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The Royal Bank of Canada (RBC) is one of the oldest and largest financial institutions in Canada. The institution is almost a hundred and fifty years old (RBC, 2013). The bank started as a merchant bank in 1864, and served the needs of businesspersons in the Halifax area (RBC, 2013). The bank has two headquarters, one in Montreal, and the other in Toronto. The Montreal office is the institution’s corporate headquarters while the Toronto office serves as the operational headquarters (RBC, 2013). RBC has a customer base exceeding ten million people in Canada, and a further two and a half million customers in other countries (RBC, 2013).
This customer base reflects the stability associated with the bank and the Canadian banking industry in general. Just like many other businesses, the bank is grappling with human resource management challenges. There is no shortage of staff, but there is the prevalent feeling that businesses must rationalize their labor forces to remain profitable. This paper looks at the non-market forces affecting the operations of the bank in light of recent revelations that the bank replaced permanent Canadian employees with foreigners who came under the Temporary Foreign Workers Program through an outsourcing contract. The move is controversial in the public arena because of the current state of the Canadian labor market. Public opinion on the matter is that the bank should be creating jobs, and not exporting them.
Public Perception as a Force in the Non-Market Environment
Public Perception is a very strong force in the conduct of any business. It is the sole justification for the emergence of professional PR practice across the world. The technological advances in IT over the last decade have complicated the execution of PR. It is impossible to control information once it reaches social media channels. In this regard, the RBC found itself on the wrong side of public perception when it became clear that it had employed foreigners to take up jobs previously held by Canadians by using the Temporary Foreign Workers Program. The four I’s model will be ideal for analyzing the impact of the public outcry that ensued. The I’s stand for interests, issues, institutions, and information.
The interests that led to the PR nightmare for RBC came from various places. First, RBC was under pressure due to public interest. The interest of the public is usually difficult to capture or measure because of the indefinite and impersonal nature of the public (Cardoso, 2009). Short of a referendum, gauging public interest on any issue is almost impossible. This does not mean that it does not exist. In fact, ignoring public interest can ruin a business (Ab Hamid, 2008). In this case, the public expected that RBC to protect Canadian jobs in order to help reduce the rate of unemployment. Therefore, when the public learnt that there was an effort to replace Canadian workers with foreign workers, the perception created was that RBC did not care about the public good.
The second interest in the debacle was from the outsourcing company called iGate. The company had a contract with RBC to provide temporary workers (Beltrame & Paddon, 2013). Therefore, it had the reasonable expectation of seeing the deal through. The third source of interests was the Canadian government. The reaction of the Canadian government clearly showed that the government had expected all companies to use the Temporary Foreign Workers Program to fill up human resource shortfalls, but not as a backdoor for exporting Canadian jobs (Beltrame & Paddon, 2013).
The main issues that arose from the choice the bank made to hire foreign workers were as follows. First, the country has a high level of unemployment compared to previous years. The current unemployment level in Canada is 7.2% whereas the unemployment rate in Toronto, the city where RBC expected to post the new workers has an unemployment rate of 8.4% (Beltrame & Paddon, 2013). Therefore, the bank’s strategy faced public disapproval because its result was aggravation of the unemployment situation.
The second issue that arose from the case was the plight of migrant workers in Canada. Generally, migrant workers are welcome to Canada especially in industries that have an insufficient number of native employees. The reports may have made migrant workers feel unwanted in the country. This is a very sensitive matter because of the increasing number of migrant workers in the country. On one hand, Canada needs migrant workers to fill the human resource gaps in the country, but it also needs to ensure that it does not give jobs that its citizens need to foreigners (Beltrame & Paddon, 2013).
The third issue in the case was the ethical predisposition of the bank in regards to its own employees. There was a feeling that the bank was not remorseful for its actions, but was addressing the issues publicly as a matter of PR.
The Temporary Foreign Workers Program at RBC involved four institutions. The first institution was the bank itself. The bank wanted to outsource some of its IT work; therefore, it contracted iGate to handle the outsourcing contract (Beltrame & Paddon, 2013). iGate was the second institution in the matter. The company handles outsourcing contracts for Canadian corporate firms. According to iGate, there was nothing wrong with how it handled the situation. In fact, the company felt wronged by all the bad press the matter brought up. The third institution was the Canadian government. The plight of the RBC workers who were about to lose their jobs attracted the attention of the government. This is because the government did not expect anyone to use the Temporary Foreign Workers Program to outsource jobs that Canadian workers need. This had led to an interest by the Ministry of Human resource to review whether the program is being abused (Beltrame & Paddon, 2013).
