Lessons from RBC outsourcing controversy

Bank hardly alone but will experience cause employers to re-evaluate tactics?
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 05/17/2013

Having a disgruntled employee vent his frustrations in a national CBC broadcast did no favours for RBC recently. David Moreau, who works in IT, claimed he was among a group of employees in Toronto who were being terminated after they trained a group of temporary foreign workers to do their jobs.

RBC’s initial response to the CBC story came from Zabeen Hirji, CHRO, who said it was outsourcing provider iGate that was supplying the workers for the transition and “moving your processes and operations to other suppliers is a business practice both within Canada and globally that is very well-established.”

But the situation garnered further attention, with Human Resources and Skills Development Canada (HRSDC) saying it was “unacceptable” if RBC was replacing Canadian workers by contracting with iGate, which was filling some of the roles with foreign workers.

“The purpose of the Temporary Foreign Worker Program is to fill acute labour needs when Canadians are not available for the work required,” it said.

There was also a backlash from consumers and calls for boycotts. A group of union pension plans in British Columbia warned it would withdraw funds invested or managed by RBC if the bank did not stop using temporary foreign workers to replace Canadians.

“If RBC doesn’t get that Canadians are furious about this and change course, then we will be forced to relocate over $1 billion in investments with another firm that wants to build our economy in Canada and keep jobs here,” said Lee Loftus, business manager of the BC Insulators Union.

Responding to the growing controversy, RBC CEO Gord Nixon emphasized in a CBC interview that offshoring certain jobs is part of doing business.

“This is not nearly the story that it’s been made out to be but it’s very difficult to get that message across to the Canadian public,” he said. “That’s how you have to run a global company if you want to compete, if you want to be productive.”

But in a full-page newspaper ad on April 11, Nixon apologized to the employees affected by the outsourcing arrangement, saying the bank “should have been more sensitive and helpful” and they would be offered comparable job opportunities at RBC. The CEO also said RBC was reviewing its supplier arrangements and policies “with a continued focus on Canadian jobs and prosperity, balancing our desire to be both a successful business and a leading corporate citizen.”

The incident involved several HR-related issues — outsourcing, temporary foreign workers, social media and employer branding — but will the outcry see employers reconsidering their outsourcing efforts?

Employers are now wondering if they’re vulnerable, if they’ve done the right thing or if they’ll get caught, said Michael Dunn, president of public relations firm Dunn & Associates in Halifax.

“All the other CEOs were very happy to let RBC take the hit on this so… somebody’s passing memos around saying, ‘Double check on our outsourcing policy and our outsourcing activities. What are we doing? How do we measure up?’” he said. “Whether or not you’re doing things well is fine, but you can be tarred by the same brush. So this perceived stumble by RBC — which was somewhat confirmed by the letter by Gord Nixon — everyone’s looking at that.”

The negative experience that was very public in the case of RBC will certainly see senior managers and boards wanting to make sure that they are acting in a way that will be seen as fair and reasonable within their communities, said Finn Poschmann, vice-president of research at the C.D. Howe Institute in Toronto.

“That doesn’t mean broad and searching questions about outsourcing,” he said.

“Outsourcing is a fact of life — it’s just contracting out, make or buy — but any business manager, board member or folks in similar roles will have observed the bad public fallout in this situation and likely will have questions about… whether their own institutions face similar risks because, there’s no question, bad reputation is bad for business.”

Employer branding

While RBC said iGate was responsible for bringing in the employees, it’s all semantics when it comes to the employer brand, said Cissy Pau, principal consultant at Clear HR Consulting in Vancouver.

“At this point, they are, from the public perception, an extension of RBC,” she said. “For an employer, you really need to be careful if you’re even going down this path. Just be aware that if it’s not done well, the message can spread very quickly through social media and other means.”

This situation has arguably left a stain on the RBC brand, said Dunn.

“It doesn’t help that it seems to reinforce the cliché or stereotype of bankers as ‘profit first, people second.’ Whether that is true or not is not relevant anymore,” he said. “Whether you’re an employee in a huge organization or someone thinking of joining, you’re going to wonder, ‘Is RBC going to invest in developing me and my value and my productivity, or are they just going to use me to a certain point and then if I can be easily replaced by a temporary foreign worker or somebody else, they will?’”

Changing role for HR

When employers are making major operational decisions, areas such as legal, finance and HR have to work in sync and not do things in isolation of context, said Dunn. And when it comes to social media and big HR decisions, they have to think: “This is going to go out quickly, how are we going to position it?”

If an employer has to do a major termination or restructuring, it should look around first to see if there’s another place for the employees, said Pau. And it should treat exiting employees well so they are champions for the company after they leave.

“It really goes to what’s the value that the company puts on its staff and the retention of those staff? The company can say one thing, like ‘We value our employees, they’re our greatest asset.’ But how is that perceived out in the market? Is that an authentic message or is that just lip service? So the actions have to support that value.”

The good news is RBC already has a very strong employer brand and Nixon’s apology was excellently crafted, said Stacy Parker, managing director at Blu Ivy Group in Toronto.

But when it comes to employer branding, HR is not the sole communicator and should not only look at the legalities of a situation.

“(HR) needs to interact with marketing, IT, communications and really have a strategy when there are downsizing and restructuring efforts to talk about ‘What if this hits the press tomorrow, how are we handling this? And is the way that we’re addressing this situation consistent with what our employer brand is?’” she said.

And the traditional role of HR is changing rapidly.

“They need to also be incredible marketers, incredible communicators and, essentially, economists,” said Parker.

Ottawa acts

Changes to TFWP

On April 29, the federal government announced reforms to the Temporary Foreign Worker Program (TFWP). The changes will:

• require employers to pay temporary foreign workers at the prevailing wage by removing the existing wage flexibility

• temporarily suspend the Accelerated Labour Market Opinion (A-LMO) process

• increase the government’s authority to suspend and revoke work permits and Labour Market Opinions (LMOs) if there is misuse

• add questions to employer LMO applications to ensure the TFWP is not used to facilitate the outsourcing of Canadian jobs

• ensure employers have a plan in place to transition to a Canadian workforce, over time, through the LMO process

• introduce fees for employers for the processing of LMOs and increase the fees for work permits

• identify English and French as the only languages that can be used as a job requirement.

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