THE POWER OF WORDS IN HIGH-STAKES ENVIRONMENTS

In Isabel Allende’s ‘Two Words,’ Belisa Crepusculario makes a living selling words. Her fate changes when a colonel with presidential ambitions kidnaps her to craft a speech powerful enough to sway the masses and defeat his rivals. Her gift for capturing emotions, aspirations, and dreams makes her indispensable.

Allende’s story delves into the impact of storytelling and the transformative power of words. Leadership is not merely about authority and strategy. While the colonel may possess those assets, it is his ability to articulate this ‘package’ within an effective narrative that defines his leadership in the eyes of his followers. The Holy Trinity? Will, skill, and ... thrill.

Lacking the ability to influence motivation and, consequently, behavior, a leader is merely a manager focused on daily box-ticking tasks. A powerful story that resonates with followers and intrinsically motivates them is particularly relevant in high-stakes environments such as investment banking, where leadership involves navigating uncertainty and volatility, inspiring teams, and communicating complex ideas to diverse clients and other stakeholders.

The most impactful stories — stories from the trenches — resonate with followers because they offer guiding principles that capture their inner feelings and emotions. I once interviewed Bruce Wasserstein, the legendary former head of M&A at First Boston, co-founder of Wasserstein Perella & Co., and former Chairman and CEO of Lazard; he was an impressive storyteller, to say the least. John Mack (former CEO and Chair of Morgan Stanley) was also a revered wordsmith.

A well-crafted story, adorned with metaphors, unique experiences, and anecdotes, has the power to transform dry and abstract figures such as numerical data into a vivid picture. Most people, including the clients of investment banks, perceive numbers as incomplete. While the metrics of an M&A deal are crucial, the narrative surrounding it determines its success (e.g., how will the combined entity serve its customers better?)

A well-told story can inspire confidence, foster resilience, and create a sense of shared purpose. During the 08/09 financial crisis, leaders like Jamie Dimon of J.P. Morgan and Lloyd Blankfein of Goldman Sachs used storytelling to navigate their organizations through unprecedented challenges. By framing their key decisions within a broader narrative of resilience and renewal, they were able to inspire their teams and restore confidence among clients and investors.

Despite the analytical nature of investment banking, key decisions made by leaders must be rooted in an effective story. Effective stories lubricate the wheels of an investment bank’s leadership-followership engine. Allende’s ‘Two Words’ is a masterful exploration of the intersection between narrative and leadership in a complex, high-stakes environment.

BEING 'NICE' ISN'T A STRATEGY — THE NON-LINEAR TRUTH

What exactly does ‘better’ relationship management (RM) mean, and is the payoff likely to justify the investment? The possibility that superior RM can yield an edge does not mean every attempt to improve RM will succeed.

Investment banks still misunderstand key aspects of RM. Too often, they approach RM in ‘warm terms,’ assuming that attention and goodwill automatically translate into client loyalty. Many believe that superior RM stems from an all-pervasive ‘good attitude’ (the right ‘mindset’) among employees, and that any perceived ‘lack of engagement’ will inevitably erode performance. But being ‘nice’ isn’t a strategy. Surprisingly few banks clearly define what ‘superior’ RM actually means in a specific context.

Even when investment banks invest heavily in RM, results often disappoint, because [1] the investment fails to produce the desired service levels, [2] the initiative is easily copied by peers, [3] improvements occur in areas the client doesn’t really value, or [4] the effort to improve client service may be made at the expense of other concerns.

Clients, it turns out, do not always rank ‘better’ RM among their greatest needs; for many banks, a surprising insight in an industry where the client is the giant. Therefore, RM investments should be expected to produce a value to clients disproportionate to the cost of investment, including a demonstrable change in client behavior leading to additional business. Which small lever moves the big mountain of perception?

Every client interaction with the bank has distinct attributes such as responsiveness, depth of advice/skills, transparency, personalization, efficiency, and speed, and these attributes vary in importance across clients, locations (countries/regions), moments, and specific situations. They must be analyzed individually, because only a few truly differentiate; small improvements in those attributes can materially shift overall client impressions.

Crucially, the relationship between client satisfaction and client behavior is nonlinear: client behavior typically lags changes in client satisfaction. In other words, client satisfaction scores, the outcome of the firm’s client research, do not reliably predict client action.

Message: Investment banks must map how clients perceive RM in fine detail (that is, individually) and then test which changes (in attributes) actually drive client behavior, knowing that client ‘expectations’ (the future) always trump client ‘experiences’ and ‘perceptions’ (the past).

Executives and senior managers admit that even elite firms regularly overlook key pieces of the RM puzzle. Over-investing in ‘gold-plating’ services such as fancy dinners, art events, and social perks, the ‘theatre of relationship management’, often signals inferior rather than superior RM.

More details are available at www.pieterklaasjagersma.com/reports.

WHEN STARS COLLIDE — BALANCING STAR BANKS WITH STAR BANKERS

A few years ago, Boris Groysberg conducted a study of 1,052 ‘star stock analysts’ from 78 U.S. investment banks between 1988 and 1996. Stars were recognized for their superior performance and perceived as key assets. However, his findings revealed surprising outcomes when stars switched employers:

Decline in individual performance. Stars’ performance dropped sharply after moving to a new bank, with 46% performing poorly within the first year. Their output declined by an average of 20%, showing no real recovery even five years later.
Team disruption. The presence of a new star hire can lead to interpersonal conflicts and overall team demoralization.
Negative impact on valuation. Star hires tend to erode shareholder value. Groysberg found that announcements of individual star hires led to a 0.74% decline in stock prices, costing banks an average of $24 million per star hire (i.e., between 1988 and 1996).

