The Tata Group


“In a free enterprise, the community is not just another stake holder in business – but is in fact the very purpose of its existence.” 1

– Jamsetji Tata

Background

Founded by the legendary pioneer Jamsetji Tata in 1868, the Tata Group is one of India’s oldest private sector business entities. 2A global enterprise that operates in over 100 countries across six continents, the Tata Group has been India’s largest Business House almost uninterruptedly for over a century now. 3Its companies collectively clocked revenues of Rs. 673,347 crores during FY 2016-17; while the 29 publicly listed entities among these together possessed a market capitalization of Rs. 944,057 crores (as on 28 March 2018). 4

With its deeply entrepreneurial and patriotic spirit, the Tata Group established several industries of national importance. It started India’s steel industry at Jamshedpur in 1907, and also set up the nation’s first major hydroelectric power project (at Khopoli) in 1910. 5Meanwhile, Jamsetji Tata had constructed the country’s first luxury hotel in 1903. The Taj Mahal Hotel was Mumbai’s first building to use electricity and was equipped with American fans, German elevators, Turkish baths & English butlers. 6

The India Cement Company was set up in 1912, while the Tata Industrial Bank took shape in 1917. The Group also brought civil aviation to India in 1932, when the Tata Aviation Service took to the skies. In fact, JRD Tata held the Indian Pilot License Number 001. 

The Tata Group proactively introduced several labour welfare benefits at their facilities, including an eight-hour working day, free medical aid, Leave with Pay, Provident Fund Scheme, Workmen’s Accident Compensation Scheme, Maternity Benefits, Profit Sharing Bonus and Retirement Gratuity. Most of these welfare initiatives were incorporated into national statutory legislation, several years after they were first introduced at the Tatas. 7

Headquartered in Mumbai, the Tata Group is highly decentralized in nature. It presently comprises of nearly one hundred operating companies that collectively employ around 700,000 people. Each company is relatively independent, and operates autonomously under the guidance and supervision of its own Board of Directors. The Group manages the relationship with its member companies through its representatives on their Boards.

The Tata Group is governed by a complex, interwoven federal structure. Tata Sons is its principal investment holding company. 8

Tata Sons is the promoter of the various Tata companies and maintains an equity stake in nearly all of them. It sets the overall strategy for the Group, and provides investment capital to its affiliate companies as required.

The Tata corporate brand serves to unify the Group. It embodies the cherished values of integrity, excellence, understanding, responsibility, and unity. However, different group entities use the Tata brand in different ways. While Tata Steel, Tata Motors, and several others explicitly use the corporate name and logo, many others such as Trent and Taj Hotels refrain from doing so. 9

A Business Excellence and Brand Promotion (BEBP) agreement governs the manner and extent of the use of the Tata brand by the respective Group companies. These companies pay Tata Sons a nominal fee that is used to run centralized services for the benefit of all the Group companies. 10

The pattern of corporate behaviour of the House of Tatas was established by the business ideas, strategies, and ethics of Jamsetji Tata. Over nearly 150 years of existence, the Tata Group has been led by visionaries who stayed true to the values of its Founder.11Dorabji Tata, the elder son of Jamsetji, succeeded the latter as the Group Chairperson in 1904. After Dorabji’s death in 1932, Jamsetji’s nephew Nowroji Saklatwala took over as the Tata Chairman.

Bharat RatnaJRD Tata, the son of Jamsetji’s cousin and business partner RD Tata, came next. Remaining as Chairman for 53 years, JRD guided the Group from the pre-independence era right uptil the economic liberalization of 1991. Ratan N. Tata, the great-grandson of the Founder, held the forte thereafter till 2012. Cyrus Mistry became the next Chairman of the Tata Group. He held the position for the next four years, before being unceremoniously ejected in 2016. 

Natarajan Chandrasekaran is the current Chairman of the Tata Group.

