MBA 611

ORGANIZATION STRUCTURE AND DESIGN

LIAR’S POKER
An Insight into Salomon Brothers by Michael Lewis

Submitted By:-
Arghyadeep Ray 19125012
Sajal Agrawal 19125035
Shiv Kumar Sharma 19125039
Vaibhav Mittal 19125049
 INTRODUCTION
• Salomon Brothers was founded in 1910 by Arthur, Herbert and Percy
Salomon
• By the end of 1970s, no other firm knew more about bonds than SB. Still
not as large.
• It was world’s most profitable corporation, per capita in 1985. What
happened in between?
• Federal Reserve Bank of America changes its interest rates policy.
Boom for SB!!
• But with successive scandals and acquisitions finally in 2003, the name
Salomon vanished from corporate landscape.
• Is this linked with the Organization Culture at Salomon Brothers?
• Let’s try to understand…
 CULTURE AT SALOMON BROTHERS
Organizational culture is defined as the underlying beliefs, assumptions, values and
ways of interacting that contribute to the unique social and psychological environment
of an organization.

CHARACTERISTICS OF CUTLURE

Characteristics Meaning At Salomon Brothers

Innovation and Degree to which employees are • If we look at buying or selling bonds, SB left everyone free
Risk Taking encouraged to innovate and to do whatever they want.
take risks • But parallelly they were not allowed to make changes at
trading floor, frowned upon when they dressed
unconventionally.
Attention to Expected level of analysis, • Not very strong.
Details precision and detailing • The only focus was to sell or purchase. In the process if the
firm lost money, the concerned person was in most cases
fired but the approach never changed.
 CULTURE AT SALOMON BROTHERS
Characteristics Meaning
Outcome Degree to which management
Orientation focusses on results and
outcomes rather than
techniques or process used
Team Organization Degree to which work is
organized in teams rather than
individuals
Aggressiveness Degree to which people are
aggressive rather than easy
going
Stability Degree to which organizational
activities emphasize maintain
status quo rather than growth
At Salomon Brothers
• An easy one. Very high degree of Outcome Orientation at
Salomon Brothers.
• Being fruitful, traders depended more on instincts and
experience than on regular bond market math.
• Highly individualistic culture.
• Trainees had to stand around as invisible, were frowned
upon when asked questions.
• All employees and trainees were pitted against each other
for job, department and location.
• Highly competitive environment. Use of terms like Big
Swinging Dick and Equities in Dallas.
• Very High.
• Explained with previous point.
• Trainees ignored or behaved rudely with speakers and had
the same thrown back at them on the trading floor.
• High growth driven organization.
• From 5 million worth of trades per week to 300 million per
day.
 CULTURE AT SALOMON BROTHERS
Characteristics Meaning
Communication Has two aspects
1. Along the hierarchy
2. Between the organization
and the employee
Identity Degree to which people identify • Moving towards high degree of alienation.
with the organization
At Salomon Brothers
• Along the hierarchy, the communication was very difficult.
One has to make himself wanted, even if by preparing a
fake bubble around him/her.
• Training though consisted of personal experience stories,
was most of the time non interactive and one way
dialogue.
• People supposedly close to top management were not
disturbed much.
• One can say that SB was able to appropriately convey the
values and culture of the organization to employees as
from the first day the competitive environment was built.
People were already competing!
• One employee was selling clothes in the firm.
• Most of the trainees were there to make huge money.
Expected to get thrown out or leave in 3 years.
 How is Culture Passed On?

• The firm organized a 5 Month long training session for all the new
joiners
• The tutors were mostly traders from the SB who narrated their
personal life experiences to the students
• Trainees were mandatorily taken to the trading floor everyday to have
a feel of the organization
• Strict punishments were imposed upon those not adhering to the
conduct – 3 trainees were expelled before completion of training
program.
 What do we learn from it?

• People are mostly interested in fulfilling their personal goals and the
organisation as a whole is interested in profit goals. Things go well as
long as the two don’t collide.
• Incentives are incredibly powerful, and will eventually determine the
culture of some organization.
• Special treatment feels good in the short term, but is probably not
worth the resentment of your peers.
• Behaviour in an organisation depends on the nature of work being
performed. Even aggression is accepted when it gets the work done.
THANK YOU!