Banks often underestimate how much a star banker’s success depends on their prior organization’s assets. Key factors identified in my own empirical study on investment banking excellence include:

Routines, habits, procedures, and systems. Team-based mentoring processes, effective investment and compliance committees, a collaborative business culture, and technological novelties play critical roles in supporting the star’s performance.
Managerial support. Executives and managers allocate, lead, and prioritize (e.g., investment banking versus trading), which is essential for stars to thrive in a high-octane environment. Clarity is key. Do superiors really understand how to inspire and leverage the distinct qualities of stars, or not?
Prominence and status. The bank’s brand name, professional legacy (barriers to entry for the elite are high), and the reach and richness of its networks make it easier for stars to focus on what made them a star; a star’s ‘freedom to perform’ is actually a byproduct of a heavy, efficient bureaucracy behind them.
Collaborative networks across the bank. Individual stars profit from a trust-based environment, fueling a collaborative infrastructure. As Goldman Sachs’ former chief, John Whitehead, emphasized, “At Goldman Sachs, we never say I.”

Hiring stars is definitely not the industry’s Rosetta Stone. Excellence is not a portable commodity but an organic byproduct of a specific ecosystem. However, for decades, European and Asian banks attempted to enter the U.S. market through ‘buying’ stars from incumbent players, sometimes even complete investment banks. The final result was financial disaster in virtually all cases. Most investment banks want the trophy of the star, but refuse to build the gym where stars are actually made. That sounds simple, but in practice, few firms understand that the success of weightlifting is lifting a lot of weights, persistently and systematically.

More details: www.pieterklaasjagersma.com/reports.

I 'LIKE' THE BANK, BUT 'LOVE' THE BANKER — A FIELD MANUAL FOR INVESTMENT BANKS

In investment banking, managing client relationships is central, something marketing’s classic 4Ps — Product, Price, Place, and Promotion — fails to capture.

During a multi-year study on banking excellence, I asked key decision-makers at Fortune Global 500 and Forbes Global 2000 companies what they considered the most important marketing tools of investment banks. I also asked them to rank those tools by importance. Below are the results, summarized as the ‘7Ps of investment banking’:

1. People. Alpha and omega of investment banking. Interestingly, the person is often ‘the brand’. One executive said: “I like Goldman, but loved Gregg,” [i.e., Gregg Lemkau, former Co-Head of Goldman Sachs’ Investment Banking Division]. In investment banking, the institution provides the platform, but the individual provides the trust. The bank’s greatest risk is the ‘portability of reputation’.

2. Products/services. In practice, this includes more than just the core product or service elements that respond to the client’s primary need (see ‘process’, hence, they share the number two spot). The ‘what’ is the ‘how’.

2. Process. How firms do things — the underlying processes — is often as important as what they technically offer. Process includes supplementary product/service elements like responsiveness, reliability, consistency in performance, and speed. The ‘how’ is the ‘what’.

4. Pricing. Pricing matters, but not as much as bankers think. Clients often mention non-monetary costs such as wasted time or unproductive meetings. Many said pricing (typical quote) “isn’t their top concern,” provided the value and relationship are strong.

5. Promotion. Clients view promotion not as advertising, but as (quote) “communication and education.” In other words, promotion means guiding them effectively through the bank’s services, processes, and people (their experience). Conferences, IR days, and in-person interactions matter, including informal gatherings where relationships deepen. Message: Pedagogy trumps persuasion. Be a professor, not a promoter.

6. Place (refers to product/service delivery). Today, many services are delivered electronically, meaning they can be delivered almost instantaneously to any location in the world. Still, in critical moments, clients want to meet face-to-face. They appreciate the fact that bankers visit them regularly, systematically, and on time. Place equals the client’s boardroom.

7. Physical environment. Offices, materials, and professional appearance send subtle (tangible) cues. While not decisive, key decision-makers/clients admit they are not insensitive to the signals of quality those cues produce.

For more details, visit www.pieterklaasjagersma.com/reports.

THE '48% TRAP' — WHY 'CLV' AND 'CRV' DON'T TELL THE FULL STORY

Managing relationships between wholesale banks and their clients requires more than financial logic. Simply retaining or rejecting clients based on profitability or time spent oversimplifies a crucial decision. Instead, banks must weigh multiple strategic, reputational, and relational factors — and explore compromise options.

According to my latest empirical study on the corporate reputations of wholesale banks, terminating client relationships is primarily driven by:

No, low, or declining profitability (48%), typically measured via metrics such as client lifetime value (CLV) and client referral value (CRV).
Major market shifts (14%).
Changes in the bank’s business strategy (18%).
Correction of past errors (8%) — often inherited from departed executives.
‘Other’ reasons (12%), for example, some banks — particularly smaller boutique investment banks — drop clients due to reduced employee morale from dealing with challenging (‘difficult’) clients or less acceptable terms.

Client divestment carries significant risks. The three most important are:

Erosion of remaining client trust (27%). High-value clients might question their own security with the bank. ‘How predictable and trustworthy is our bank?’
Legal and reputational risks (25%). Terminating relationships can lead to disruptive, high-profile lawsuits or a reputation as a ‘difficult’ bank with ‘difficult’ bankers.
Competitor advantage (17%). Divested clients may take their business to competitors.

Before cutting ties with business clients, banks should first consider the following three related questions:

Why is the client less profitable or unprofitable? Profitability metrics alone don’t tell the full story. Unprofitable clients might lack awareness of relevant products and services. A thorough strategic assessment is crucial to understanding the root causes.
Can the bank still provide mutually beneficial products or services? Some clients may need more guidance on leveraging specific products or services. Educating (mentoring) clients improves relationships and eases transitions if the relationship ends. Exploring additional offerings tailored to clients’ needs can unlock hidden value.
Can the relationship be revitalized? Options include adjusting payment models, redefining and refining relationship management strategies, transitioning clients to peers (external partners), and so on. Peers or specialized partners may have cost structures better suited to serving certain clients. Such a client migration approach demonstrates extra effort on the bank’s part, mitigating client dissatisfaction and fostering goodwill, sometimes even beyond the industry.

