Friday, March 16, 2012

Goldman Sachs, Corporate Culture, and Medical Ethics

When Greg Smith, an executive director at Goldman Sachs, and head of the firm's US equity derivatives business in Europe, the Middle East, and Africa, explained why he resigned from the company in a remarkable New York Times op ed piece two days ago, the story went viral. Here's the essence of what he had to say:
After almost 12 years at the firm...I believe I have worked here long enough to understand the trajectory of its culture, its people, and its identity. And I can honestly say the environment now is as toxic and destructive as I have ever seen it....I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs...I attend derivatives sales meeting where not one single minute is spent asking questions about how we can help clients. It's purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client's success or progress was not part of the thought process at all.
Years ago, my friend Marc Bard, a brilliant consultant, taught me the aphorism - "culture beats strategy every time." This is perhaps especially true in health care, which is so strongly mission-driven. If the shared culture of a health organization is truly patient centered every action will express the organization's values.

I experienced how culture works especially clearly 19 years ago, when my father, near the end of his life, was a patient at the Lahey Clinic. In my distracted and distressed state, I locked my keys in my car. I went to the building services office to get help. A staff member (a) picked the car's lock with expertise, but also (b) conducted excellent common sense psychotherapy with me around how we get forgetful when we're upset, and (c) said he would pray for my father. Remembering the incident and writing about it here brought tears back to my eyes. I'm happy that I wrote to the CEO to report on the excellent care I received from his non-clinical staff and to congratulate him on the culture of the organization.

I'm lucky that the four health organizations I've been part of during my career - the Massachusetts Mental Health Center, Harvard Community Health Plan/Harvard Vanguard Medical Associates (HCHP morphed into HVMA), the Harvard Pilgrim Health Care insurance company, and the Harvard Pilgrim Health Care Institute,  have all had cultures and evinced values I've been proud to be associated with. I doubt, however, that the people at those organizations were intrinsically more ethical than the colleagues Greg Smith is writing about.

When one's colleagues and the leaders of an organization share core values they reinforce each other. Newcomers are selected for fit with the culture, and the culture (what educators call the "hidden curriculum") brings out the best in us. It's easier for a health organization than for Goldman Sachs to cultivate a positive culture because the mission of caring for people who are suffering encourages empathy. I'd like to believe that I'd leave as Greg Smith did if I found myself part of an organization with a environment that is "toxic and destructive" and was unable to influence it, but knowing the human capacity for self-delusion, I can't be smug and certain that I wouldn't follow the same playbook Greg Smith discerned at Goldman Sachs.

Aristotle conceptualized "character" as an inner state or way of being that shows itself in the patterns of our actions. "Culture" is the organizational equivalent of "character." Culture is partly formed by the characters of those who constitute it, but the influence goes both ways. In trying to understand our human natures, we need to consider "culture" and "character" along with "nature" and "nurture."


Roy M. Poses MD said...

I agree with your thoughts on the importance of culture.

However, I'm afraid that far too many health care organizations have cultures like Goldman Sachs.

We have discussed many of them on Health Care Renewal (

Some causative factors may be growing overlaps between health care and the finance industry in the era of "greed is good."

These include interlocking boards and leadership (e.g., see this post: ); the rise of generic managers as leaders of both (look here: ); and the sometimes chaotic environments in both health care and finance that makes things more comfortable for psychopaths to rise in management (look here: .

Roy M. Poses MD said...

Also see Wendell Potter's comparison of Goldman Sachs to Cigna, a typical for-profit health insurance/ managed care company here:

Anonymous said...

I agree that, if the shared culture of a health organization is truly patient centered, every action will express the organization's values. Seeing denials as preferable to approvals, refusing to recognize or acknowledge the expertise of attending physicians at diagnosing their patients, lamenting allowing patients to use all available tools and information to advocate for themselves- these things are not consistent with a patient centered culture, but seem to have become accepted behaviors in at least one of the health plans you mentioned. How does one effect change from the inside when leadership is too busy, or too disengaged, to notice, let alone change, these behaviors?

