Ratan Tata: The man who made the elephant dance


Ratan Tata in the Nano, the world's cheapest car. (Illustration: The Hindu)

By Raghuvir Srinivasan/The Hindu

“Well, what’s new?”, asked the legendary J. R. D. Tata as Ratan Tata walked into his room on March 23, 1991, for his regular Monday meeting. “Nothing Jeh, we only met on Friday. There’s nothing new since then,” replied Mr. Ratan Tata. Jeh is supposed to have smiled and said “I have something new, I’ve decided to retire as chairman and to appoint you in my place as Tata Sons’ chairman.” With those famous words, recounted by Mr. Ratan Tata himself, began a fabulous journey on a balmy spring afternoon; a journey that will end on Friday as Mr. Tata hands over the mantle to his successor, Cyrus Mistry.

 

Mr. Tata received the baton from Jeh, as Mr. J. R. D. Tata was fondly known, to an empire made up of a disparate set of companies united only by name, literally. When he hands over charge to Mr. Mistry on Friday, Mr. Tata will present the keys to a cohesive, well-knit conglomerate that is united not just by name but by ideology and value-systems and a brand that is among the most valuable in the country. It is a group where the binding force is not the charisma and aura of a single personality, as it was in Jeh’s time, but one united by a shared vision, philosophy and identity.


Mr. Tata has transformed the style of functioning of the group from a personalised to an institutionalised one and in his own understated style. Without doubt, this has been one of the most crucial factors for the group’s success in the globalised world of today and will go down as the biggest achievement of Mr. Tata when historians sit down to record the group’s history under his leadership.


A daunting task


Accomplishing this was not easy though. Jeh’s patriarchal style of functioning — where in his own words, he was “firm in principle and easy going on details so long as the principles of honesty and integrity were not affected” — allowed prima donnas to grow right under his feet and carve out their own little empires within the group. And it was these satraps — Russi Mody of Tata Steel, Darbari Seth of Tata Chemicals, Ajit Kerkar of Indian Hotels and Nani Palkhivala of ACC — that presented Mr. Tata’s first challenge.


Used to a laissez-faire approach, these gentlemen resented the imposition of a group mandate imposed by someone to whom each thought he had lost the race for chairmanship of the group. And there ensued the inevitable unpleasantness as Mr. Tata rightly sought to exercise control. It consumed the better part of the first five years of his leadership but he emerged from it with greater authority albeit saddened. Reflecting on this period in 2003, Mr. Tata wrote: “If I reflect on what these ten years have been for me personally — they have been a mixed bag. There is some satisfaction…. there is also a sense of frustration at the resistance to change from many of my colleagues that I have seen through this period of time. Some resistance is open, which I can deal with, but some resistance in the form of undercurrents, has been very destructive.” Strong words, these and to think that he wrote them a full decade after his jousts with the satraps reveals how much he was affected.


Even as he fought to impose his suzerainty over the group companies, Mr. Tata started restructuring the group. By the time he stepped down as executive chairman in 2002 when he turned 65, Mr. Tata had sold off 16 businesses and entered into 32 new businesses. Interestingly, all that he did in the first decade of his leadership were planned by him way back in 1978 itself when he sent a so-called “Tata Plan” to Jeh. It impresses as to how Mr. Tata foresaw what was to follow very clearly and had the gumption to put up a note to the formidable Jeh; Mr. Tata was all of just 40 years old then and still in the fringes. Jeh had already been leading the group for 40 years by then!


Mr. Tata clearly enunciated his philosophy that the group had no business to be in any business where it did not rank among the top three. Thus, first out was Tata Oil Mills Company, original maker of the dear Hamam soap. As the company was sold to Hindustan Lever (then) the move set off shock waves in the group and in India Inc itself. The Tatas selling off a company? And that too ol’ boy TOMCO?


The man himself was clear in his mind as a string of divestitures soon followed. Lakme, Merind, ACC, Nerolac Paints, Hi Tech Drilling, cement business of Tata Steel, white goods business of Voltas and so on. Mr. Tata was beginning to grow in his role. Simultaneously, he drew up a plan for the group to enter or strengthen its presence in what he saw as the growth businesses of the future — IT, telecom, financial services and airlines. This is where he encountered his first setback.