However, termination might be necessary. Handle the exit with as much care as the onboarding.

Details: www.pieterklaasjagersma.com/reports.

THE 'WILL-SKILL-THRILL'-EQUATION OF PROFESSIONAL SERVICES BUSINESSES

Maintaining a top-tier reputation in professional services businesses depends primarily on people who are willing, able, and excited to perform. I call this the ‘will-skill-thrill’ Holy Trinity of people management: success = discretionary effort (will) + capability (skill) + excitement (thrill). This equation matters in M&A and restructuring, but also in other high-stakes, client-facing arenas, where human capital is the primary asset.

My recent research on excellence in professional services businesses, such as investment banking, identified five key drivers of the aforementioned Holy Trinity, listed below in order of decreasing importance:

‘Fit’ (person—role match). ‘Will-skill-thrill’ issues frequently stem from staff not being well-matched to their roles. Before assigning well-defined tasks, ensure employees are both emotionally and technically prepared for their roles — most can’t handle ‘sink or swim’ circumstances.
Role clarity. When employees are unsure of what is expected of them, including how to meet those expectations, they face role ambiguity. Employees must know what is expected of them, which entails understanding the firm’s short-term and long-term goals with regard to clients. They also need to have up-to-date knowledge about the firm’s services and its clients. Training and mentoring employees intensely and systematically boosts their confidence and competence — and their loyalty to the firm.
Perceived control. When employees feel they have control over their work, including challenging situations, stress levels decrease and their performance improves. Perceived control diminishes when the firm’s rules, procedures, and organizational culture restrict flexibility or when decision-making authority resides elsewhere in the organization (for example, when approvals must come from other departments or senior management).
Role conflict. Employees often face role conflict — the feeling that they cannot meet all the demands placed on them. This conflict arises, for example, when management asks employees both to ‘sell’ and to ‘serve’ clients. Employees may struggle to satisfy both. Excessive paperwork, too many demands, and ‘role overload’ (serving too many clients) can worsen this issue, leading to emotional exhaustion, reduced job satisfaction, increased absenteeism, and, ultimately, increased turnover.
Teamwork. Teamwork is an essential organizational tool for enhancing both pleasure (thrill/will) and performance (skill). There are only two types of relevant people: those who serve the client, and those who serve those who serve the client. However, solitary brilliance is always a risk; collective effort is the best hedge against institutional risk.

Ignoring these key ‘will-skill-thrill’-drivers means sabotaging the firm’s performance.

Details: www.pieterklaasjagersma.com/reports.

GOLDMAN SACHS AND THE '12% CLUB' — HOW INVESTMENT BANKS GET IN, OR NOT (88%)

When asked which service dimensions investment banks should measure, key decision-makers from Fortune Global 500 and Forbes Global 2000 companies ranked trustworthiness first, followed by highly knowledgeable employees, and effective needs-driven service. Most respondents defined ‘trustworthiness’ as “fair,” “predictable,” “solid,” “candid,” “reliable,” “straightforward,” “precise,” “open,” or “honest.”

What follows are the overall average scores (each research participant allocated 100 percentage points across 10 items): Investment bank X .......

Is a trustworthy firm [19%]
Has highly knowledgeable employees [17%]
Addresses our needs effectively [17%]
Proactively supports us strategically [13%]
Provides cutting-edge services [9%]
Completes transactions on time [6%]
Demonstrates being a partner [6%]
Quickly mobilizes support [5%]
Is good value for money [4%]
Treats us as a valued client [4%]

Superior relationship management (RM) is an essential source of strength, but measuring it precisely and reliably is not easy, since its meaning is influenced by many ‘soft’ factors, such as national culture, firm culture, specific business circumstances, the personality types of individuals involved, and so forth. RM in investment banking is far more complicated than it was ten or twenty years ago. More players, greater variety among players, clients’ much easier access to data, the erosion of barriers to entry, and lower switching barriers among competitors, to name a few, have culminated in a more challenging environment for investment banks.

Investment banking is brutal, especially from an RM perspective: low-quality service means ‘game over.’ You cannot score on the rebound. More than half of the clients I surveyed across several industries and countries said they’d had at least one ‘bad’ experience with an investment bank. Over 60% of clients who had even one bad experience stop doing business with the firm in question. Investment banking is the ultimate winner-takes-all business.

Except for the ‘12% Club’ — the elite, such as Goldman Sachs — there is much to improve for the remaining 88% of the industry. In evaluating service, firms should [1] monitor and measure all client interactions, products, and services across all market segments, [2] determine the root causes of problems (which too often persist because many clients still do not complain; they simply want the transaction completed), and [3] make any necessary improvements. Alienated clients too often disappear without the slightest warning.

GREENHILL + MIZUHO: A TOP 10 CATALYST OR A $550 MILLION GAMBLE?

Mizuho’s $550 million acquisition of Greenhill in 2023 has given the Japanese financial supermarket, in its own words, “all the capabilities inside our institution” to become a top-10 global investment bank, said CEO Masahiro Kihara in an interview with the Financial Times (September 12, 2025). He added: “We have the aspiration to ratchet up the league table in global corporate and investment banking,” and “I think Greenhill will be the catalyst for that.”

But does the market agree?

Is Greenhill truly Mizuho’s springboard into the global top 10? Is Greenhill’s reputation — in essence, its key asset and the primary rationale for the acquisition — genuinely the catalyst Mizuho expects it to be?

Warren Buffett once warned a group of managers at Salomon Brothers in the aftermath of the 1991 trading scandal: “If you lose dollars for the firm by bad decisions, I will be very understanding. If you lose reputation for the firm, I will be ruthless.” (Source: J. Fuerbringer, New York Times, August 27, 1991).