The fourth institution in the situation was United Steelworkers. This labor union represents workers employed by chartered banks. The union planned to take the bank to court for dismissing the workers and replacing them with temporary foreign workers. If the union proceeds to court, then it will make the situation worse for RBC.
The information flow on this issue has been representative of the challenging nature of PR activities in the modern world. First, the information regarding replacing IT workers from the bank because of the outsourcing contract got into the public sphere through the social media. Essentially the workers were protesting the banks outsourcing policy that was threatening their jobs. This illustrates just how difficult it is to control information flow in the world today.
The second aspect of information flow in the case was the responses from the public on social media sites. People lambasted the bank for its part in the contract that was going to lead to the loss of Canadian jobs. The problem with the information in social media is that the message is usually at the mercies of the people communicating, and it is often distorted (Haddon, 2004). There is no rational dialogue.
The third aspect of information in the case was the statement made by the Gord Nixon, who is RBC’s chief executive. He apologized for the actions of the company and sought to confirm that the employees would be redeployed within the bank (Beltrame & Paddon, 2013). It is unclear from the report whether this was the original plan, or whether it was a PR move.
The RBC is a successful bank. Its longevity speaks volumes about its robust performance since inception. The bank has a large local base, and a growing international clientele that are seeking the stability of Canadian banking. The bank serves a wide range of clients in the Canadian economy. It is interested in becoming the dominant banking institution in Canada. Its market integration strategy has seen the bank grow its branch network to reach as many people as possible. In fact, its expansion to foreign countries was driven by the need to make it easier for Canadian businesses that have international interests to find it convenient to bank with RBC. On the other hand, businesspersons in the other countries where the bank has branches also find the bank’s branch network very attractive.
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The banks integration of non-market strategies shows that the bank has a heightened awareness of its business environment. First, the bank knows that its long-term profitability rests with rationalizing its wage bill. This is what led to the decision to hire workers through the Temporary Foreign Workers Program. In essence, RBC is a business institution, and it has every right to pursue profits. The only problem in this case is that the interests of the bank are at odds with the interests of other stakeholders (Arson & Gray, 2011). This was the basis of the negative press that the RBC received concerning the hiring of foreign workers to replace Canadian workers.
In terms of business positioning, the bank is well poised to experience further growth. Its branch network and its increasing clientele base seem to be pointing at better times in the near future. The bank is also taking advantage of the reputation of the Canadian banking industry to position itself as a very stable institution.
At a strategic level, the bank must reposition itself in line with developments in the technological sector (Volberda, Morgan, Reinmoeller, Hitt, Ireland, & Hoskisson, 2012). The decision to outsource some of its IT functions points to the realization by the bank that it cannot survive if it maintains the old employment models. This shows that the bank is willing to adjust its operations a means of achieving market repositioning.
On communication, bank took almost four days to release a statement after information regarding the outsourcing contract became public. This shows that the bank has a very slow response mechanism for such situations. While there is a chance that the bank delayed its response deliberately, it is more dangerous to ignore accusations such as the ones leveled against the RBC. This shows that the bank may need to look at its PR strategy and the execution of its PR function. The current business climate demands for quick response to issues raised in the public.
Overall, the bank is in a good strategic position to take advantage of the globalization of banking. What it needs to do it is to ensure that it embraces globalization in manageable steps (Dalic, 2007). Global operations for banks are very complicated because of the differences in banking laws in different countries. In addition, banks that operate in more than one country usually deal with several regulators, which can make integration of services very difficult.
Conclusion and Recommendations
The review of the RBC in relation to its non-market environment revealed several things. First, the bank needs to rationalize its human resource pool (Arson & Gray, 2011). It is a factor of future profitability. Secondly, the bank took too long to respond to the allegations leveled against it in regards to the abuse of the Temporary Foreign Workers Program. The bank outsourced jobs that were held by Canadian employees rather than use the program to fill up human resource shortfalls. The third main issue arising from the analysis in regards to the banks’ market integration efforts is its desire to expand into the international market.
The first recommendation is that the bank needs to explore other models of outsourcing that are less controversial. Outsourcing work that Canadians can handle can only lead to more controversy. Secondly, the bank needs to engage faster with the public whenever there are PR issues. The slow response to the iGate issue could have contributed to greater public outrage on the matter. PR is essential for controlling the narrative surrounding controversial issues (Haddon, 2004). Thirdly, the bank’s efforts towards internationalization are potentially beneficial to the bank. As globalization deepens, businesses will seek banks that can service their needs without regard to geopolitical boundaries. This effort needs to be strengthened to position the bank to take advantage of the emerging market situation.
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