If Brian Porter's first year leading Bank of Nova Scotia is boiled down to one specific strategy, it's clear his main goal has been to act swiftly. It's his bank now, and he is quickly shaping it how he sees fit.
From the get-go, the bank's CEO has explained what he wants to do – focus on four specific countries outside Canada, sell the majority of the bank's stake in CI Financial – and then sketched in the details of his plans shortly after.
Even Mr. Porter's latest move, which includes replacing two regional heads, cutting 1,500 jobs and incurring $450-million in one-time charges, was partially foreshadowed at an investor conference six months ago.
"The reality is in a slow-growing economy like the Canadian market, expense management through operational excellence is imperative," Anatol von Hahn, the lender's head of Canadian personal and commercial banking, said at the time.
Such a restructuring can seem shocking when the banks are churning out record profits. But the sector is quietly preparing for a new landscape. If you listen closely to bank speeches and conference calls, there are signs that a number of the large lenders are fretting about the future. They've experienced phenomenal growth for the past few years, but executives know banking moves in cycles, and so they need to change gears to prepare for the next wave.
Like Scotiabank, Toronto-Dominion Bank has talked an awful lot about a tough banking environment – albeit less loudly of late – and what it will mean for the country's largest lenders. Before he retired, I asked then-chief executive officer Ed Clark why he and other banks even mention cost cutting in an era of record profits. His explanation was quite simple: When things are good, it's easy to become bloated. If you don't tackle these problems in boom times, you get brutally punished for them when things sour.
To understand the dire consequences of dithering, just look at what happened at Royal Bank of Canada during the first three years of Gord Nixon's tenure as CEO. After he took over in 2001, RBC suffered from infighting among executives and a bloated middle management that resulted in stultifying bureaucracy. Mr. Nixon did not act for three years, and that led to critiques like this one in ROB Magazine, which questioned if he was "tough enough" for the job.
Looking back in an exit interview with the Globe earlier this year, Mr. Nixon said he wish he hadn't waited so long to put his foot down. It wasn't until 2004 that he let go of three senior executives and some 1,700 staff. "I wish I'd acted quicker in terms of some of those changes," he said, but added that "rushing into wrong decisions is worse than delaying what is a right decision."
Such bureaucracy and soaring costs can plague any big company. Rogers Communications is suffering through its own restructuring right now. After years of wireless growth, driven by Apple's iPhone, Rogers found itself bloated and ultimately brought in a new CEO from Britain to change gears.
By acting so swiftly, Brian Porter has sent a message that he doesn't want to succumb to such problems. But cutting is only the first step, and it's now up to his new team to make sure the radical changes bear fruit.