Tata Consultancy Services, then a division of Tata Sons, grew rapidly and importantly, without the need for much guidance from Mr. Tata. It is to his credit that he left the company alone and did not interfere in its functioning which is largely the reason for where TCS is today. But his plans to enter the airline business suffered an aborted take-off. Politics and competition connived to deny Mr. Tata an entry into a business that he was passionate about. And he was bitter.


Answering a question in an interview to India Today in February 2003 on whether he couldn’t handle the politics surrounding his proposal for an entry into aviation in partnership with Singapore Airlines, Mr. Tata, a qualified pilot who, in 2007, flew the supersonic F-16 combat aircraft, said: “… three governments changed the law to keep us out…. I’m proud I cannot handle that kind of political manipulation.


The group’s financial services company, Tata Finance Ltd., landed in trouble when the top management committed fraud. The company was saved from the brink of collapse.This was atypical in liberalising India where the natural option would have been to allow the company to collapse.


Of regrets and resolutions


Mr. Tata’s biggest disappointment though was reserved in telecom. Though it managed to acquire international gateway provider VSNL from the government, the group could never get its strategy right in telecom. Maybe things would have been different if it had not lost to the Birlas in the battle for control of Birla-AT&T-Tata, which went on to become Idea. The choice of CDMA over GSM was flawed and the policy quagmire would go on to haunt Mr. Tata as his conversations with corporate lobbyist, Niira Radia, tumbled into the open. This was a low for both Mr. Tata and the group; a virtuous brand had been singed, the pristine pure image of the Tata group had been stained.


Yet, it proved that Mr. Tata was human and humans are after all fallible. The telecom tangle also highlighted the perils of doing business in an industry where the government held all the aces and could be manipulated. Perhaps memories of the airline fiasco and the fear of an encore were behind some of the moves that the group made to influence government policy. These would have been considered minor transgressions for any other business group but the Tata group was unlike any other. It had a reputation to guard and high principles to live by and hence the feeling of let down among stakeholders.


Singur low


The steel hiding behind the calm and dignified exterior of Mr. Tata was revealed during the Singur controversy when an agitation by farmers supported by the Mamata Banerjee’s Trinamool Congress almost killed his dream Nano project.


Along with the tangle over telecom, this episode must rank as a low point of Mr. Tata’s tenure.


While people may remember him for the Nano, the truth is that he should be credited for something much bigger — that of leading the stodgy commercial vehicle manufacturer, Tata Engineering and Locomotive Company (now renamed Tata Motors) into the glitzy world of passenger cars with Indica.


Of course, Tata Motors could have done better than it has in the car business; it let the momentum slip in the Indica segment and by the time it woke up to the fact that the model was fatigued, competition had drawn away. Mr. Tata made up for it though with the $2.3 billion acquisition of Jaguar Land Rover (JLR) in 2008.


Though it was a stretch for the group financially, the JLR buy has proved invaluable now in terms of the technology learnings, boost to the Tata brand image and, of course, for profitability.


How history will judge


When the chapter on Mr. Tata’s leadership is written by historians they will probably settle on the following three as his major achievements: making the group a cohesive whole from a mere sum of disparate parts; giving it focus through divestments and acquisitions; and finally, taking it global. Indeed, the group earns 60 per cent of its revenues from global operations now; it was an insignificant figure when he assumed charge in 1991.


Has Mr. Tata accomplished everything that he could have? Certainly not, there is a lot more to be done. Every leader when he steps down leaves behind his legacy and it is for the next one to tackle it. After all the restructuring, Mr. Tata still leaves behind an unwieldy group for Mr. Cyrus Mistry to lead. Surely, Mr. Mistry will discover several things that he needs to change, just as Mr. Tata did when he took over. One thing is clear though: Mr. Ratan Tata taught the elephant to dance. It is now up to Mr. Mistry to teach it newer tricks. And he has to do that without compromising on the basic values of the group. Quite a challenge and all we can say is: Godspeed, Cyrus.



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