on the person, the consumer or the employee, who enhances an organization in the long run."
A Basic Tenet of Success
The creation of meaningful relationships lies at the core of a successful organization. Treating employees well translates into their treating customers as they would want to be treated. According to Walker Information, workers are six times more likely to stay on the job when they believe their company acts with integrity. Howard Behar of Starbucks prioritizes the relationship when he said, "Starbucks is in the people business selling coffee, not the coffee business serving customers."
After going through the financial crisis I'm sure some of us sympathize with the past CEO of BP who, during the drilling platform explosion in the Gulf, said, "I want my life back." In other words, "I don't deal with change well!"
In the wake of the financial crisis we have all changed and our credit unions most likely have also. And our members have changed, their needs and wants have changed, but one thing that hasn't is the members' desire to be treated fairly and with respect.
Critical Questions
Have we replaced that "moral purpose" we once had with an approach pieced together by the actions taken over the last five years just to survive? Do we need to reconsider our interactions with our members and employees? Has our "survival mode" transformed us into people we are not proud to be? Have we let regulations interfere with who we are and what we value? Have our members lost confidence in us? Do you tell your members and employees how much you value them? Do your members and employees trust you to do the right thing? What business are you in?
And perhaps, most importantly: Are you in the member business selling trust or the trust business selling accounts?
Ron Schmidt, CPA, is with CBS Certified Public Accountants LLC in Solon, Ohio. He can be reached at 440-542-1536 ext. 28, or
