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Royal Bank announces tough new rules on outsourcing

RBC CEO Gordon Nixon wrote a public letter in April in which he apologized to employees affected by the outsourcing decision.


Responding to a public backlash over its outsourcing practices, Royal Bank of Canada has released a new code of conduct that favours hiring Canadian workers and limits what jobs it outsources to other countries.

Under the new code, RBC and its suppliers must not hire foreign workers to perform services for the bank, when someone eligible to work in Canada is available and able to perform the service.

RBC also pledged that it "will not offshore work where salary savings is the primary reason and will make every effort to source in Canada."

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RBC has been working with a global consulting firm to craft the code, and used major multinational financial institutions and companies as benchmarks. RBC believes it is the first Canadian company to issue a code of conduct on this matter, said Greg Grice, the bank's chief procurement officer.

Outsourcing experts also said that this is the first time they've heard of such strict rules.

The code released Friday could put the bank in a tough spot, especially as the Canadian banking sector cools. Cost cutting, or "expense management," as the banks classify it, is a hot topic. Just Thursday, Toronto-Dominion Bank released its quarterly results and announced that curtailing costs is a key focus for the bank in this environment.

Outsourcing call centre and developer jobs is particularly easy way to cut costs – especially now that the banks are plowing money into developing mobile apps and online banking and investing platforms.

RBC started to put together its code of conduct after allegations surfaced in April that one of the bank's IT worker suppliers, iGate, replaced Canadians with temporary foreign workers working here on short-term visas.

RBC clarified that the 45 affected employees were not losing their jobs to temporary workers – the jobs were being outsourced instead – and promised to find them new spots within the institution. But the allegations put the bank in a negative spotlight.

The issue also prompted the federal government to conduct a review of its Temporary Foreign Worker Program, under which the number of visas issued has boomed over the past decade.

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Outsourcing expert Anil Verma, at the University of Toronto's Rotman School of Management, said the code won't change the entrenched trend across industries.

"I doubt that any such 'guarantee' like the one by RBC will alter the course of offshoring," he wrote in an e-mail. "What could slow down offshoring would be a rise in costs in places such as India and China and improvements in efficiency in Canadian operations."

RBC chief executive officer Gord Nixon wrote a public letter in April in which he apologized to the employees affected by the outsourcing decision.

In the new code, RBC did not promise to never outsource. Instead, the bank said it will only offshore to suppliers when their investment in scale, technology or operational knowledge provides better skill sets and capabilities "that RBC cannot duplicate inside its own business or in Canada."

To stress this point, Mr. Grice noted that the bank's Canadian call centres in New Brunswick, Montreal, Mississauga and Winnipeg will stay here.

The bank also promised to use temporary foreign workers on a "very limited basis for executives and for workers with highly specialized skills."

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About the Authors
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More


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