Management Fundamentals 5th Edition by Robert Lussier

Exercise 16

Citigroup is a major American financial services company based in New York City. It is one of the "Big Four Banks" in the U.S., along with Bank of America, JPMorgan Chase, and Wells Fargo. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate Travelers Group in 1998. Citigroup has the world's largest financial services network, spanning 140 countries with approximately 16,000 offices worldwide. The company has 260,000 employees around the world and holds over 200 million customer accounts. Citigroup experienced almost a decade of great prosperity, having revenues of over $85,000 and a stock market value of $300 billion in 2006. However, that all changed with the subprime mortgage crisis that hit in 2007. Heavy exposure to troubled mortgages in the form of collaterized debt obligation (CDOs), compounded by poor risk management, led Citigroup into major trouble. The company had used elaborate mathematical risk models that looked at mortgages in particular geographic areas but never included the possibility of a national housing downturn, or the prospect that millions of mortgage holders would default on their mortgages. As the crisis began to unfold, Citigroup announced in April 2007 that it would eliminate 17,000 jobs, or about 5 percent of its workforce, in a broad restructuring designed to cut costs and bolster its long underperforming stock. Even after securities and brokerage firm Bear Stearns ran into serious trouble in the summer of 2007, Citigroup decided the possibility of trouble with its CDOs was so small that it excluded them from its risk analysis. This turned out to be a fatal mistake for the company. By November 2008, the ongoing crisis hit Citigroup hard and the U.S. government was forced to intervene with a massive $45 billion bailout to rescue the company from having to declare bankruptcy. As a result, Citigroup announced plans for about 52,000 new job cuts, including many among the ranks of senior executives, and Wall Street responded by dropping its stock market value to $6 billion. In their end-of-year 2008 Annual Report, the company reported a net loss of $27.7 billion. To put it in perspective of just how far and fast Citigroup had fallen, the company had reported a $21.8 billion net income just two years earlier.
In 2009, Citigroup began a turnaround strategy. In January, the company announced its intention to reorganize itself into two operating units: Citicorp, for its retail and investment banking business, and Citi Holdings, for its brokerage and asset management. The next month, Citigroup announced that the U.S. government would be taking a 36 percent equity stake in the company by converting $25 billion of the emergency aid provided to Citigroup into common shares. By the end of the year, Citigroup had repaid the other $20 billion owed to the government and was no longer deemed to be a beneficiary of "exceptional financial assistance." The company reported an overall net loss of $1.6 billion for the year-a huge improvement from their 2008 $27.7 billion loss.
Even though the company has endured some difficult times recently and was forced to lay offhundreds of thousands of workers, Citigroup is still one of the top places to work in the United States, and its human resources department is still considered one of the best in the industry. Citigroup's "Careers at Citi" Web site discusses seven aspects of their human resources management:
• Recruitment. Citigroup's professional resourcing team provides key recruitment strategies for implementation at all levels across the company. They have a strong graduate recruitment team who works to recruit the most talented graduates in the market, a permanent recruitment team who works with managers in hiring the future business leaders of the company, and a temporary recruitment team who provide temporary workers and contractors.
• Citigroup has a dedicated Web site for graduate recruitment ( http://oncampus.citi.com) which allows recent graduates to learn about Citigroup and search and apply for open positions by region, country, degree level, entry level, and type of job (e.g., sales). By clicking on a keyword, potential employees can find a program of training that matches their educational background and interests. Program applications can then be completed online and submitted for consideration.
• Diversity. Citigroup values a work environment where diversity is embraced. The company aims to be a leader in the attraction, selection, and hiring of diverse candidates to positions at all levels of the organization through open, fair, and objective recruitment policies.
• Listening to Employees. Employee feedback is important. Citigroup gathers opinions in many ways, including periodic "pulse" surveys and the annual employee opinion survey. Managers use the feedback to improve performance and strengthen the culture.
• Training. Citigroup's training and development specialists design programs to meet the specific needs of each business unit, and offer training in classrooms and online. Employees can participate in leadership, management, and professional development programs that give them the skills they need to succeed in their roles, grow with the company, and reach their potential.
• Performance Evaluation. Citigroup measures employee performance and allows managers to provide specific feedback to clarify employee expectations, facilitate growth, and inform pay and promotion decisions.
• Compensation and Benefits. Citigroup's compensation and benefits team is comprised of Compensation, Benefits, Relocation, Tax, Deferred Compensation, and Pensions specialists. The specialists develop and implement compensation strategies to ensure that Citigroup offers and executes some of the most effective compensation plans in the industry. For example, Citigroup offers child care and elderly care services to more than 81,000 employees. Employees are also able to have flexible work schedules.
• Unions and Collective Bargaining. Citigroup supports the freedom of association for employees and the right to organize and bargain collectively. Employees have formed and joined unions in many of Citigroup's operations around the world.
The use of collective bargaining is not necessary at Citigroup.
A) true
B) false