A strong reputation has a shelf life, and in today’s fast-changing world, it can fade quickly. Built on admiration, excellence, and status, reputation is like water — always flowing somewhere. As a business asset, it is definable, measurable, and, interestingly, always improvable.

With this in mind, a new study set out to identify the most respected wholesale banks operating in Europe. The goal was to create the equivalent of a Pulitzer Prize for wholesale banking — that is, for banks providing commercial, corporate, and/or investment banking services.

To come up with the definitive list of elite wholesale banks in Europe, over 4,000 C-level executives and senior managers from Fortune Global 500 and Forbes Global 2000 companies nominated their top banks operating in Europe (i.e., European and non-European banks). Banks were rated on six key success factors: [1] client centricity, [2] external engagement, [3] competitiveness, [4] quality of leadership and employees, [5] innovativeness, and [6] business model efficiency and effectiveness (indicators include the bank’s agility, client responsiveness, and reliability).

Recently, the report “Mizuho — Banking Beyond Limits” was published. It is the definitive report card on Mizuho’s reputation and performance, as seen through the eyes of this influential group of decision-makers. “Mizuho — Banking Beyond Limits” focuses exclusively on the bank — independently, systematically, comprehensively. It offers unique data and dozens of actionable insights and recommendations for Mizuho, its peers, investors, and other stakeholders.

More details are available at www.pieterklaasjagersma.com/reports/mizuho-banking-beyond-limits.

[Note: A few years ago, I wrote a book about Greenhill's reputation and performance entitled ‘On Becoming Extraordinary: Decoding Greenhill and Other Star Professional Service Firms’ (ISBN 9798630508621]

ON BECOMING EXTRAORDINARY: DECODING GOLDMAN SACHS AND OTHER STAR PROFESSIONAL SERVICE FIRMS

Why do some professional service firms (PSFs), such as Goldman Sachs, prosper extraordinarily, while others fail? What, precisely, makes Goldman Sachs excellent?

‘On Becoming Extraordinary: Decoding Goldman Sachs and Other Star Professional Service Firms’ answers these questions. The book unlocks the key performance drivers of leading PSFs and explains how a small elite consistently outperforms peers in the most competitive professional services businesses.

The practices of Goldman Sachs are streets ahead of most competitors. The critical question, therefore, is: what can other firms learn from the best-of-the-best? Challengers seeking to reach the ‘peak of the pyramid’ must excel across eight core competencies:

People development — there is no substitute for world-class professionals.
Client development — systematically deepening high-value client relationships.
Practice development — building a superior knowledge and support infrastructure.
Office management — managing key internal and external stakeholders (for example, alumni) effectively.
Reputation management — enhancing and protecting the firm’s identity and image.
Information management — delivering the right information to the right employees at the right time.
Innovation management — systematically and continuously developing and implementing new products or services.
Continuous performance improvement — a relentless focus on better and best practices.

The study’s findings are based on a rigorous empirical research process:

338 interviews with senior managers, directors, and partners of PSFs, providing insights into the voice, character, and internal dynamics of those firms.
366 interviews with client executives, primarily board members and senior decision-makers from public companies, state-owned enterprises, and private (family-owned) firms, spanning many geographies and industries.
Extensive secondary research and archival analysis.
Interviews with ‘knowledgeable outsiders’ — for example, industry experts, professors, academic specialists, and experienced journalists; these interviews strengthened the robustness and generalizability of the findings.

The strengths of Goldman Sachs — particularly in people development and managing client relationships — create a powerful, self-reinforcing ‘wheel of fortune.’ This flywheel helps them defend their dominant market position over time. The bank outperforms most competitors on what truly matters: reputation and presence, profitability and total fee income, status and influence.

‘On Becoming Extraordinary: Decoding Goldman Sachs and Other Star Professional Service Firms’ (ISBN 9798411954883) is available via Amazon and other major retailers.

THE '12% CLUB' AND THE 'C-MINUS' CULTURE IN PROFESSIONAL SERVICES BUSINESSES

How is your frontline performing in today’s challenging environment? To find out, I interviewed 245 executives from 88 Fortune Global 500 companies across 9 industries, with an exclusive focus on the performance of the frontline (relationship management) in three professional services businesses: [1] wholesale banking, [2] strategy/management consulting, and [3] IT/AI advisory services.

I asked them to rate their professional services providers’ frontline performance across three categories: people skills, support infrastructure, and firm culture. I used a Likert scale: 1 (Strongly disagree), 2 (Disagree), 3 (Neutral), 4 (Agree), and 5 (Strongly agree).

SKILLS

The frontline excels at delivering the right solutions.
The frontline identifies the right performance improvement opportunities because of its thorough knowledge of our products, services, competitors, and markets.
The frontline effectively cements and deepens relationships through the systematic and continuous guidance of the client dialogue.

SUPPORT

Senior management effectively supports the frontline by providing clear direction and adequate operational support.
Well-aligned account & opportunity management, IT/CRM, training & development, and performance management systems fuel the effectiveness of the frontline.

CULTURE

The frontline understands exactly what it needs to do, when and how — and executes it flawlessly.
The frontline is adequately rewarded through financial incentives and promotions when serving clients successfully.
The frontline is intrinsically engaged and dedicated to achieving outstanding client results.
The frontline is highly responsive because it has the freedom to do what needs to be done without interference from senior management or other parts of the organization.
The frontline performs well because of the firm’s ‘we’re all in this together’ culture — ‘collaboration’ is alpha and omega at the firm.

In addition to the ‘CT scan’, I asked executives to describe, via ‘stories from the trenches’, their experiences with the frontline of the aforementioned professional services firms (PSFs). The results were sobering, with significant differences across professional services businesses, including rather low overall scores (a ‘C-minus’), meaning that, seen through the eyes of clients, there is significant room for improvement; only 12% gave the frontline of their PSFs an A-minus or higher. The data revealed a massive opportunity for any firm willing to move from ‘C-minus’ to ‘A.’

