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'RBCgate': Big bank's hard lesson in fumbling PR

In the five stages of grief, Royal Bank of Canada has reached anger. The bank now blames the media and the opposition parties for blowing out of proportion what could now be called "RBCgate."

There are, after all, only 45 employees losing their jobs as the bank outsources the back office support of its investor services to an IT offshore specialist who brought in foreign workers to Toronto. For a bank that employs 57,000 people in Canada, this is a trifling number.

Yet when chief executive officer Gordon Nixon says the bank puts a "very high priority on Canadian jobs," it is hard not to take issue. After a CBC report stoked a sharp public reaction, the bank said it would "work diligently to find suitable roles" for the displaced workers who weren't offered another position at the bank, as Mr. Nixon wrote in a memo on Sunday. Before that, however, the bank appeared content with sending out severance checks and enlisting a career-transition firm.

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The change in tone is telling of the bank's fumbling of the situation, since it decided to outsource another service to iGate Corp. and welcomed a batch of the firm's foreign workers in its Toronto offices.

To be clear, outsourcing and even offshoring are not at issue here. For years, financial institutions have delegated their back office functions to outside firms to cut costs and boost profits. This is the bread and butter of Montreal-based CGI, which has become the fifth-biggest IT firm in the world with 71,000 professionals and over $10-billion in annual revenue.

A number of banks and financial institutions even prefer to outsource within North America, in a closer time zone, for security issues, even if the cost savings are not as high than if they had outsourced their services to Bangalore or another offshoring hub. This is not the case with RBC, however. Most of the work the bank is now outsourcing will end up in India, where iGate's activities are concentrated.

Even if offshoring is yesterday's news, the transfer of work remains highly sensitive. While touring CAE's Bangalore offices some time ago, I remember running into two young Quebeckers who were teaching Indians how to use a sophisticated simulation software. When I asked them about their jobs, I don't think they would have been more embarrassed had I talked about their weight. While Canadians have somewhat come to terms with the loss of manufacturing jobs, there is still uneasiness about the outsourcing of professional office jobs.

Given this, the bank needed to use tact. Instead, it asked its soon-to-be-terminated employees to show an iGate transition team how RBC Dexia's computer systems work before they leave. This was cruelly insensitive. No surprise, then, when employees blew the whistle on iGate's foreign workers to CBC, including one who was flown in from India through the temporary foreign worker program with the claim that no other Canadian could accomplish the task.

Confronted with the news, RBC could have investigated the matter and asked some pointed questions to iGate. But when the news broke, on Sunday the bank appeared to just wash its hands of the problem. "We don't get involved in the hiring practices of our suppliers," said Zabeen Hirji, the Royal Bank's chief human resources officer – as if the situation hadn't occurred right under the bank's eyes.

RBC pleaded that iGate's team had only been brought in to oversee the transition of the bank's computer systems. This transition appears rather long. RBC spokesperson Rina Cortese told the CBC that some foreign workers will be working at the bank's Toronto offices until 2015, at which time the work will be transferred abroad. Even after that, a few of the foreigners will remain indefinitely.

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No matter which way you want to spin this, bringing in foreign workers for a prolonged period of time to take over the work once done locally looks bad – on the company and on the government that approved iGate's hiring plans. The number of temporary foreign workers has tripled in the past decade to an estimated 338,000 people in 2012. The change in the surface area of strawberry and cucumber fields cannot explain this rise alone.

RBC and its long-time outsourcing partner are now under high scrutiny from a government that is assailed by opposition parties on its labour record. And for what? RBC's small savings will pale in comparison to the hit to the bank's image.

If there is no such thing as a small profit, as the French saying goes, some are costlier than others.

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About the Author
Chief Quebec correspondent

Sophie Cousineau is The Globe and Mail’s chief Quebec correspondent. She has been working as a journalist for more than 20 years, and was La Presse’s business columnist prior to joining the Globe in 2012. Ms. Cousineau earned a master’s degree in journalism from the University of Illinois and a bachelor’s degree in economics and political science from McGill University. More


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