Goldman Sachs cafeteria’s genius pricing plan?

OCTOBER 22, 2013

goldmanGoldman Sachs’ cafeteria has been described as something out of Gattaca, the 1997 science fiction film, reports The Washington Post (Oct.18, 2013).  It’s a wide-open space full of furniture that looks like it was smuggled from a utopian future in which nothing is ever dirty, broken or unintentionally asymmetrical. It isn’t just the physical design of the 11th-floor space that creates this impression. It’s the way Goldman administers it with a clever policy designed to economically engineer efficient eating.

The most crowded time of the day to eat lunch is, naturally, during lunch time. For most people, this falls around noon. This creates the phenomenon of the lunchtime rush hour. Goldman didn’t like the idea of its people waiting on long lines to get their lunch. People are capital to Goldman. It wants to use its capital efficiently. Standing on line waiting for a burger is not an efficient use of Goldman’s capital. So the cafeteria has a set of timed discounts. If you show up before 11:30 or after 1:30, you get a 25% discount on your food.

As it turns out, Goldman folks are both especially attuned to economic incentives and ruthless about capital efficiency. Some take pride that they’ve never eaten lunch inside the “cost penalty window,” as one trader referred to the 2 hours when the discount isn’t in effect. In the cafeteria around 1:20 pm, the lines at the pay registers are empty. So are many of the tables. But the area between where the food is collected and where you pay is quite crowded. The Goldman lunchers are chatting with each other, waiting for the final minutes to tick down until they can save a dollar or two.   When its spokesman was called about Goldman’s lunch market manipulation, neither he nor anyone else in his office was available around 1:30. “Goldman approves of employees using their capital efficiently,” he said later.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.comProfessors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

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