It seems that PSF management too often sees only the ‘polished’ final results, not the underlying ’C-minus’ process; bad news can lead to better, more distinctive relationship management strategies.

More details about the ’12% Club’ in wholesale banking are available at www.pieterklaasjagersma.com/reports.

DEALS ARE WON IN ROOMS, NOT IN SERVERS — THE 'HUMAN TRIAD' TRUMPS A.I.

The reputation of an investment bank relies on how well many elements work together to meet clients’ expectations. Flaws in any part of a ‘client service system’ can significantly damage the relationship and, consequently, the firm’s reputation.

At first glance, this seems like a perfect opportunity for AI. Prioritizing AI, however, can be risky because the hype around it threatens to overshadow the key asset of investment banks: high-caliber employees.

The reputation of banks can be enhanced in several ways (see my other posts on this topic), and AI definitely isn’t the silver bullet. In a multi-year study, an overwhelming majority of leaders from Fortune Global 500 and Forbes Global 2000 companies told me they don’t believe AI will ever replace highly skilled investment bankers — and, as a client, I fully agree.

To excel in investment banking, you need [1] the engineer’s precision, [2] the architect’s holistic view, and [3] the salesperson’s client focus, three human capabilities that together produce sound judgment — the essence of outstanding client work. AI cannot replace this ‘human triad’ in professional services businesses such as investment banking. Judgment by itself is the ultimate human skill.

I believe that the potential for improvement in investment banking is more of a ‘design challenge’ than a ‘technology (AI) challenge’. With careful, detailed, data-driven, genuine attention to clients’ expectations, firms can ‘design’ greater excellence into their services. ‘Genuine attention’ is the work of outstanding people, not AI. The key to ‘better’ work is to fuel ‘genuine attention’ with the right — especially human — ingredients.

Does this mean you should overlook AI? No, of course not. But AI is never a substitute for highly skilled people working in a high-stakes environment where client cases are often unique. Setting the right ‘high-touch, high-tech’ priorities is crucial, as I see AI as too dominant a focus in many banks’ agendas (even the C-suite can’t escape the SOS aka ‘Shiny Object Syndrome’).

In professional services businesses, clients value reliability above all. Reliability becomes trust through proximity — cognitive, emotional, and relational; qualities uniquely human. At its best, AI is a superb ‘servant’. It can handle the cognitive data, but it fails at the emotional and relational proximity required for (for example) high-stakes M&A. When the going gets tough, a client doesn’t look for an algorithm; they look for a human being who has skin in the game. Walt Disney once said, “You can dream, create, design, and build the most wonderful place in the world — but it takes people to make the dream a reality.”

Investment banking is the ultimate ‘contact sport’. AI thrives on explicit knowledge (data), investment banking on tacit knowledge (judgment). Deals are won in rooms, not in servers.

THE BLITZKRIEG TRAP IN INVESTMENT BANKING — WHEN INNOVATION BECOMES EXPENSIVE NOISE

Investment bankers dream of the product or service breakthrough that will help them break out of intense rivalry and live happily ever after. Innovation in investment banking, however, is often unrewarded because it fails to provide an edge at all.

Irrelevant innovations in investment banking come in four varieties: [1] those aimed at markets without (enough) clients, [2] those that generate client value but not (enough) firm value (read: profits), [3] those that are too easily copied, and [4] those that can be better exploited by others who control more relevant capabilities.

Markets without clients. In considering a potential new product or service idea (in a relationship-driven industry), it always pays to ask five obvious but frequently overlooked questions: [1] who are the true clients, [2] do they have a real incentive to hire us, [3] do they have the means to pay us, [4] do they inspire us — client development equals people development, and [5] will they use us again (the best clients aren’t incidental ‘wallets’, they are ‘growth catalysts’)? Surprisingly few innovations breed great clients.
Client value without firm value. Investment banks often assume that generating client value will automatically lead to profits. However, this assumption is flawed and usually dictated by the relative bargaining power of the players involved (with the client being the giant). Any investment bank considering a new product or service should pause and carefully evaluate the opportunity before committing significant time, talent, and other assets to the investment.
Fast-followers’ opportunity. In the dynamic world of investment banking, shielding innovations from imitation poses a significant challenge; the lack of IP protection in financial services is an inherent part of the game. Does leading the pack with a groundbreaking product or service truly pay off in a specific client niche? Or does the lion’s share of rewards go to the agile, smart, and fast follower? Although innovation gets you in the door, it doesn’t keep you in the room.
Lacking lasting advantage. When the next ‘newest new thing’ comes along, the bank’s senior management will do well to ask a ‘what if’ question or two. Assume the financial innovation succeeds and that peers soon catch up with the bank’s initial lead. Does it, or can it, control the key factors for success so that it can transform an innovative ‘blitzkrieg’ into a long-lasting competitive advantage? If the answer is negative or doubtful, the risk of an ineffective innovation is almost certainly high.

Asking the right questions filters out irrelevant (often costly) innovations and promotes the development of truly profitable, client-centric, and sustainable financial solutions. In an industry where imitation is fast, the quality of questions — not the quantity of ideas — determines who wins.

For more details, visit www.pieterklaasjagersma.com/decoding-goldman-sachs.

WINNING THE WHOLESALE BANKING GAME IN EUROPE

The European wholesale banking market is complex and diverse, yet attractive; non-local banks often struggle to compete with established, national players due to limited local connections, political clout, and market understanding.