The Social Mandate

The Tata Group was originally founded for the purpose of creating and spreading wealth, in order to strengthen the Indian nation. Its present mission is to improve the quality of life among the communities that it serves globally. 12

Tata Sons remains a closely held firm. Two-thirds of its equity share capital is held by philanthropic trusts that have endowed institutions for science and technology, medical research, social studies and the performing arts. The Tata Trusts also provide aid and assistance to non-government organizations working in the areas of education, health care, and livelihoods. 13In addition, a wide range of social welfare activities are independently undertaken by the individual Group companies at their locations. 14

Jamsetji Tata placed the greater good of society at par with business growth. His belief in returning to society manifold of what the business earns from the peoplecontinues to form the bedrock of the Tata culture. Few other corporations of comparable size and visibility across the world have been known to place their charitable arm at the controlling nexus of the business.This evokes deep trust and respect among its customers, employees, and the community.

The commitment of the House of Tata to protect its heritage of trusteeship was poignantly on display after the 2008 terrorist attack in Mumbai. This assault had badly damaged the Group’s flagship Hotel – the Taj Mahal Palace and Towers. 

The Tata Group directly oversaw the medical treatment of injured staff members, and paid generous health and school tuition benefits to the families of all slain individuals. 15This included railway employees, police officers, and even the passersby who had had no direct connection with the hotel before the attack. The Hotel itself was repaired and re-opened within a year of the tragic event. 15

The Tata Group operates on the premise that a business thrives on social capital (the value created by investing in the greater good to community and human relationships) as much as it does on hard assets. 15

The Genesis of the Institution

Nusserwanji Tata, the father of Jamsetji Tata, was the first businessman in a family of Zoroastrian Parsi priests that hailed from the small town of Navsari in Gujarat. Jamsetji followed in his father’s footsteps and pursued a commercial career in the belief that the people could be better served that way. Although he eschewed priesthood, Jamsetji remained loyal to Zoroastrian tenets that describe a worthy life as one that is dedicated to charity and justice.

As an entrepreneur, Jamsetji founded the Tata business in 1868 as a small trading company that prospered – partially on account of the opium trade which was perfectly legal at that time. In 1869, he converted a bankrupt oil mill in Mumbai into a textile factory. That was financed with stock issued in India’s first private placement. 16

Two years later, the mill was sold to a local cotton merchant for a significant profit. This was followed up with an extended trip to England in order to exhaustively study the Lancashire cotton trade. 

This visit instilled in Jamsetji the passion as well as the confidence to replicate that success story in his own country. 

Jamsetji’s genius figured out that the chances of success could be maximized if three crucial points were factored into the endeavour: a) close proximity to cotton-growing areas, b) easy access to a railway junction, and c) plentiful supplies of water and fuel. The (then) remote town of Nagpur, at heart of Maharashtra’s cotton country, was chosen as the location for this endeavour. Jamsetji floated the Central India Spinning, Weaving and Manufacturing Company at Nagpur. The Empress Mills was inaugurated there in 1877. 17

After making a fortune in textiles, Jamsetjideveloped a long-term blueprint for his family’s role in India’s future. It was a humble start for a grand vision. India’s first domestic steel plant and hydro-power generating station were conceived and planned, as also a grand institution that could tutor Indians in the sciences. Even in theface of racial prejudice and the dismissive attitude of the colonial viceroys, Jamsetji stoodfirm inprogressing these initiatives.

None of these projects materialized during Jamsetji’s lifetime. However, the seeds that he laid and the force of will that he displayed helped to ensure that this triumvirate of his dreams eventually found glorious expression through the dedicated and intense efforts of his successors. 17

Jamsetji spelt out his concept of a township for the workers at the steel factory in a letter that he wrote to Dorab Tata in 1902, five years before a site for the enterprise had even been identified. 18He envisaged widely available electric power as well as housing for workers that featured running water.