Jim Sabin said...

Hi Roy -

As I've said in posts of my own, and in response to your always VERY welcome comments: Health Care Renewal has been a crucial contributer to the ethics of health care for years.

I've often heard from colleagues when they shifted from for-profit health organizations to not-for-profit organizations that they experienced the nor-for-profit culture as more congruent with health care ideals.

That said, I don't see the for-profit structure is per se toxic for health care. For 10 years I ran a small for-profit "organization" - my own solo psychiatric practice. In the pre-word processing era I typed the bills for my own patients and wrote out the checks for all expenses. If I deviated from good health care ethics I had to look the patient in the eye and take responsibility. I think that's the best support for a good moral compass. In the years I practiced with a large not-for-profit medical group, I felt the same kind of ownership. I didn't have the same control as in a solo practice, but I was, with my colleagues, responsible for our policies and conduct.

The structure I feel most uncomfortable with in health care is equity ownership. Equity owners may not be any less ethical than the clinicians in the organization they own, but they don't deal with patients directly. For equity owners, quarterly income and stock price is what they see directly. That's not a healthy moral climate for health care.

(Readers - if you haven't yet visited Health Care Renewal, please do so now. I have a link in this blog.)



Jim Sabin said...

Dear Anonymous -

Thank you for your comment.

From the examples you give, I' guessing that the organization you see as having deviated from "true north" is the health insurer, since "denials" and "approvals" are associated with health insurance.

Every health system must set limits because there are more interventions that a population will desire than any society is prepared to pay for. The challenge is to do this in a clinically informed, ethically justifiable, and potentially socially acceptable manner - that's the topic Norman Daniels and I addressed in Setting Limits Fairly. There's no way a health system won't be disappointing to some people. Those who are responsible for the system can only hope that limits are experienced as disappointing but fair.

Since I first joined the Harvard Community Health Plan HMO in 1975 I felt that the best ethical test for those who were responsible for setting limits was to be prepared to explain the decision or policy to those who were affected, to listen to criticism, to engage in thoughtful discussion, and to be prepared to change the decision or policy if reasoned discussion showed that it was wrong. Disappointment is humanly important and must be acknowledged and addressed as well as possible. But disappointment in itself doesn't demonstrate unfairness.

Whatever the experiences are that you're referring to - I'm sorry you've been left feeling that you've encountered a lack of organizational integrity.



Roy M. Poses MD said...

I think the issue is not so much for-profit versus not-for-profit. For health care organizations of both types, the issue is whether the organization puts patients' and/or the public's health ahead of other goals.

I do not think equity ownership of for-profit corporations in health care is per se a problem. However, currently, the stockholders of many public corporations have become unable or unwilling to exercise stewardship over their own organizations. This appears to be due to the rise of what John Bogle calls managers, as opposed to owners capitalism. In managers capitalism, the hired management becomes unaccountable, and hence tends to put its own self-interest ahead of all else, thus ahead of patient's and the public's health.

See this post:

But the same situation can occur in large non-profit organizations, which have no owners to begin with, if their boards of trustees forsake their stewardship.

Jim Sabin said...

Hi Roy

Thank you for your comment and the link to your recent post in Health Care Renewal.

I agree with you that for-profit organizations can conduct themselves in accord with the best health care ethics and that not-for-profits can lose their way.

I doubt that there's a single explanation for erosion of mission in health care. In addition to the factors you describe, I believe that group process has a strong influence on organizational ethics. If my colleagues conduct themselves admirably, I'm likelier to do the same. If I speak up for patient care and public health, that nudges them in the same direction. Cultures have an element of self-creation and self-perpetuation.

With regard to compensation, the ratio of CEO and top management compensation to the bottom of the scale has its own effect on culture. The greater the spread, the greater the risk of loss of mission. Equity and solidarity among employees reinforces patient and public health oriented organizational values.

Thank you for all the work you do on behalf of Health Care Renewal. You've put organizational ethics onto center stage, where it belongs.