The following list, drawn from a recently completed field study on the reputations of Europe’s leading wholesale banks, outlines five necessary rules for success across the continent:

Master the delivery. The difference between ‘good’ and ‘excellent’ banking is in the delivery. Ban advertising — deliver. Let service excellence speak for itself. Don’t spin a story, ‘be’ a story. Within Europe, classic standardization strategies — the ‘low-hanging-fruit-approach’ — definitely do not work. Cultural differences complicate matters: what works in Germany doesn’t work in Greece. Delivery excellence in Europe is not operational — it is human.
Know who really knows clients — clients. If you want to understand what European clients expect, ask them directly. Banking is about addressing pressing concerns — yet in the right order. Failing to prioritize means losing clients. Effective prioritization is tough since there are no general formulas that work across Europe. Hence, personal engagement matters more than secondhand insights through consultancies (to crack the code of banking excellence across Europe, too many banks use too many consultancies).
Client satisfaction starts with ‘understanding human nature’. Clients are people first, clients second. Financial models are secondary to human motives. Banking isn’t a B2B industry; it’s a H2H (Human-to-Human) industry. Always recognize clients’ need for esteem. But making clients feel competent, offering them choices, taking responsibility for problems, finding solutions to challenges, and acting compassionately is just the start. Being an outstanding student of behavioral science is a must — especially across Europe.
Fairness breeds trust. Make sure the bank’s services and interpersonal dealings with clients leave them feeling (quote) “justly treated” — as many executive clients emphasized in my interviews. However, across Europe, both fairness and trust mean different things to different people. Proactively involving clients helps. Professional intimacy is alpha and omega in an industry built on trust, nuance, and seamless service.
Hire for attitude, not just skill. Mediocre staff quality is an expensive way for a bank to save money. The best hiring strategy? Watch how people behave. Do employees truly understand the intricate cultural sensitivities across Europe? Europe isn’t one market; it’s a collection of deep-seated memories and pride.

Across Europe, wholesale banking success is ultimately determined not by scale, but by human judgment, cultural intelligence, and disciplined delivery.

Details: www.pieterklaasjagersma.com/reports.

WHAT I'VE LEARNED ABOUT INVESTMENT BANKS AND CLIENTS — AS A CLIENT

Throughout my career, I have worked with a wide range of investment banks — from major US and European banks to smaller, lesser-known firms based mainly in Europe and the US.

Ten things I’ve learned about investment banks and clients — as a client:

Paying attention is not enough. For example, knowing executives on an informal basis is one of the most important elements in client relations. However, there is no way to teach this kind of informal work other than to fail a few times. The hurdle everyone faces isn’t simply getting noticed but getting believed.
Clients prefer teams. Clients consider the teams serving them as direct windows into the bank’s capabilities. The era of the individual virtuoso is declining. This is obvious, but some investment banks don’t seem to get it.
Although clients ‘like’ quality work, they ‘love’ impact. The work of banks should be better than clients expect, but not more or less than the situation calls for (clients dislike surprises).
Investment banks must never confuse success with excellence. Many firms have enjoyed a lot of the former. Most do not have enough of the latter. Don’t confuse awards with achievement.
Clients need stroking and affection — they are human beings first. It isn’t necessarily part of the service banks offer, but a thoughtfully developed, regular personal dialogue with clients can put a useful, highly positive frame of reference around the work bankers do with them.
Outstanding work is remembered for a year; poor work lingers on for a decade. Message: relatively small client projects are key in terms of reputational impact. It’s not the big things that will kill you — it’s the accumulation of little things. The essence of investment banking seen through the lens of bankers? Creating ‘referral value’.
Clients admire the ability to mobilize the best of the best — the ‘right few’ — across the bank. They expect investment banks to be intellectually vibrant, professionally proactive, and continually innovative. Don’t spin a story — ‘be’ a story.
The most valuable contributions to clients are not analytically based. The best advice I receive is usually judgmental by nature. Occasionally, the most valuable contributions consist simply of asking the right question at the right moment. Having all the answers is less important than knowing what to ask.
Investment bankers must tell clients the truth. William Blake, the English poet, said it best: “When I tell any truth, it is not just for the sake of convincing those who do not know it, but for the sake of defending those who do.” Make the truth as interesting as it can be.
Investment banks are about clients, people, ideas, and relationships tied together by a collaborative mindset. They have to continually make investments along all four dimensions. That sounds like a ‘motherhood and apple pie’ statement — it isn’t.

MOTIVATING THE REST BY CHALLENGING THE BEST

Jet aircraft pilots know that a certain deadly combination of airspeed, glide angle, and throttle is a recipe for a crash landing. When they’re in this position, just a little more power brings down the nose and accelerates their rate of descent. The pilot’s position is called ‘behind the (power) curve’ because a marginal increase in power does not create the expected uplifting effect.

A number of companies these days find themselves somehow ‘behind the power curve’. Short-term operating results are not adequate, nor is the long-term competitive position. More pressure on people does not improve the company’s performance; instead, the rate of descent accelerates. Interestingly, in that case, companies usually focus on mediocre performers and attempt to bring them up to a certain ‘acceptable’ level.

They should take a different approach. The best individual performers are generally the most strongly motivated. Singling them out should reinforce their efforts to excel and motivate others to aim for excellence, too. In other words, pick out the stars and inspire them to achieve even greater things. Set challenging improvement goals for ‘great’ performers. Usually, ‘good’ performers are inspired by the improvement goals of the best of the best, and, as a result, their performance will also improve. But whatever the response, it must be selective and more than incremental. Pouring on a little more power won’t work.

Productivity can best be improved not by striving to bring mediocre players up to speed, but by pushing the best, for example, highly talented youngsters, to raise their standards of excellence. Enter: mentoring — a highly effective motivator. As a young and ambitious Ph.D. student and already a serious equity trader, I was in awe when I met some of my mentors, Nobel laureates like Bob Solow and John Nash. There’s nothing quite like meeting and being challenged by ‘living libraries’, the peak of the pyramid. It’s like putting a jet engine in an already fast Porsche 911.

