Posts Tagged ‘RBC’

So, the Royal Bank has come out and apologised for outsourcing some business to an organization that was using foreign workers to facilitate some of its IT work. The effect of the move was that 45 Canadians would lose their roles at the bank….hmmm.

So who’s to blame? Gord Nixon or the bank? The tech company hired to do the work? The RBC employees for not doing a good enough job or not being productive enough? I am sure there would be people that would argue on any of these fronts, but I want to propose that there is someone else responsible for these continued stories of outsourcing, layoffs, downsizings, corporate restructuring or any other word that you want to use for a reduction in the workforce at any company.

YOU. (I include myself in the YOU, but YOU sounds more powerful than WE in this case.)

It’s a complex situation with many other variables (which I would like to expand on in future blogs), but specifically it is anyone who owns shares in a company (or a mutual fund) and continues to demand/expect high quarterly growth or share price increases and dividends without considering the consequences in the short and long term. You see, once sales start to drop (which is happening in just about every company in every sector) there are only a few ways for companies to maintain their profitability in order to keep YOU happy. First, as most companies have already done, you strip out all the fat in your logistics, production and any other cost centre that you may have. Once that is done you start to investigate other areas that create massive amounts of stress within organizations…How about cutting unique aspects of your product out or cutting back on the quality?… Not a good idea. How about cutting your marketing budget and hoping that it won’t affect sales?…I might suggest that it is more about the type of marketing that you are using that may be the issue, but in general if you cut your budget you are less likely to maintain awareness with the buying public…Also, not a good thing. Finally (and not always the last choice), how about cutting some staff or outsourcing to save money?…Well, obviously that doesn’t go over so well with those folks who are directly impacted, but even those that are left behind (I know there is a syndrome named after this) have all of the work that was in the hands of the fired employees dumped on them with no pay increase and no increase in the hours that they have available to get the job done. Outsourcing has a similar effect on the people removed, but the work is…supposedly…passed to others and in this case, the jobs left the country. Whatever choice the company makes, it usually cuts at the core of what and who the company once was, but those in the leadership roles who are most often motivated by short term incentives as well, really are not worried about the long term health of the organization.

In the short term there is upset and anger within the people that have been personally impacted by the downsizing/outsourcing etc. This creates personal stress, family stress, stress within their circle and it all leads to additional issues in society.  The assumption would be that there will be a period of time until these people are able to find a new place to work (if at all) and as a result will change their spending habits, buying less of everything, potentially increasing their debt and adding to the overall risk that they face. This extends to be a risk to our country’s finances should inflation and/or interest rates go up having another negative impact on the segment of the population caught in this growing group.

In the long term, if this type of action happens in more and more companies (open your eyes, it’s happening all around us) and more and more people face the same impact as the individuals above, then it means a lot less people buying a lot less of everything which completes the ugly cycle that we are in right now. Less people with jobs buying less of everything, those with jobs buying fewer products because they think they are next and the companies selling less of everything as a result…and what happens next?  These companies then fire more people to maintain their shrinking profit margins and the cycle begins all over again. It just keeps getting worse unless we start to do something about it.

So what is the solution? Well I am certainly no Einstein, Marx or Keynes and I am certainly not against people working hard and being rewarded for it, but it seems to me we all need to accept less. We need to understand that by accepting less individually (that includes the greedy individuals at the top of organizations making gazillions – when is enough, enough?) we all win as a society.  We need to see that a greater separation between the haves and the have nots is only going to increase the stress and pressure amongst us. That continuing to worry about the Jones’ and buying into continued consumerism will only require more access to money and we will continue to pressure organizations to keep filling our pockets (and theirs) with profits driven by the exact things that drove Gord Nixon and the leadership at RBC to make the decision that they did to outsource the IT roles…even though their first quarter profit for 2013 was 2.7BILLION dollars. Yep, first quarter.

So here is what you and we can do. The next time you show up to your Shareholder’s meeting or have an opportunity to discuss or impact any organization’s direction in whatever role you play, think twice about downsizing or outsourcing as a means to maintain double digit quarterly returns. For those of you who may not be in tight with such business decisions, speak up when you see other situations like the one at RBC. The more light that is placed on these issues in all businesses and industries the more likely it will be that organizations may reset their priorities to include the population that they ultimately serve and who buy their products.  In the world we are in today, the growth numbers of the past couple decades are not sustainable (of course there will be some exceptions) and if we don’t reset our expectations (profit and lifestyle), more Canadians than ever will be out of work, the government will have less people to tax and pay for what will be a growing need for services and we will ALL be worse off.

BUT, let me say this…There might actually be a beautiful golden pot at the end of this not so beautiful rainbow. If we can all (and it must be everyone simultaneously or it will fail) shift our expectations, accept that the past is the past and that the future will be different in how we value our life and lifestyles, if we can accept that he with more toys does not win and that work life balance really is a goal that is worthy of a achievement, we may actually create an even better society that is full of people who think about one another, share their wealth and take the time to smell the roses.

Fingers crossed.

Cheers,

Pete