Reference no: EM133143817

The capital gained from culture:

By Bernard Simon in Toronto

Read the case study below, then answer the question

Gordon Nixon makes a point of escaping Canada's frigid winter each January for a Caribbean cruise. But the excursion is more work than pleasure for Royal Bank of Canada's chief executive. His 700 fellow passengers are RBC tellers, administrative staff, junior employees and middle managers who are being rewarded for superior performance.

Mr. Nixon joins the cruises to put into practice the team work and mutual respect he has tried to foster among RBC's 73,000 employees in eight years at the realm of Canada's biggest bank. As he sees it, that culture has played a crucial role in RBC's ability - rivalled by only a handful of other large banks - to ride out the storms that have battered the financial services industry during the past two years. 'We don't tolerate fiefdoms and so forth', Mr. Nixon says. 'Those are the sort of things that brought down a lot of organisations.

Team work and 'doing the right thing for the organisation' are non-negotiable elements of RBC's culture, Mr. Nixon says. 'We can have the hottest-shot trader in the world, but if he doesn't comply with the culture and values of the organisation, we don't want that person being part of the [bank].'

None of Canada's big five banks - the others are Toronto-Dominion, Bank of Nova Scotia, Bank of Montreal and Canadian Imperial Bank of Commerce - has escaped the turmoil unscathed. Even so, the Canadian banks are emerging from the crisis in better shape than most of their rivals elsewhere in the world. They have survived without any infusion of government money, and have relied far less on liquidity support than US and European lenders. All five have maintained their dividends.

M. Nixon, 52, has a reputation as a level-headed manager. He joined Dominion Securities - at the time Canada's biggest brokerage firm - 30 years ago and stayed on after RBC acquired it in 1987. He has spent most of his career in investment banking, including a three-year stint in Tokyo. RBC is gearing up to take advantage of its strong position. 'I think we've got a period here that's going to last at least two to five years where banks around the world are going to be shrinking their balance sheets when we have the ability to invest in all of our businesses', he says.

Asked what RBC will look like five years from now, Mr. Nixon is noncommittal. 'In many ways that's a dangerous question because it was at the root of some of the problems that some banks had in the early part of this decade', he says. 'There's no hurry because there are going to be lots of opportunities and lots of restructuring in the financial services industry over the next five years. So if you do something, you want to make sure it's very sensible and very strategic.'

On the capital markets side, however, Mr. Nixon says: 'We're not going to make an acquisition. We're going to grow it by continuing to do what we have been doing for the past five years- which is to hire people, hire teams, extend our balance sheet, build our customer base.'

A great believer in having the right person running each business

Gordon Nixon, Royal Bank of Canada chief executive, traces RBC's good fortune to its conservative culture. In the late 1990s and early this decade, he says, there was a 'pretty significant shift'. The bank wanted to make sure that 'where we were extending our balance sheet, we were being paid for it' and that in each case the client decision was sensible. 'We weren't going to lend our balance sheet to a customer in Europe who Royal Bank had no relationship with simply because there was an opportunity to lend money and to earn a return.'

Mr. Nixon says he is 'a great believer in ensuring that you've got the right person running your business and giving them the rope to make mistakes but also to do the right things'. But, he adds: 'You can't be afraid to make changes even when you've got good people.'

The former chief operating officer is now head of strategy. She has been replaced by thirteen-strong operating committee.

Source:

Simon, B. (2009). The capital gained from culture. Financial Times, p. 10

Case Question

Imagine you are Mr. Gordon Nixon, Royal Bank of Canada chief executive! You have decided to make structural senior management changes at your head office following the shareholders recommendations and observations to maximum revenues and reduce loses.

You have decided to fire Brittany McFarlane, Chief Financial Officer, Dominion Securities, 200 Bay Street, Toronto, ON M5J 2J5. You don't think she is doing 'the right thing for the organisation' and RBC's culture. You also think she is not a 'hottest-shot trader' and she doesn't comply with the 'culture and values of the organisation.' You no longer want her to be part of the [bank]. You feel that she is not 'the right person to run the Dominion Securities. You have given her sufficient time 'and freedom to make mistakes' but also to 'do the right things' for the organisation. However, she doesn't seem as qualified as her credentials claim and she must go.

Write a one-page letter to fire her. It should include a buffer, the reasons why you are firing her, the clear firing statement, and the forward looking statement with reader benefit.