ROB Insight is a premium commentary product offering rapid analysis of business and economic news, corporate strategy and policy, published throughout the business day. Visit the ROB Insight homepage for analysis available only to subscribers.
Canadians have a complicated emotional relationship with the Big Five banks. On the one hand, we're smug about the fact they weathered the financial crisis so much better than institutions in other countries. On the other hand, it's a rare depositor who embraces their giant profits, indifferent customer service and oligopolistic grip on the market.
While feelings are not running as red hot here as in other countries, where once-respected financial giants have been found guilty of manipulating interest rates and laundering money for international criminals, it takes very little to awaken the bank-bashing element in Canadian society. The implicit bargain that Canadians have struck is to allow the Big Five their fat-cat status so long as they're perceived as being our fat cats – financial giants, yes, but ones with a maple leaf on their hearts.
Now Royal Bank of Canada has broken that understanding – not by doing anything that is illegal, but by handling a relatively minor outsourcing contract in a tactless and tone-deaf manner.
The bank's decision to outsource just 45 jobs has ignited a ferocious public reaction. RBC said it did nothing wrong, but the bank, and particularly CEO Gord Nixon, needs to get ahead of this story before it causes further damage.
First, it has to realize that a bank is not just any business. While many Canadian companies have outsourced jobs in recent years, few have done so while constantly assuring Canadians that they have their best interests at heart.
Second, it has to realize that job losses are a particularly sensitive matter at a time when the economy is sputtering. An RBC employee touched a nerve when he described to the CBC the humiliating experience of having to train foreign replacement workers on his turf to do the job he's about to lose. It's easy to see why.
Consider the context: Canadian banks led by multi-millionaire CEOs are continuing to mint ever larger profits as thousands of jobs vanish and concerns grow about the threat that overleveraged Canadian consumers present to the economy. While the bank says it's merely following standard business practices, public opinion has found the bank guilty of greed and patent unfairness. Whether that's justified is almost beside the point.
RBC hasn't done itself any favours with its pitiful defence, which consists largely of blaming the situation on a supplier. Spokeswoman Zabeen Hirji told the CBC "in terms of the situation that we're talking about here and the use of temporary foreign workers, I think really the point I'd like to make is it's not RBC that has hired these employees." Corporate hand-washing is no longer acceptable practice as Wal-Mart made clear recently to its suppliers following a deadly fire at a factory in Bangladesh where its clothes were made.
RBC goes to considerable lengths to position itself as a public benefactor. Last year it spent $95-million on good causes. Now much of the goodwill those expenditures generated has gone up in smoke.
Mr. Nixon, who defended the move to his employees and committed only to "work diligently to find suitable roles for the remaining staff" is not reading the crowd well. He needs to explain why the bank's outsourcing practices are vital to keep it strong in the global marketplace – but also admit that the bank made a big mistake in the way it handled the transition.
In a global economy, a company has a right to outsource work to lower cost jurisdictions. But it's not smart business to treat those outplaced workers with such insensitivity – especially if many of your customers can see themselves in those displaced employees.
Sean Silcoff is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow Sean on Twitter at @seansilcoff .