Canadian Banks Mobilize for Preservation of Endangered Species: The Middle Manager
Clarke, David, American Banker
MONTREAL -- Canadian bank management talent has been at a premium since the 1980 Canadian Bank Act opened up the country to foreign banks.
To their annoyance, Canadian-owned banks found their middle management ranks being depleted as 58 American and other foreign banks fished in domestic waters for experienced personnel to complement top management imported from abroad.
Foreign banks now face the prospect of opening up more branches and hiring new staff to capture the larger market share that the proposed liberalization of their own industry will make possible. A bill is before the Canadian Parliament to open up the Bank Act once more, and double the foreign bank asset ceiling to 16% of the domestic bank's Canadian assets.
The expected escalation of the competition for scarce human resources focuses attention as never before on Canadian bank management development programs and policies.
Traditionally, middle and upper echelon positions in Canadian banks have been filled with high school graduates -- often as not from small towns -- who began long apprenticeships with banks and then further upgraded their skills with internal training programs and the occasional spell at an outside educational institution.
Loyalty to and long service with one bank are the hallmarks of the career of this type of executive, who fills many of the top spots in Canadian banking. A notable exception is American-born and trained William Mulholland, chief executive officer of the Bank of Montreal.
The effectiveness of this traditional type of executive has been hard to judge, for until recently there were few other Canadian prototypes with which to compare. The development of leading Canadian banks into institutions with global scope is a positive indicator. Canadian banks do compare favorably with American banks.
For example, share prices of major American banks dropped 23% between Jay. 1 and June 11, 1984, according to the Dow Jones News Service. Meanwhile, a survey of second quarter profits of major Canadian banks conducted by the Toronto Globe and Mail "Report on Business" showed Canadian banks down only 11%.
Among Canadian-owned banks, the Toronto-Dominion Bank had the highest return on equity at 17%, and the highest return on assets at 84 cents in profit for each $100 in assets.
Whatever the current performance of the major Canadian banks, all banks operating in Canada are finding that, in the face of increasingly sophisticated competition using the latest technology, relying on the apprenticeship system no longer suffices. As entry-level requirements increase, however, banks find that they are encountering problems with the Canadian educational system.
Canadian business schools graduate only half the numbers relative to the population of the country as American schools do. Furthermore, the option of concentrating on financial services management within an MBA program is not available at any Canadian university.
The root of the problem is that salaries offered by Canadian universities are not competitive, and the supply of qualified business instructors lags behind demand. With some 300 business school teaching positions vacant, generally strict rules limiting the number of foreign professors who can teach in Canadian universities have been relaxed, but to little avail.
"We should be graduating twice as many to be in the same ratio as the United States," said Urban Joseph, executive vice president of human resources at Toronto-Dominion Bank. "Still, there are several very high quality schools with MBA programs. If you zero in on those, and if you really have a good selection process, your chance of getting the top 25-30% is very high. We also recruit at American universities and there is not much difference when you are in that top part of the class."
For Mr. Joseph, the lack of bank or financial services management training at Canadian universities ". …