Sandy Weill and Citigroup
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Case Code: BSTR103 Case Length: 12 Pages Period: 1998 - 2004 Pub Date: 2004 Teaching Note: Available |
Price: Rs.300 Organization: News Corporation Limited Industry: Media & Advertising Countries : USA Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Weill-The Leader
Weill was always very focused on what he wanted. He put before himself definite goals which he sought to accomplish. Throughout his career, he aimed at doubling the company's earnings every five years, which translated to around 15% growth each year. And surprisingly, he had been able to achieve this ambitious goal. In the case of Citigroup, he settled for single digit growth every year, as Citigroup was too big to grow so fast. He used messages like, "Make your numbers; do what you've promised; work together; think shareholder value" to motivate his subordinates to achieve the goals. Weill believed strongly in creating value for shareholders. Most of the acquisitions he made benefited the company's shareholders. When Travelers acquired Salomon in 1997, Warren Buffet said, "Over the decades, Sandy has demonstrated genius in creating huge value for his shareholders by skillfully blending and managing acquisitions in the financial services industry. In my view, Salomon will be no exception..."
The Dealmaker
Weill had a knack for acquisitions. He chose acquisitions as a strategy for growth, rather than attempting organic growth. (Refer Exhibit II). Weill acquired a reputation as a cultivated dealmaker as he always succeeded in his attempts to acquire both big reputed companies as well as smaller companies. Weill had a unique ability to identify firms with high growth potential or a good brand name that would be worth acquiring. Throughout his career, he made several deals and every time a deal was made, he made sure that everything went fine and there was transparency in the process The deals were designed to give a win-win feeling to both parties. After acquiring a company, Weill worked towards realizing the synergies. He cut costs by laying off people, closed down unprofitable businesses, and integrated the operations. After the Citicorp-Travelers merger, Citigroup slashed 10,400 jobs worldwide, i.e. 6.5% of Citigroup's global workforce...
The Change Agent
When Citigroup was formed, there were substantial differences in the cultures of Citicorp and Travelers. Weill tried to integrate both the cultures in the best possible way. Citicorp paid fairly low salaries but rewarded longtime workers with generous benefits. Travelers paid showy benefits, and stock options were a major part of compensation. When the merger took place, Weill introduced employee stock options in Citigroup at all levels. The work culture of the two companies was also very different. Travelers had an aggressive, fast, deal-making culture. On the other hand, Citicorp had a conservative culture built around long-term customer relationships. Travelers' fast moving staff activated Citicorp's bureaucratic culture. Travelers' staff also brought their aggressive sales culture to Citigroup. Citicorp's consumer business had rich and affluent clients and its corporate business had several Fortune 500 companies as their clients whereas Travelers had clients in the medium range. Weill realised the potential of middle and lower class consumers as a growing segment and started concentrating on this segment...
Power Struggle
After becoming the president of Amex in 1983, Weill had struggled to do things the way he wanted. This was chiefly because he was second in the hierarchy at Amex, and had to report to CEO, Robinson. Amex bought Investors Diversified Services (IDS), a Minneapolis-based firm that sold mutual funds and insurance products door-to-door. But Weill had a tough time haggling with the board over the price to be paid for the acquisition. Weill worked hard for about a year to turnaround Fireman's Fund, Amex's insurance subsidiary. But subsequently, the Amex board decided to sell the subsidiary despite the turnaround. Some analysts believed that when Weill realized that Robinson had no plans of leaving Amex and there was no way he could lead Amex in conjunction with Robinson, he was frustrated and put in his resignation in 1985. Weill failed to gain power at Amex, but he didn't want to fail once again. When he acquired Primerica and Travelers, he made sure that he would be heading the companies...
Stepping Down
Analysts were of the opinion that Weill had been very keen on running Citigroup right from the beginning. This was very clear from his power struggle with co-CEO John Reed, his firing Dimon and his not declaring a successor. However, some analysts opined that Weill didn't want to step down at a time when the company was surrounded by scandals (Refer Exhibit I). On July 15, 2003, he declared a new plan for growth through acquisitions. As a part of the plan, he announced a $3 billion deal to acquire Sears, Roebuck & Co.'s credit-card portfolio...
Exhibits
Exhibit I: Controversies at Citigroup
Exhibit II: Mergers and Acquisitions by Sandy Weill
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