A Tale of two Princes and a Citi

1. Innovative methods needed for a long term solution
2. Job reductions a publicity stunt and a knee jerk reaction rather than a method.

The current changes mark Citigroup’s first major company-wide restructuring since the banking giant was forged by a merger of Citicorp and Travelers Group in 1998. The 17000 job cuts, which is slightly less than the yearly attrition rate of 20000 jobs at the Citi, is likely to have negligible impact on the global investment and consumer bank’s operations worldwide. Riding on the back of these cosmetic changes the Bank hopes to streamline its business and save nearly USD 5 billion over the next 2 years.

That the Citi’s hand was forced demonstrates that the mighty are willing to listen to the tiny (shareholders), however, in this instance the tiny happened to be the mighty Saudi prince Alwaleed bin Talal.

However, Citi is to be blamed on at least three counts for total indifference to its performance and neglecting its stock :

1. The performance over the years, vis-à-vis its competitors has been sluggish.
2. There are layers of management, often increasing the number of workers reporting to each manager.
3. Acquisitions at any cost.

In all this melee, one of the beneficiary would be the country where the jobs are outsourced. Technological development has emerged as the key factor in helping the movement of jobs to lower cost areas, mostly the emerging economies. Corporates worldwide have taken advantage of this to trigger savings and produce a healthy bottomline and a golden handshake to its executives.

It must be understood that the key to any growth plan is innovation and a cut and paste job is just that – cut and paste. Movement of jobs or work to lower cost areas, which helps in creating ‘One world one people’, is only part of the solution. For the other part, Citigroup has to have a more durable solution, such as :

1. Identify other areas for surge in expenses, instead of time worn job cuts.
2. Exercise proper cost control measures, including executive salaries and perks.
3. Rework costing of the products, regularly, in tune with the times.
4. Quick to adapt changes in technology to trim costs and achieve savings to stay ahead of competition.
5. Quicker delivery.

To move the giant requires much more effort than this and more time. But a leaner organization has the flexibility to respond to changes faster. And Charles Prince III , Citigroup’s Chairman and Chief Executive appears to recognise that when he said “ Ultimately these changes will streamline Citi and make us leaner, more efficient, and better able to take advantage of high revenue opportunities.”