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Citigroup chief executive Jane Fraser has her work cut out for her at the US’s third-largest bank ranked by assets. Faced with an underperforming share price and bloated expenses, she announced a massive reorganisation that seeks to speed decision making by eliminating management layers and dozens of committees while also cutting costs.
That will require pushing out a big chunk of Citi’s 240,000-strong workforce and rewriting job descriptions for many more. Citi watchers first started talking publicly about a shake-up involving large job losses in August and the plan was announced in September. But the bank has been close-lipped about the details, including planned redundancies.
Staff are on tenterhooks, tuning into multiple video town hall meetings and trying to divine their own fate from what has been disclosed about top management. Rivals say their Citi counterparts seem distracted, and morale in some parts of the bank is described as “terrible”. Most of the workforce — close to 200,000 people — will not know their fate until well into the first quarter next year.
Management experts generally counsel against such an extended process, with good reason. “When [management] makes an announcement without pulling off the Band-Aid, it can throw an organisation into paralysis. It’s incredibly stressful,” says Brandy Aven, who studies organisations at Carnegie Mellon.
Last winter, Morgan Stanley won praise for moving more expeditiously on lay-offs than counterparts at Goldman Sachs, as both cut staff numbers after bulking up during the pandemic.
Citi counters that it is deliberately taking a systematic, top-down approach to what will be the bank’s biggest reorganisation in more than 15 years. A former McKinsey consultant, Fraser wants strategy to drive job cuts and reassignments, rather than the other way around. The human resources team also talked with other companies that have attempted changes on this scale while formulating its approach.
The bank opted to start in September by announcing the names and structure for the first two layers of management. These roughly 200 executives will design and run the reconstituted bank. Later this month, the next level down, some 2,500 people, will get their marching orders.
The next stage of changes, involving perhaps 25,000 to 30,000 managers will be made public until January, with the aim of completing the entire process by the end of March. The goal is to make sure that each stage, managers have a hand in designing their teams, and that everyone facing reassignment or redundancy will have a superior already in place that they can talk to.
“If you were a manager, would you want to be handed what organisation you get or would you want a say in the structure?” asks Citi’s chief human resources officer Sara Wechter. Her view is supported by some workplace experts, who say that a fundamental restructuring has to be handled more carefully than mass lay-offs after overhiring. “Business continuity is really important . . . It will take longer,” says Angie Kamath, dean of NYU’s school of professional studies, who started her career at Citi.
So far, headhunters say they have not seen an uptick in Citi resumes. With investment banking business still depressed, there are fewer outside opportunities, and no employee wants to be caught job hunting while managers are pondering redundancies. The bank’s stars also have a good reason to hang around a little longer: Citi pays year-end bonuses in late February.
Still, the deliberate pace leaves Citi at the mercy of leaks and the rumour mill, which puts job losses in the tens of thousands. Asked last week about a CNBC report that the cuts would be up to 10 per cent of the total, managers could not deny it, because they do not have concrete information.
The clock is also ticking with investors who feel that Fraser should move more decisively. They raise red flags over the abortive effort to sell off Citi’s Banamex unit in Mexico — an initial public offering is now planned — as well as the failure to name a permanent head of banking, one of the most important jobs in the original September announcement.
Barclays provides a warning of what can happen when investors feel change is moving too slowly. After word leaked last spring that the UK bank had hired consultants, Barclays felt pressured to say at last month’s earnings that a strategic review was under way, but the results would not be announced until February. That news, plus falling profits, pushed its shares down 7 per cent.
Deliberation must not become delay. Other CEOs have tried to tackle Citi’s sprawling and barely governable bureaucracy. It has outlasted them all.
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