“Be sure to lay wide streets planted with shady trees, every other of a quick-growing variety,” the letter stated. 18“Be sure that there is plenty of space for lawns and gardens. Reserve large areas for football, hockey, and parks. Earmark areas for Hindu temples, Mohammedan mosques and Christian churches.” 18 Born of such a sterling vision, the city near the tribal village of Kalimati was aptly named as Jamshedpur. 18

Jamsetji also moved to expand and improve the educational opportunities for Indians. In 1892, he created the J.N. Tata Endowment for Higher Education as one of the world’s first charitable trusts. This scholarship program sent bright young Indians of limited means overseas for training in science, engineering, law, government administration, and medicine. 15By 1924, two out of every five recruits into the elite Indian Civil Service were Tata scholars. 15

It was especially important that Indian citizens be admitted to the Civil Service. This is because it showed that native Indians were amply capable of governing themselves. Illustrious JN Tata Endowment scholars include former Indian president KR Narayanan, renowned scientists Raja Ramanna, Jayant Narlikar and Raghunath Mashelkar, and Jnanapeethaward-winning writer Girish Karnad. 15

The soft-spoken Jamsetji Tata was one of the prominent founders of modern India. As the father of Indian industry, hetook the lead in ideation as well as action. 19As a fervent patriot, Jamsetji helped his countrymen work towards political and economic self-sufficiency.20The moving force behind his projects was the desire to advance the industrial frontiers of India, and not merely to earn profits. 

In his choice of business structures and strategies, Jamsetji demonstrated a remarkable degree of originality that often ran counter to the prevailing wisdom. For instance, his remarkable concern for values, ethics, and responsible corporate citizenship was at least equal in measure to his desire for quantifiable returns on investments. 20

Jamsetji Tata thus employed the wealth that he created in order to enrich his beloved India and her people.

The Dorabji Tata Era – The Era of Disciplined Growth

Jamsetji’s idea of philanthropy found true and ample expression in the work of his sons Dorab and Ratan, both of who donated a major chunk of their personal wealth for public good. Sir Dorab Tata was the quintessential entrepreneur, who worked tirelessly to make his father’s visionary ideas a reality. He roamed the jungles of Jharkhand in a bullock cart to set up Tata Steel, and also pioneered the generation of hydroelectric power in the wilderness of the Western Ghats. On the other hand, Sir Ratan Tata was a connoisseur of the arts and a passionate votary of social development. 

Born in 1859, Dorabji Tata attended the Proprietory High School in Mumbai and subsequently the Gonville and Caius College at Cambridge. Dorabji distinguished himself at sports, and won honours for cricket and football. He also played tennis for his college, became an expert rower, and was a good horseman. After his return to Mumbai, Dorabji attended the St Xavier’s College and graduated in 1882.

Following Jamsetji’s death in 1904, the chairmanship of the Tata Group passed on to Dorabji Tata. At that time, the fledgling Tata Group owned three textile mills and the Taj Mahal Hotel in Mumbai. Dorabji guided all the three unfulfilled passions of his father’s life to fruition – the steel mill, the hydroelectric plant and the Indian Institute of Science at Bengaluru. 21

Under Dorabji’s stewardship, the Tata Group also added two other electric power companies, an edible oil and soap company, two cement companies, a leading insurance company, and an aviation unit. 22The other industrial companies established during Dorabji’s tenure were those that manufactured and supplied commercial goods such as tin-plate, steel tubes, and transport vehicles – which India did not have at that time.

Dorabji Tata expanded Jamsetji’s commitment to economic development and community welfare to include the workplace. In 1917, he invited the famous British social scientists Beatrice and Sidney Webb to recommend a medical-services policy for his employees. 14The Tata Iron and Steel Company was the worldwide pioneer in instituting modern pension systems, workers’ compensation, maternity benefits, and profit-sharing plans.

