The Citi that slept through the Years

Citibank and Travellers Group merged to become the Financial Supermarket in 1998. The $83 billion merger was described as the deal of the century. The merger was done with the aim to make Citi a one-stop-shop for all their customers. During 2008, when the banking crisis struck, Citi lost considerably but the root of the matter, as critics point out, lay 10 years ago when the merger happened. - led by Mr. Reid and Travellers - led by Mr. Weill had contrasting approaches to management. The whole idea for the merger was that customers of Citibank would be sold Travellers products and vice versa thus leveraging on each others strengths, but the personality of both these heads had shaped their organization in different ways which was not compatible. Moreover, the organization structure of Citibank post the merger was very haphazard and confusing, and had many small units and unit heads.

What went wrong at ? In 1998, the $83 billion merger between John Reed's Citi Corp and Sandy Weill's Travelers was described the deal of the century. A decade later, the dream of an all-purpose global financial conglomerate lied in tatters. Weakened by years of in-fighting, poor management, misguided strategies and lax oversight by regulators and its board, Citigroup has been dealt a near-mortal blow by the most virulent financial crisis in 2008. , Citi's current chief executive, has been criticized for his cerebral, low-key management style and uninspiring public speaking has failed to lift morale among Citi's 350,000 employees, while his propensity to rely on an inner circle of aides from Morgan Stanley, his former employer, has alienated many long-time Citi executives. The roots of CITI's demise in 2008 go back to the year of 1998 when the merger was done. As Mr. Pandit has said, the merger between Citicorp and Travelers was never fully completed. Legend has it that Citi's beginnings were undermined by the lack of personal chemistry between Mr. Weill, the Brooklyn-ite upstart with a voracious appetite for acquisitions, and Mr Reed, the patrician banker with a world vision. But although the two co-chief executives had a tempestuous relationship that led to a bitter clash and Mr. Reed's ousting in 2000, the original sin of Citi's conception was that its diverse businesses were not properly integrated. "It was a marriage of convenience in some sense," recalls an executive who worked on the merger. "Citicorp had a great franchise and needed good management and Travelers had good management and needed a franchise." The result was an uncomfortable agglomeration of businesses and management teams that lacked a common strategy, ranging from the street-smart traders of to the ambassadorial bankers that flew Citicorp's flag in foreign lands.

Through our case we will try to analyze the structure of both companies before the merger and the management styles of the leaders, the reason for the merger, organization structure post the merger and the problems associated with it using the various OB models and finally the response of Citibank post the crisis in reference to its organization structure.

Efforts by: (CITI Group) Rashi Arora Sanjana Narang Savneet Kaur Swati Gupta Shounak Mitra Vivek Ostwal Jain

You have done a very good job of what appears to be some deft copy-pasting of relevant stuff from the internet. Your of organization and topic for the case study, is also very good. However, you need to sharpen the focus of the case and restrict the scope, otherwise you may end up writing a book – which is not a bad idea but may not be feasible before the timeline of October 12, which is what you have for submission of the case. Sit down as a group and decide on the specific organizational issues you would like the case to illustrate. – Keith

History of the Merger On 8th October, 1996, two giants – Citicorp, the then second largest commercial and the Travelers Group, the then leader in the global insurance and business joined hands to form Citigroup, Inc., the world’s largest company. The deal was valued at $70 Bn and as an equal merger, the CEOs of both the companies – Sanford Weill of Citicorp and John Reed of Travelers became co-CEOs. Though the group was granted approval from the European Union and Federal Reserve, they were supposed to be evaluated after two years to gain the final approval. Post-merger, the amalgamation of the consumer businesses of both the groups was headed by Joe Plumeri, who was appointed CEO of Citibank North America. He was incharge of 450 retail branches. People considered him to be rough, but they knew that the troubled bank needed someone like him. He was expected to be a major contender to the whole group after the then current CEOs resigned. He helped increase the group’s earning by approx. 300% to $415Mn. However, in 2000, Plumeri unexpectedly resigned. During the period 2000-2004, Citigroup got involved into a series of scandals, including Enron, WorldCom, predatory lending practices, poor quality research advice, violations of banking rules and European trading abuses. These resulted in the fall in Citi’s price. Ineffective responses were given by the management. There was little improvement in the company’s organizational behavior despite a publicized campaign to improve Citi’s culture. In 2002, triggered by the falling stock price, the company spun off its Travelers Property and Casualty Insurance underwriting business. Travelers earnings were more seasonal and were easily impacted by disasters. Thought the business was merged with St. Paul Companies Inc. in 2004, Citigroup kept the life insurance and annuities underwriting business, which was later sold to MetLife in 2005.