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Management

What Must Ratan Tata's Successor Be Like
By Sanjeev Nayyar, August 26 2010 [esamskriti@suryaconsulting.net]

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First appeared click here to read.

Ever since the Tatas announced  the formation of a Committee to select a successor to the worthy Ratan Tata  there is constant speculation who would that person be! Given the size,  geographical spread and complexity of the Tata (referred to as T) Group it  would probably be easier to nominate India’s PM than to find a CEO for  the Tata Group (referred to as TG).

But first some background information  on the TG. In 2008-09 revenues stood at Rs 3, 25,334 crs or $ 70.8 billion with  65% of its accruing outside India.  TG employs 363000 people and has 28 publicly listed companies. It is divided  into seven business segments namely Communications & I.T. (14%-TCS,  TCommunications), Engineering (24%-TMotors, Jaguar), Materials (45%-TSteel,  Corus), Services (3%-Taj, TAIG), Energy (6%- TPower), Consumer Products  (3%-TTea, Titan, Trent) and Chemicals (4%-TChemicals). In brackets are % of group  turnover and key companies under that business.

You can see that the TG is  present in diversified lines of business from cars, steel to selling books and  air time not to forget new areas like manufacture of helicopters.

Two third of the Tata promoter co  i.e. Tata Sons are held by philanthropic trusts. The Group Executive Office (5  members) and Group Corporate Office (7 members) define and direct the business  endeavors of the TG. The former’s chief objective is to increase synergy  between group companies while the latter reviews with broad policy issues  relating to growth and entry into new growth areas are discussed. Every company  has a Managing Director and Board.

Five core group values are  Integrity, Understanding, Excellence, Unity and Responsibility. Above all the  name Tata symbolizes TRUST.

Ratan Tata (RT) is on the boards  of Fiat SpA and Alcoa and on many International Advisory Boards. He is a member  of the PM’s Council on Trade and Industry and UK  PM’s Business Council for Britain.  By education is a qualified architect.

After Nano and low cost purifier  one has begun to associate Innovation or its Indian name Juggad with the group.

From the above a few things come  out clearly. Tatas are a diversified conglomerate across continents. The  companies are run pretty independently. Centrally there is a great degree of  focus on building the Tata brand and exploring group synergies. Integrity is a  key group value. Giving back to society is an important aim of the Tatas.  Unlike other business houses there is no large or extended Tata family.
According to outgoing Chairman RT  he expects the group to be much bigger than now in India and outside. He hopes that “the  group comes to be regarded as being the best in India — best in the manner in which  we operate, best in the products we deliver and best in our value systems and  ethics”.

It is today a well knit cohesive  group unlike what RT inherited where he had to fight corporate satraps to first  establish his hold over the company, reform it, imbibe it with group Values, give  it a Tata identity and take it to the next level.

Now what should the profile of  RT’s successor be, called CEO for convenience.

The person should have presence  and stature. A requisite since the CEO would have to interact with corporate  leaders globally and Heads of State in India & UK etc.

Should the Group CEO be a  specialist? The Tatas have specialists to manage individual companies so the  CEO should be a generalist with excellent people management skills. These would  be put to test in dealings with senior colleagues, group CEO’s, politicians, world  leaders and diverse employees worldwide.

RT might have got away at times  by virtue of his being a Tata. The CEO might not have this luxury and should  have the ability to manage the Boardroom, carry the team with him at all times.

Note that 18% of the promoter co  Tata Sons is owned by the Shapoorji Pallonji family who would like to see the  value of their investment increase. Hence shall monitor group performance more  closely.

Should the CEO be an Indian? The  Group needs to hire the best available talent. If a non Indian heads the group the  CEO would need to understand the Indian way of working.

The CEO should be a Visionary and  understand how the global economy is going to play out in the next 12-15 years.  Based on that should be able determine the Strategic footprint for the group to  take it to the Next Level.

Since 69% of the TG’s turnover  comes from engineering and materials should the CEO have an industrial  manufacturing background? Not necessarily but such a background would help.  After all adapting technology to emerging markets has been one of the group’s  strengths.

It is very important for the  Group not expect the CEO to be a clone of RT or constantly compare him with RT.  Just like there can only be JRD Tata so also there will only be one Ratan. The  CEO should have a personality strong enough to leave his imprint on the group.  

The CEO should have:
1.Impeccable public integrity and image. You can trust  the Media to investigate the CEO’s background from the moment he was born!
2.A track record that inspires respect.
3.Be able to spot opportunities, the next big  idea, strategize and ensure execution.
4.Run global organizations and managed a set of  business portfolios.  
5.An understanding of how decisions are taken in  the Group and accept as is rather than try to create a different culture i.e.  bound to result in friction. 
6.To realize that the Group and its people could  be pretty set in their ways. Instead of trying to change them the CEO should  find ways to enhance performance.
7.To believe that people are as assets who have to  be nurtured and developed not retrenched at the hint of a downturn.
8.To acknowledge that one of the Group’s focus  area is the Climate Change crisis.
9.To accept that the Group is deeply committed to  philanthropic work.
10.To export the group’s innovation worldwide.
11.The ability to convince the Board to induct  younger and outside talent in the Group Corporate office.
12.The internal strength of character to stick his  neck out by saying that the group would say   produce the Future Infantry Combat Vehicle (FICV) for the Indian Army at  lower cost and comparable quality with the best in the world.
13.Be unemotional and able to hive off businesses  that are not focus areas for the Tatas.
14.An understanding of State politics to avoid  another Singur.
15.The ability to effectively communicate with the  media esp. in India  where he would be under intense scrutiny.  
16.A network of contacts with world leaders in  defence products and energy.
17.An understanding of the African market would assist  the Tatas in capitalizing opportunities there.   
18.To work towards having a larger the number of  woman on the boards of Tata companies.
19.Importantly internalize and promote the five  core group values.

Deep down some rich Parsi  families have not forgotten that it was India  that gave their forefathers refuge when they were persecuted in Iran. Their  nationalistic and philanthropic approach in India could arise out of a feeling  of gratefulness. The CEO would need to relate to this feeling more so if he is  not an Indian.

A non Indian CEO needs to:
1.Know that heads of business in India are as  much concerned about financial results as they are about social issues,  national well being.
2.Know that improvisation and adaptability are at  the core of what is called the Indian way of doing things.
3.Realize that Indians are relationship more than  transaction oriented.
4.That Indians are forever looking out for Money  for Value buys.
5.Understand what unites India is  cricket and Bollywood.

It is not clear what RT’s role  would be after he steps down as Chairman of Tata Sons. Would he become Non  Executive Chairman of Tata Sons? How his role is defined and played out are  key? Would the incumbent be designated as Chairman of Tata Sons or Group CEO?

This is probably the most  interesting and keenly watched leadership change that shall be effected in post  liberalized India.  Ratan Tata’s tenor as Chairman can be a wonderful case study in organizational  change and enhancing shareholder value. It would be very interesting to capture  the process of leadership change in the form of another case study as to how a  diverse conglomerate goes about planning and executing this change. Would this  case study be an example of a successful change only time can tell!

The author is a Management Consultant and Cross Cultural  Trainer.

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[1] Comment(s) Posted
  1. Comment By - Satheesan Kallat Date - 26 Aug 2010 Time - 7:13AM
  2. As the author rightly stated "Tata" name is a luxuary in India ..and it will rmain so..for the coming centuries even.


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