With thousands of new job cuts set for the next several months, Citi's workforce and managers are in for tense times
Citigroup's plan to eliminate 53,000 jobs was intended as a signal of reassurance to investors, a tangible sign that the banking colossus is on track with plans announced last spring to revamp its business. On that basis, the returns on Nov. 17 were mixed: Citigroup's stock price fell 6.6%, to 8.89 a share.
But within the organization, the news of massive new cuts spread over the next few months—some from the sale of business units and some from layoffs and attrition—is certain to unleash a wave of anxiety and apprehension in an environment already awash with tension. While some specifics of the planned cuts are known, many are not.
Citigroup (C), of course, is hardly alone in pursuing a big downsizing. More layoffs are announced every day across the business landscape, and the number of employees affected is soaring. The financial-services sector alone has cut 129,000 jobs from January through the end of October, according to outplacement firm Challenger, Gray & Christmas.
Aiming for 300,000 Head Count
Any way you slice it, the number of jobs Citigroup is shedding is huge. Chief Executive Vikram Pandit has already cut 23,000 positions, bringing the number of employees to 352,000 as of Sept. 30. With the Nov. 17 announcement, the bank says it is aiming for a head count of 300,000 during the first half of 2009—an additional 14% reduction. Citigroup's executives are racing to match expenses to its declining business: Over the past nine months, the company has lost $10 billion.
About half the job cuts will come from divestitures, says Citigroup spokeswoman Christina Pretto, including 18,000 employees at units in India and Germany whose sale has already been announced. The rest of the cuts will "be across all businesses and geographies," Pretto says. As for who will get the ax, she says: "We don't have the specific details at this time."
Not knowing who will go and who will stay makes for anxious times in an organization—and makes managing the workforce tricky. "It's not a comfortable environment until that road map is out there," notes Steven Gross, an HR consultant at Mercer.
Traversing Legal Minefields
Managers need to act with care when pruning their ranks. In addition to business considerations, there are legal minefields to navigate to try to avoid discrimination lawsuits and other lawsuits. That generally involves having lawyers and HR staff vet so-called RIF ("reduction in force") lists to make sure they'll pass legal muster. And workforce reductions in Citi operations outside the U.S. will have to comply with local labor laws.
Mark Dichter, a Philadelphia employment attorney, says that in recent decades companies have gotten fairly sophisticated about how they handle this process. But as the pressure mounts to cut costs quickly, he says, "Companies are frequently foregoing all of the carefully learned lessons over the years simply because they need to stop the bleeding." Dichter made clear he was not speaking about Citigroup.
Even as a business ushers people out, it has to work hard to alleviate the concerns of those who remain (BusinessWeek, 11/12/08). This is partly so people can focus on doing their work. Speaking of layoffs in the financial-services sector, Lawrence Lieberman, a recruiter at the Orion Group, says, "You've got a huge number of very distracted employees right now, and that certainly doesn't bode well if you're trying to measure productivity."
Rivals May Pluck Stars
A company that is contracting is also vulnerable to having its top performers picked off by competitors. That may be less of a concern when nearly every business seems to be retrenching (BusinessWeek, 11/6/08). Still, says Lieberman, his firm is working with clients who believe that as a result of the environment at Citigroup and other banks "there's an opportunity for them here perhaps to gain access to talent."
Citigroup spokeswoman Pretto notes that in May CEO Pandit announced a blueprint for stabilizing the bank's business, including $15 billion in "reengineering benefits." The job cut announcement, she says, "is simply a way of telling the world what is the next wave of our effort to reduce our expenses and be a more productive company."