Goldman Sachs has a hierarchical structure with a clear chain of command and defined career advancement process. The structure is also underpinned by business-type divisions and function-based groups.
Department
Type of Structure
Structure Details
Advantages
Drawbacks
Investment Banking
Functional Structure
– The Investment Banking division is organized by function. Teams within this division handle various aspects of investment banking, including mergers and acquisitions, capital raising, and advisory services.
– Efficient utilization of specialized skills. Focused expertise in specific areas of investment banking.
Potential challenges in coordination between functional teams. May result in siloed operations.
Global Markets
Hybrid Structure
– Global Markets is a hybrid structure that combines functional and divisional elements. It comprises Sales and Trading and the Securities division. Sales and Trading operate based on functions, while the Securities division focuses on various asset classes, combining product-focused teams with functional expertise.
– Balance between specialized functions and divisional product focus. Expertise in specific asset classes.
Complexity in balancing divisional and functional roles. Potential conflicts between divisional and functional priorities.
Asset Management
Functional Structure
– Asset Management operates with a functional structure, focusing on investment strategies, client services, and product development.
– Efficient management of investments and client services. Specialization in investment strategies.
Limited adaptability to rapidly changing market conditions. Potential challenges in cross-functional collaboration.
Consumer and Wealth Management
Divisional Structure
– Consumer and Wealth Management is organized into divisions such as Marcus by Goldman Sachs, Private Wealth Management, and Consumer Banking. Each division operates as a self-contained unit, with its own leadership and strategy.
– Tailored approach to different customer segments. Quick response to specific market needs. Specialization in consumer and wealth management areas.
Potential coordination challenges between divisions. May result in duplication of efforts.
Investment Research
Functional Structure
– Investment Research operates with a functional structure, providing research and analysis on various investment opportunities.
– Efficient production of investment research. Specialized expertise in research and analysis.
Potential limitations in cross-functional collaboration. May not align with specific business divisions.
Legal and Compliance
Functional Structure
– The Legal and Compliance functions are structured by function. The legal team handles legal matters, while compliance ensures adherence to regulations.
– Specialized focus on legal and compliance matters. Efficient handling of legal and regulatory issues.
Potential challenges in coordinating legal and compliance efforts across the organization. Limited alignment with specific business divisions.
Technology and Engineering
Functional Structure
– Technology and Engineering functions are organized based on specialized technology roles, such as software development, infrastructure, and data.
– Efficient development and management of technology resources. Specialized expertise in technology areas.
Potential challenges in cross-functional collaboration between technology and business units. May not align with specific business divisions.
Operations and Services
Functional Structure
– Operations and Services are structured by function, with teams handling various operational aspects, including clearing, settlement, and client services.
– Efficient handling of operational processes. Specialized expertise in operational functions.
Potential coordination challenges in managing complex operational processes. May not align with specific business divisions.
Human Resources
Functional Structure
– The Human Resources function operates with a functional structure, focusing on HR-related functions such as talent acquisition, talent development, and employee relations.
– Efficient management of human resources and talent-related activities. Specialized expertise in HR functions.
Potential challenges in cross-functional collaboration with business units. May not align with specific business divisions.
Goldman Sachs has a somewhat hierarchical organizational structure with a clear chain of command.
The company is led by current Chairman and CEO David Solomon with a 14-member Board of Directors and a few levels of management underneath.
The structure of Goldman Sachs is best exemplified by its career advancement process.
Recruits start as Analysts and are then promoted to Associate, Executive Director/Vice President, and occasionally, Managing Director.
Progression through these titles (except for Managing Director) is formal in the sense that it depends on the number of years served and the individual’s competence level.
This is partly due to the time-sensitive nature of career progression, but also because few Vice Presidents possess the credentials to become Managing Directors.
Nevertheless, the high number of senior staff makes Goldman Sachs flatter in structure compared to a traditional financial institution such as a bank.
What’s more, each division is permitted to run its own recruitment process when selecting a new Vice President.
While a clear chain of command exists, the combination of some divisional autonomy, thousands of senior personnel, and fewer levels of management (when compared to peers) mean the company embodies aspects of both a hierarchical and flat organizational structure.
Business type divisions
Until recently, Goldman Sachs had four business-type divisions to reflect services it offered across banking, securities, and investment management. These included:
Asset Management.
Consumer & Wealth Management.
Investment Banking, and
Global Markets.
However, in October 2022, Chairman and CEO David Solomon announced a new structure to reflect a future where technology would hinder the company’s ability to make money as a transaction intermediary.
Solomon hoped that this new structure would enable the company to position itself as a digital bank with more diversified revenue streams.
The new structure has three business-type divisions which are yet to be formally named.
The first is a combination of asset, consumer and wealth management, while the second combines investment banking with global markets. The third unit houses Goldman Sachs’ digital offerings.
Function-based groups
The company also contains numerous function-based groups which Goldman Sachs also calls divisions on its website.
Depending on the group, each is managed by one or more Executive Directors, Vice Presidents, or Managing Directors. Groups include:
Conflicts Resolution Group.
