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With his team in a slump, Gord Nixon has purged his lineup of veterans, brought in heavy-hitter Barbara Stymiest and completely revamped the game plan. But is this really the bottom of the ninth for the Royal Bank? By Kimberley Noble

THE LAST THING GORD NIXON WANTS TO DO is another interview. It’s the middle of what promises to be a long week, and Nixon, president and CEO of the Royal Bank of Canada, has better things to do than answer yet more questions about his plans to overhaul the country’s biggest chartered bank. Nixon is one of those guys famous for never slowing down—he is, after all, the investment banker who set some fundraising record by dashing up the CN Tower stairs in 16 minutes—but that’s nothing compared with the relentless pace that he’s been setting lately.

It’s late October, just days away from RBC’s year-end. And what a year-end this one promises to be. In the past six weeks, Nixon has restructured Royal Bank management, cutting what used to be five operating divisions down to three and consolidating more than a dozen internal functions under one umbrella. Nixon has also shed blood: five senior managers are gone, four from head office, an unprecedented purge. (Really; other than a handful of rogue fund managers who cheated, when was the last time you heard of the Royal Bank firing anybody important?) Nixon topped this with a headline-grabbing outside hire, talking TSX president Barbara Stymiest into leaving the public company she created to become the Royal’s new chief operating officer as of Nov. 1.

Plus, he’s still on the road. On this particular day, Nixon’s made a breakfast speech, followed by a sales meeting out at some hotel near the airport, and now he’s scheduled to fly to Florida for a two-day corporate and investment banking conference. He says he’s been away from home so much this fall that even his teenage kids have started giving him a hard time. But like this conversation, it can’t be helped. “It comes with the territory,” Nixon says. Since he took over in 2001, Nixon has been criticized for sitting on his hands and letting predecessor John Cleghorn’s senior executives continue to run the bank Cleghorn’s way. Now that he’s visibly making changes, and has persuaded RBC’s board of directors to support his plan, he has to persuade the rest of us that he knows what he’s doing.

Nixon has spent the past year under fire for what critics plainly believe has been mismanagement of the Royal Bank. As proof, they cite the bank’s failure to meet its own short-term financial targets, in particular the poor performance of more than $8 billion in U.S. acquisitions made during the Cleghorn era, as well as the billion or more bucks in market capital that’s evaporated since Nixon took charge. Reaction to the reorganization has focused on whether he’s going to succeed in alleviating those problems.

Illustration by Todd Julie

What they overlook is that Nixon has set his sights on something much tougher than fixing this year’s bottom line. Nixon may have been promoted because the Royal’s board thought that after years of Cleghorn, once described as somebody who would come out of the phone booth still dressed as Clark Kent, they had found themselves a true action hero. Surprise. Turns out that however brilliant Nixon might be at clinching those big deals—and however much he enjoys it—this is not what he sees as his life’s work. Instead, he wants to be remembered as the CEO who purged the bank of its vast and sluggish bureaucracy.

This may not sound as daunting as, say, saving a major airline or big steel company from the brink of bankruptcy. But make no mistake: it’s one of the great business challenges of our time. All chartered banks are bureaucratic enough, but in Canada, the Royal wins the prize: 20 years after the four pillars started to crumble, the bank is still notorious for layers of middle managers and committee meetings that shield its long-standing organizational traditions from anything resembling an innovative method or idea. Nixon’s personal mission is to get rid of all that. He’s determined to create a corporate structure that streamlines internal decision-making while encouraging—and rewarding—interdepartmental co-operation. “We want to make sure the organization is structured around the customer, rather than forcing the customer into the organization,” Nixon says. “To do that we have to break down the barriers, the inefficiencies and bureaucracies, that we know are at the centre of the bank.”

Ever wondered why nobody’s launched a reality show featuring integrated financial services conglomerates getting make-overs? What Nixon’s proposing is a long way from teaching some messy hetero guy how to shop at Club Monaco and make crème brûlée. There’s a reason companies like RBC are so complex. However frustrating they might be, all those vice-presidents and committees are a big part of what’s prevented the Royal from the major scandals and disasters that have occurred at some other banks after they were handed over to the investment bankers. Peeling away the layers built up over a century of bureaucracy without destroying the necessary checks, balances and safeguards requires a clarity of vision and strength of character that you see in legendary entrepreneurs, but rarely, if ever, encounter in bank CEOs.

Is Nixon up to the job? He was promoted to his current position when he was just 44, making him the youngest person ever appointed to run a major Canadian bank. Three years later, he is widely, one might almost say universally, liked and admired for his vast energy, his unflagging friendliness and his exemplary work in investment banking. But he’s still something of an unknown entity. Nixon’s big claim to managerial fame was the way he combined the Royal Bank’s investment banking and corporate lending units in the late 1990s, a feat that may have knocked the socks off Cleghorn and then-RBC Dominion Securities supremo Tony Fell, but did not attract a huge amount of attention outside the bank.

Granted, all the corporate finance people know him, and the CFOs of RBC’s largest corporate clients—companies like Brascan, Quebecor and Dofasco—have probably seen more of Nixon over the years than they’ve seen of their wives. But there are prominent players in corporate Canada who confess to having no real sense of Nixon’s depth or abilities, let alone whether he has a handle on the colossal task of leading at all. “I know Gord,” says one of Canada’s most influential business figures—albeit on a no-name basis. “But I don’t know him as a person of brilliance. I’ve attended meetings where I was at one end of a table of 20 people and he was at the other, and I’ve always found him indistinguishable from all the rest.” Others are less diplomatic. “A revolutionary new strategy in banking?” snorts veteran Toronto investment analyst Ross Healy. “You’ve got to be kidding.”

That said, Healy is the first to point out that the Royal is light-years away from a real crisis. “To be absolutely brutal about this, they’ve got their share of problems,” he says. But for all the publicity, RBC’s stock price has spent the past year bouncing back and forth within a reasonably narrow price range, never losing or gaining more than 10 percent between extreme highs and lows. Earlier this fall it was the subject of much finger pointing and name-calling because it was the only one of Canada’s Big Five banks to see its shares lose rather than gain value in the current calendar year. Yet that stock price has bounced back again in recent weeks, trading 3.5 percent higher than at the end of 2003, and at a Nov. 12 close of $63.37, coming within one percent of its 52-week high.

The same goes for return on equity, which ranges in the high-20s to 30 percent in Canada. But the Royal ended up at only 17.6 percent at the end of the third quarter once the bank factored in its poorly performing U.S. operations, in particular its North Carolina-based Centura Bank and struggling mortgage businesses. Analyst Quentin Broad of CIBC World Markets points out that there have been times this year when there’s been “only a buck a share” standing between Royal Bank’s total market capital and that of second-place Bank of Nova Scotia—which, until the past year, would have been an unthinkable concept. “RBC could end up with the second-largest market cap in Canada,” Broad says. There are also dark mutterings that the Royal is bracing for more than $1 billion in acquisition-related writedowns.

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The Bay Street Bull - Exploring Executive Life