Could Citigroup Be Any More Dysfunctional?

With over 300,000 employees, Citibank (C) presumably has a very deep team of talent from which outstanding future leaders can be chosen and groomed. One would think so, anyway. Except that the bank apparently persists in being managed along the precepts that seem to make up Citi’s proprietary Citigroup Non-Management Method. Here are the results the program has produced to date:

• Chuck Prince, a lawyer with no banking experience becomes CEO and proceeds to destroy massive shareholder value.

• Vice Chairman Robert Rubin collects $120 million to make friends and avoid responsibility.

• Citi promotes to CEO a non-banker, with no banking experience, who’s never made a loan or been the CEO of any public company.

If recent history is any guide, Citi’s board looks for leaders that have the following background:

• No banking experience;

• No lending experience;

• No CEO experience;

• No management track record;

• No vision.

America’s smallest public community bank would not accept these criteria. Would your bank? Of course not. But apparently the Citibank directors, shareholders, and regulators do.

Citi’s sorry track record in recent years, related to everything from regulatory matters, to its retail branch expansion, to succession planning, ought to prove beyond doubt that Citigroup is ungovernable to the point of being organizationally dysfunctional. Its silos are impenetrable and sclerotic. Every recent strategic plan has failed. In the process, one of America’s great brands is being destroyed—as is massive shareholder value.

Is it too much to ask that the board ensure that management do what needs to be done to recruit talent, train talent, and have a process in place to recruit, from without or within, a CEO who actually has run a large organization and knows something about the banking business?

Citigroup is one of the financial industry’s most storied institutions. I wish Vikram Pandit luck, but fear that Tom Brown is right. The only way out of Citigroup’s problems is a breakup of the company.

Comments

[billydlight:]

This makes perfect business sense. When a company begins it has outstanding leadership. Then, as it ages, people are promoted that are not a "threat" to those higher up the ladder via flattery, etc. Productive employees are left under a glass ceiling. Why rock the boat by removing an expert loan officer through promotion? As middle managers are promoted, backed by good numbers from the productive self-starters, they begin to rot out the core management. They avoid "exposure" by promoting a patsy(take-one-for-the... underneath them. The "productive people have messy desks" theory comes into play also. Sadly, the "Office Space" parody reaches all areas of business from solid waste to coffee shops. This critical mass paves the way for opportunity and new companies. It is hard to say but more often than not, an honest work ethic leads you to a dead end.

2008 Feb 20 10:09 AM

[NARSpin:]

what a dog

2008 Feb 22 09:42 PM

[Red Rose:]

Citibank is definitely dysfunctional! They're sitting on a massive amount of foreclosed homes and they list them at the price the former owner owed perhaps hoping someone is stupid enough to put an offer on one. Why not reduce the prices to meet he current market rates and sell them, at least they'd recoup some money rather than have empty foreclosed homes on their books, it just goes to show how greedy they really are-I hope they go bankrupt.

2008 Feb 23 08:28 PM

[Philly Banker:]

Well said. What are they thinking hiring an attorney who NEVER ran a business nor has banking experience as the CEO? Why is he still there? Look at the destruction of share value!

As a Commerce Bank employee, I have seen many of my equivalents fly to Citibank. Citi throws a lot of money and promises. I have also seen them recruit many of my employees as Citi started to expand in the Philly metro market. Most of them are calling me begging for their job back because they were either laid off or experienced the empty promises. Citi claims to follow what I like to describe as the "Commerce Model", positioning it as a retail and service driven establishment, when in fact, they are not. I don't need to be a customer or an employee to know that. I hear it daily from current and former Citi employees and customers.

2008 May 12 08:38 AM