Controllers.
Corporate & Workplace Solutions.
Corporate Treasury.
Engineering.
Executive Office.
Finance.
Firmwide Strategy.
Global Compliance.
Global Investment Reach.
Human Capital Management.
Internal Audit.
Legal.
Operations.
Risk, and
Tax.
Comparison with JPMorgan Chase
Similarities: Both Goldman Sachs and JPMorgan Chase operate divisional structures that segment their operations by type of service, such as investment banking, asset management, and consumer banking. This helps both firms address specific client needs and regulatory requirements effectively.
Differences: JPMorgan Chase has a more pronounced presence in consumer banking and offers a wider range of retail banking services compared to Goldman Sachs, which has traditionally focused more on investment banking and recently expanded into consumer financial services. JPMorgan’s structure allows for more integration across consumer services, whereas Goldman Sachs is now developing this capability.
Implications: JPMorgan’s broader service range necessitates a structure that supports extensive retail operations, potentially offering greater stability in volatile markets. Goldman Sachs’ focus on high-end financial services means its structure is optimized for high-value corporate and institutional services, which may involve higher risk but also higher returns.
Comparison with Morgan Stanley
Similarities: Like Goldman Sachs, Morgan Stanley maintains a strong emphasis on investment banking and wealth management, and both firms structure their operations to maximize expertise in these areas.
Differences: Morgan Stanley also has a significant wealth management division that is more integrated with its other services than Goldman Sachs’ newer consumer and wealth management division. Morgan Stanley’s structure allows for seamless transitions of clients across personal wealth management and institutional services.
Implications: Morgan Stanley’s integrated approach may provide a more holistic service experience for clients, potentially leading to higher client retention and satisfaction. Goldman Sachs might focus more on specialization within each division, which could enhance performance in specific financial services.
Comparison with Citigroup
Similarities: Both firms operate on a global scale and structure their organizations to handle a vast range of financial products and services across numerous markets.
Differences: Citigroup has a more extensive global network of consumer banking services, with a structure that supports massive retail operations alongside its investment services. Goldman Sachs, while global, has traditionally concentrated more on investment services and is relatively new to the broad consumer market.
Implications: Citigroup’s structure is designed to support large-scale operations and compliance across different national regulations, which is essential for retail banking. Goldman Sachs’ structure is more focused on high finance and corporate clients, requiring a setup that supports complex financial transactions and high-stakes investment strategies.
Goldman Sachs Business Model
Key takeaways:
Goldman Sachs has a hierarchical structure with a clear chain of command and career advancement process. The structure is also underpinned by business-type divisions and function-based groups.
With some divisional autonomy, thousands of senior personnel, and fewer levels of management when compared to peers, the company embodies aspects of both a hierarchical and flat organizational structure.
The structure of Goldman Sachs is also supported by three business-type divisions which were recently reconfigured to diversify its revenue streams. There are also numerous functional groups which the company also calls divisions.
Key Highlights
Hierarchical Organizational Structure: Goldman Sachs follows a hierarchical organizational structure with a well-defined chain of command. The company is led by the Chairman and CEO, David Solomon, along with a Board of Directors and several levels of management underneath.
Clear Career Advancement Process: Goldman Sachs has a structured career advancement process, where recruits start as Analysts and can progress to positions like Associate, Executive Director/Vice President, and occasionally, Managing Director. Progression is based on years of service and individual competence.
Levels of Management: The structure of the company is characterized by levels of management, such as Analysts, Associates, Vice Presidents, Executive Directors, and Managing Directors.
Flatter Structure Compared to Peers: Despite its hierarchical nature, Goldman Sachs is relatively flatter in structure compared to traditional financial institutions. This is due to a high number of senior staff and fewer levels of management.
Business-Type Divisions: Goldman Sachs previously had four business-type divisions that reflected its services in banking, securities, and investment management. These divisions included Asset Management, Consumer & Wealth Management, Investment Banking, and Global Markets.
New Structure for Diversification: In October 2022, Goldman Sachs introduced a new structure to diversify its revenue streams and position itself as a digital bank. The new structure includes three business-type divisions that are yet to be formally named.
Function-Based Groups: The company contains several function-based groups, referred to as divisions, managed by Executive Directors, Vice Presidents, or Managing Directors. These groups cover various areas such as Conflicts Resolution, Controllers, Engineering, Finance, Risk, and more.
Combination of Hierarchical and Flat Elements: While Goldman Sachs has a clear chain of command, the presence of some divisional autonomy, a large number of senior personnel, and fewer levels of management creates a blend of both hierarchical and flat organizational elements.
Focused Areas: The company’s functional groups cover a range of areas including compliance, human capital management, legal, operations, and more.
In a functional organizational structure, groups and teams are organized based on function. Therefore, this organization follows a top-down structure, where most decision flows from top management to bottom. Thus, the bottom of the organization mostly follows the strategy detailed by the top of the organization.
In a flat organizational structure, there is little to no middle management between employees and executives. Therefore it reduces the space between employees and executives to enable an effective communication flow within the organization, thus being faster and leaner.