Apart from mentoring, three other core factors influence the productivity of the best of the best, and, consequently, the rest:

Always challenge the status quo. Any company that does not continuously and systematically challenge long-held assumptions about its people — too often ‘sacred cows’ — is probably missing an opportunity to improve productivity.
A clear definition of what ‘extraordinary employees’ truly are. Without a clear statement that defines ‘excellent’ people, chances are the company’s main assets will be underutilized.
A strong linkage between the company and its clients. It’s always difficult to ensure high asset utilization if the linkage is weak. Alignment between the company’s capabilities — essentially, the talent of people — and the needs, priorities, and expectations of clients is crucial.

GOLDMAN SACHS — THE BLUEPRINT FOR LEADERSHIP

Warren Buffett once said to a group of managers of Salomon Brothers in the aftermath of the trading scandal that shook the investment bank in 1991: “If you lose dollars for the firm by bad decisions, I will be very understanding. If you lose reputation for the firm, I will be ruthless.” (Source: J. Fuerbringer, New York Times, August 27, 1991).

A strong reputation has a shelf life, and in today’s fast-changing world, it can fade quickly. Reputation — built on admiration, excellence, and status — is like water, always flowing somewhere. As a business asset, it is definable, measurable, and, interestingly, always improvable.

With this in mind, a new multi-year study set out to identify the most respected wholesale banks operating in Europe. The goal was to create the equivalent of a Pulitzer Prize for wholesale banking — that is, for banks providing commercial, corporate, and/or investment banking services. Reputation is to strong performance as chicken is to egg. It’s not always clear which begets which, but it’s hard to have one without the other. Business clients rent the reputations of their banks.

To come up with the definitive list of elite wholesale banks in Europe, over 4,000 C-level executives and senior managers from Fortune Global 500 and Forbes Global 2000 companies nominated their top banks operating in Europe (i.e., European and non-European banks). Banks were rated on six key success factors: [1] client centricity, [2] external engagement, [3] competitiveness, [4] quality of leadership and employees, [5] innovativeness, and [6] business model efficiency and effectiveness (indicators include the bank’s agility, client responsiveness, and reliability).

The study, independently conducted, aimed to identify the wholesale banking practices most respected by C-level executives and senior managers. It focused exclusively on banks providing commercial, corporate, and/or investment banking services. Since C-level executives and senior managers are among the most knowledgeable people in business, their verdict yields the true ‘A list’. It’s hard to imagine a more critical judge.

Recently, the report “Goldman Sachs — The Blueprint for Leadership” was published. It is the definitive report card on Goldman Sachs’ reputation and performance, as seen through the eyes of this influential group of decision-makers. “Goldman Sachs — The Blueprint for Leadership” focuses exclusively on the firm — independently, systematically, comprehensively. It offers unique data and dozens of actionable insights and recommendations for Goldman Sachs, its peers, investors, and other stakeholders.

More details are available at www.pieterklaasjagersma.com/reports/goldman-sachs-2.

GOLDMAN SACHS' REPUTATION RULES

Today, reputation is no longer one challenge among many; it has become ‘the’ challenge, especially in professional services businesses.

Goldman Sachs’ continued success hinges on cultivating a reputation that maximizes client, shareholder, and stakeholder value. Apart from dozens of other insights, this was just one of the takeaways from an extensive multi-year study analyzing the experiences and perceptions of more than 4,000 C-suite executives and senior managers from Fortune Global 500 and Forbes Global 2000 companies. The study examined the peak of the pyramid in European wholesale banking — that is, banks providing commercial, corporate, and/or investment banking services in Europe. Goldman Sachs was one of Europe’s top players.

A bank’s corporate reputation should always be anchored in six key success factors:

An excellent client strategy fueling both client satisfaction and loyalty, embedded in a ‘client-driving’ rather than a ‘client-driven’ approach — that is, an approach focused on proactively shaping client needs, priorities, and expectations.
An external engagement strategy prioritizing ongoing, mutually beneficial, and superior interactions with all essential external stakeholders — from clients to communities.
A competitive strategy enhancing the bank’s distinctiveness in its key business dimensions versus direct and indirect competitors, resulting in uniqueness, first and foremost, in the eyes of the bank’s most important clients, shareholders, and other relevant stakeholders.
A professional (people) development strategy focused on promoting excellence, fostering a collaborative mindset within the bank, and building a smooth-running ‘leadership-followership’ engine.
An innovative culture encouraging the systematic development of new products and services that strengthen and deepen client relationships.
An effective and efficient business model focused on enhancing the bank’s [1] client responsiveness, [2] organizational agility and resilience, [3] clarity and transparency of product/service offerings, [4] reliability and predictability as a business partner, and [5] alignment with evolving market dynamics (for example, geopolitical, regulatory, and other impactful forces).

By focusing on these success factors collectively, banks can improve or revitalize key aspects of their performance and prominence. In today’s banking industry, reputation isn’t just one facet of the game — it ‘is’ the game.

For more details about Goldman Sachs’ research results, please visit www.pieterklaasjagersma.com/reports.

THE GOLIATH SYNDROME IN INVESTMENT BANKING

Most rivalries are hard-fought, drawn-out battles. But there are exceptions — blitzkriegs in which market shares trade hands with spectacular speed and redoubtable industry leaders are worsted by underdog rivals almost overnight. Think of Tesla in the car industry (a few years ago) and boutique investment banks in the banking industry.

What causes this David and Goliath phenomenon? Are the Goliaths stupid, or prone to be caught napping? Of course not. It was their very excellence that left them open to successful competitive attack. This mastery — and the skill and asset commitments necessary to achieve it — makes leaders vulnerable to attack from rivals shrewd enough to aim at a chink in Goliath’s armor.

Usually, established leaders — focused on maintaining internal consistency and maximizing economies of scale and scope — have used the same overall business approach to serve client segments with divergent requirements. However, when the client segment-to-segment differences are sufficiently great, this strategy is dangerous. It invites rivals to move in with differentiated approaches tailored to the needs of particular segments — hence the rise of boutique banks in M&A.