Dorabji Tata’s business sense and audacity saw the steel company undertaking a five-fold expansion program in the post-World War I period. 21However, spiraling costs combined with transport and labour difficulties in the West and an earthquake in Japan upset his calculations. Steel prices tumbled, and the venture slipped into trouble in 1924. It got to a point when there was not enough money in its coffers to pay wages to the steelworkers.

However, Dorabji’s commitment to his father’s vision and values was so strong that he staked his entire fortune (including his wife’s personal jewellery) to save the steel company. 22All his personal assets worth about Rs. 1 crore were pledged to obtain a loan for the enterprise. The company eventually secured support from other unexpected quarters, and survived the crisis.

Sir Dorab had an enduring love for the sport. He became a patron of the Indian Olympic Association. In fact, India owed its participation at the Antwerp Olympic Games in 1920 in great measure to Dorabji Tata. He also financed the Indian contingent that attended the Paris Olympics in 1924. 

Like his father, Dorabji too believed that wealth ought to be put to constructive use. Among his most valuable legacies was the establishment of the Sir Dorabji Tata Trust. The mandate of this Trust is to advance learning and research and relieve human distress, without any distinction of place, nationality or creed. Its trustees were empowered to sell all of Dorabji’s lands, securities, and jewellery. However, they were not permitted to withdraw the shares of Tata Sons that he had to his credit. In this manner, Dorabji sought to ensure the integrity of the parent firm.

Sir Dorab gave the credit for his achievements to Jamsetji’s pioneering spirit. It was his belief that “kind” fate had enabled him to advance his father’s inestimable legacy of service to the country. 23

Nowroji Saklatwala – The Era of Skillful Navigation

Nowroji Saklatvala, the son of Jamsetji’s sister, became the third Chairman of the Tata Group in 1932. Confronted with the task of consolidation during the global depression of those years, Sir Nowroji steered the Group admirably through a difficult period during his six-year tenure.

Nowroji saw consolidation and cost control as his most urgent task. He focused upon Tata’s iron and steel, textile, banking, and power sectors. Doing “more with less” became his mantra.

Then, he turned his attention to integrating the several cement businesses in India for the sake of their continued survival. Blessed by an ability to listen to all the sides and to bring rationality to the table, Nowroji was successful in helping find a common ground among the conflicting interests of the several players in the cement industry. Thanks to his diplomacy, the various businesses were saved and merged to form the Associated Cement Companies (ACC).

Sir Nowroji had started out as a Tata employee in 1889, as an apprentice in one of the textile mills. Being a quick learner, he impressed all those around him with his work ethic. 24Nowroji understood the intricacies of the cotton products being created, as well as the economics of the industry. He was therefore promoted as the Head of the Mills Department within a few years.

In 1917, Nowroji was named as the Chairman of the Bombay Mill-Owners Association. This was a sign of the trust and respect that he commanded within the industry. In 1921, he represented the Indian employers at the International Labour Conference in Geneva.

Nowroji was a keen sportsman too. At the end of a tiring workday at the mills, he inevitably traded his workman’s tools for the cricket bat. In addition to keeping him fit, the game was of immense help in honing his capacity for collaboration, team building, and leadership. As his professional star continued to rise within the House of Tatas, so did his reputation on the cricket field. Nowroji played first-class cricket for the Parsi team of 1904-05.25

Within the Group, Nowroji was seen as a valuable team member who put his Tata colleagues and employees before himself. Although comfortable working behind the scenes, Nowroji was not afraid to accept responsibilities or to speak his mind. Blessed with the traits of respect, leadership and flexibility, he worked closely beside Dorabji as a Tata inner circle member.25

Sir Nowroji was a visionary who placed a tremendous premium on staff welfare. As the Tata Chairman, he provided the labour force with unprecedented benefits and privileges that included an innovative profit-sharing scheme. In September 1937, he raised the wages of the lowest-paid workers and improved the service conditions of temporary employees at Tata Steel in Jamshedpur. 