Project portfolio management (PPM) is a systematic approach to selecting and managing a collection of projects aligned with organizational objectives. That is a business process of managing multiple projects which can be identified, prioritized, and managed within the organization. PPM helps organizations optimize their investments by allocating resources efficiently across all initiatives.
Harvard Business School professor Dr. John Kotter has been a thought-leader on organizational change, and he developed Kotter’s 8-step change model, which helps business managers deal with organizational change. Kotter created the 8-step model to drive organizational transformation.
The Nadler-Tushman Congruence Model was created by David Nadler and Michael Tushman at Columbia University. The Nadler-Tushman Congruence Model is a diagnostic tool that identifies problem areas within a company. In the context of business, congruence occurs when the goals of different people or interest groups coincide.
McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.
Mintzberg’s 5Ps of Strategy is a strategy development model that examines five different perspectives (plan, ploy, pattern, position, perspective) to develop a successful business strategy. A sixth perspective has been developed over the years, called Practice, which was created to help businesses execute their strategies.
The COSO framework is a means of designing, implementing, and evaluating control within an organization. The COSO framework’s five components are control environment, risk assessment, control activities, information and communication, and monitoring activities. As a fraud risk management tool, businesses can design, implement, and evaluate internal control procedures.
The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.
Lewin’s change management model helps businesses manage the uncertainty and resistance associated with change. Kurt Lewin, one of the first academics to focus his research on group dynamics, developed a three-stage model. He proposed that the behavior of individuals happened as a function of group behavior.
OpenAI is an artificial intelligence research laboratory that transitioned into a for-profit organization in 2019. The corporate structure is organized around two entities: OpenAI, Inc., which is a single-member Delaware LLC controlled by OpenAI non-profit, And OpenAI LP, which is a capped, for-profit organization. The OpenAI LP is governed by the board of OpenAI, Inc (the foundation), which acts as a General Partner. At the same time, Limited Partners comprise employees of the LP, some of the board members, and other investors like Reid Hoffman’s charitable foundation, Khosla Ventures, and Microsoft, the leading investor in the LP.
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.
The Amazon organizational structure is predominantly hierarchical with elements of function-based structure and geographic divisions. While Amazon started as a lean, flat organization in its early years, it transitioned into a hierarchical organization with its jobs and functions clearly defined as it scaled.
The Coca-Cola Company has a somewhat complex matrix organizational structure with geographic divisions, product divisions, business-type units, and functional groups.
Costco has a matrix organizational structure, which can simply be defined as any structure that combines two or more different types. In this case, a predominant functional structure exists with a more secondary divisional structure.
Costco’s geographic divisions reflect its strong presence in the United States combined with its expanding global presence. There are six divisions in the country alone to reflect its standing as the source of most company revenue.
Compared to competitor Walmart, for example, Costco takes more a decentralized approach to management, decision-making, and autonomy. This allows the company’s stores and divisions to more flexibly respond to local market conditions.
Dell has a functional organizational structure with some degree of decentralization. This means functional departments share information, contribute ideas to the success of the organization and have some degree of decision-making power.
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams are based on the main corporate functions (like HR, product management, investor relations, and so on).
Goldman Sachs has a hierarchical structure with a clear chain of command and defined career advancement process. The structure is also underpinned by business-type divisions and function-based groups.
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.
McKinsey & Company has a decentralized organizational structure with mostly self-managing offices, committees, and employees. There are also functional groups and geographic divisions with proprietary names.
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.
Nestlé has a geographical divisional structure with operations segmented into five key regions. For many years, Swiss multinational food and drink company Nestlé had a complex and decentralized matrix organizational structure where its numerous brands and subsidiaries were free to operate autonomously.
Nike has a matrix organizational structure incorporating geographic divisions. Nike’s matrix structure is also present at the regional and sub-regional levels. Managerial responsibility is segmented according to business unit (apparel, footwear, and equipment) and function (human resources, finance, marketing, sales, and operations).
Patagonia has a particular organizational structure, where its founder, Chouinard, disposed of the company’s ownership in the hands of two non-profits. The Patagonia Purpose Trust, holding 100% of the voting stocks, is in charge of defining the company’s strategic direction. And the Holdfast Collective, a non-profit, holds 100% of non-voting stocks, aiming to re-invest the brand’s dividends into environmental causes.
Samsung has a product-type divisional organizational structure where products determine how resources and business operations are categorized. The main resources around which Samsung’s corporate structure is organized are consumer electronics, IT, and device solutions. In addition, Samsung leadership functions are organized around a few career levels grades, based on experience (assistant, professional, senior professional, and principal professional).
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.
Starbucks follows a matrix organizational structure with a combination of vertical and horizontal structures. It is characterized by multiple, overlapping chains of command and divisions.
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.
Toyota has a divisional organizational structure where business operations are centered around the market, product, and geographic groups. Therefore, Toyota organizes its corporate structure around global hierarchies (most strategic decisions come from Japan’s headquarter), product-based divisions (where the organization is broken down, based on each product line), and geographical divisions (according to the geographical areas under management).
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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