With less costly business models, more time for clients due to less red tape, and by tailoring their service to the needs of their target client segments with a razor-sharp focus on M&A, boutique investment banks have grabbed a sizable share of the market. Meanwhile, the business model commitments of leaders are so interlocked that it takes them years to marshal their forces when challenged by new competition. Apart from the fossilization of their erstwhile winning business approach, fundamental changes in regulation undermine those winning formulas, too. Vested interests and other roadblocks to change take shape.

So, how can established players navigate this situation? Sticking to the status quo risks suffering the same fate as Goliath.

The secret is to seed new forests while harvesting the old — a strategy Morgan Stanley implemented effectively and on time. BlackRock is pursuing a similar strategy of entering the private lending market, exemplified by its acquisition of HPS, part of BlackRock’s near $30 billion private markets M&A spree in 2024. This intricate process takes foresight and courage.

In real life, Goliath can win, but letting no assumption go unchallenged is crucial. Key success factors are: [1] courage (the willingness to embrace new opportunities), [2] foresight (where in-depth analytics meets world-class intuition), [3] synergy (regarding established capabilities and reputations), [4] enough time (transformation takes time), and [5] comprehensive analyses (it is essential to step back and take a long and analytical look at the forces that drive future client needs, priorities, and expectations).

GOLDMAN SACHS — MASTERING THE 'REPUTATION FOLLOWS VALUE' RULE

Client needs, priorities, and expectations — the issues that are most important to them — have a natural tendency to change. The overwhelming problem for incumbent players like Goldman Sachs is that reputation ‘migrates’ from outmoded business models, representing the ‘old ways of doing business’, to newer models that better align with and address clients’ most pressing concerns. Incumbent players usually find themselves trapped in rigid business models. Truths become traps — success is yesterday’s truth.

Corporate reputation by itself is a measure of the strength of a business model to create and capture value. Reputation gradually flows into business models that respond to evolving client needs, priorities, and expectations, often overlooked (or simply neglected) by established players. And although the ‘reputation migration process’ may start slowly, it gains momentum as a business model edges closer to obsolescence. Corporate reputation migration as a business concept is the process of transferring an organization’s immaterial capital (‘reputation equity’) to new — often disruptive — players.

Since the 2008/09 global financial crisis, the rate of ‘reputation migration’ has increased in the banking industry. The game has changed. The reputation once held by the erstwhile ‘masters of the universe’ now shifts towards newcomers like boutique banks, PE firms, and hedge funds.

Competing on reputation is a dynamic game, much like Go. To excel in Go, as in banking, one must grasp how specific positions and moves on the board lead to particular outcomes and subsequent countermoves.

Goldman Sachs must focus on understanding where the value in the banking industry resides today and where it will move tomorrow. Managing the ‘reputation follows value’ paradigm superbly is the name of the game. Better business models reallocate corporate reputations — it is a fundamental law. Changing client needs, priorities, and expectations — and their interaction with newcomers’ offerings built on new business models — are what trigger the migration of corporate reputations.

Consequently, Goldman Sachs must develop a dynamic, in-depth understanding of the needs, priorities, and expectations of both current and potential clients. Merely understanding their current concerns isn’t enough, according to a dataset of over 4,000 C-suite executives and senior managers from Fortune Global 500 and Forbes Global 2000 companies that participated in a multi-year study on the reputations of wholesale banks — banks providing commercial, corporate, and/or investment banking services in Europe.

Message: Goldman Sachs will not win the next competitive battle the same way it won the last one.

NEVER JUDGE A STRANGER BY THE COLOR OF HIS HAT

In classic Western films, distinguishing the good guys from the bad guys was easy — the villains always wore black hats. Similarly, in the old days of the investment banking industry, competition followed a clear narrative: clients were the good guys, rivals were the bad guys. You aimed to keep your clients happy and gave no quarter to your competitors. The lines were unmistakable.

However, in today’s business landscape, competition has become more intricate, blurring the lines between friend and foe. Now, they come in all shapes and sizes, making it challenging to discern who’s who.

Sometimes, however, foes can become friends, for example, by leveraging skills, professional relationships, or scale economies. It’s important to remember that true competitive advantage lies not just in market share, but in maximizing client value-added. Adopting a ‘share of market’ mindset demands competitive skills, while embracing a ‘share of client value-added’ mindset requires collaborative prowess.

In investment banking and other professional services businesses, success hinges on achieving the right balance between two key factors: economies of scale (market power) and distinctiveness in terms of value-added services (for more details, see the book “On Becoming Extraordinary — Star Professional Service Firms”). The trade-off between ‘reach’ (scale) and ‘richness’ (distinctiveness) defines a firm’s competitive edge. The critical question is how to leverage this ‘reach’/’richness’ dynamic. Investment banks can achieve this by forming smart partnerships. Such partnerships complement and strengthen the firm’s own proprietary assets and capabilities; they unlock new opportunities and maximize value delivered to clients. Why buy US boutique bank Greenhill when an alliance would be the smarter and (much) cheaper option, especially for Mizuho?

In contrast to its Japanese peer, SMFG is pursuing a different, more effective path with Jefferies by enlarging its stake in the American investment bank through a mutually agreed approach in which both parties leverage their geographical and product-service capabilities to deliver greater value to both firms’ clients. The underlying math isn’t that complex, according to the majority of executives and senior managers surveyed in my latest empirical study, which focuses on identifying the Rosetta Stone of outstanding investment bank management.

The key challenge for many investment banks lies in embracing a new ‘dominant logic’ — shifting from primarily intra-industry competition to a point of view that actively leverages intra-industry and inter-industry collaboration. That said, it usually takes a mental quantum leap to clear a strategic hurdle, especially in high-octane business environments. Never judge a stranger by the color of his hat.