The well being of the people was always at the heart of whatever Sir Nowroji did. 24No work, especially that which benefited people, was too small for the big man.

JRD Tata – The Era of Expansion

Jehangir Ratanji Dadabhoy (JRD) Tata was the Chairman of the Tata Group for an extraordinary 53 years after Sir Nowroji passed away. He nurtured the Tata Group’s reputation for integrity and innovation and is credited with expanding its activities in India after the country gained independence.

 JRD had joined the Tata Group as an unpaid apprentice in December 1925 under the tutelage of John Peterson, a retired Indian Civil Service officer. The following year, JRD’s father R.D. Tata passed away.

 The 22-year-old JRD was then appointed as a director on the board of Tata Sons. When he was elevated as the Chairman in 1938, JRD was the youngest member of the Tata Sons board. 

With the Group having passed through several years of financial struggle, JRD’s mandate was expansion. Over his five decades of stewardship, the Tata business grew from 14 companies to 95. Simultaneously, its assets ballooned from $100 million to over $5 billion. The Group entered into chemicals, automobiles, beverages, and information technology. 

Although JRD was a member of the Tata family, he recognized that the Group could not realize its full potential for expansion and profit if it continued as a family business. Breaking with the prevalent Indian business practice of recruiting family members to run different operations, JRD brought in professional executives. He turned the Tata Group into a business federation, where entrepreneurial talent and expertise could flower without hindrance.

JRD also played a critical role in enhancing India’s scientific, medical and artistic quotient. The Tata Institute of Fundamental Research, the Tata Memorial Hospital, the Tata Institute of Social Sciences, the National Institute of Advanced Sciences and the National Centre for the Performing Arts are all exemplars of excellence in their respective fields. These projects would not have come to fruition without JRD’s steadfast support.

The first (and undoubtedly the dearest) of JRD’s big adventures in business was born out of his childhood fascination for flying. In 1932, the first flight in the history of Indian aviation lifted off as a Tata Aviation Service offering from Karachi to Mumbai – with JRD personally at the controls of a Puss Moth aircraft. JRD nourished and nurtured his airline company till 1953, when the government nationalized it as Air India. 26Even thereafter, he continued to head the airline till 1977 as a labour of love. Tata executives privately complained that the Chairman spent more time worrying about the national airline than he did about all of the Tata Group. 27

The qualities that JRD brought to the running of Air India were as much in evidence in his steering of the Tata Group. 26His unflinching and unwavering commitment to the highest principles and standards was the light that forever illuminated his path, and guided his actions. 

JRD Tata’s commitment to perfection bordered on fanaticism. He was never satisfied with the second best in any task, however small. Like the famous Italian sculptor and artist Michelangelo, JRD believed that “Trifles make for perfection, for perfection is not a trifle.”

JRD Tata was an unusually warm and caring person. He considered a meritorious leader as one who got on with individuals according to their ways and characteristics. This sometimes involved self-suppression, which he considered as painful but necessary. He held that a true leader was one who could lead human beings with “affection”.

JRD was a deeply appreciative soul. He concentrated on “the ounce of gold” in his colleagues, and overlooked the mounds of earth that must be mined to reach it. JRD inspired performance, and never needed to command it. He touched power, but personally remained untouched by it. 

JRD Tata detested pomposity and avoided the public eye. He fit perfectly into Bob Galvin’s mould of humility, which “does not mean that one thinks less of oneself; it means that one thinks of oneself less.” For instance, upon being informed that the Indian government was bestowing the Bharat Ratna(the country’s highest civilian award) upon him, JRD is reported to have said, “Why me? I don’t deserve it.” 

Most of all, JRD Tatacame to represent an exalted idea of Indian-ness – progressive, benevolent, ethical and compassionate. To JRD, the term “national interest” meant advancing the country’s scientific and economic capacities. He had strong views on what would help India in its gigantic struggle to eradicate poverty. Other people did not necessarily agree with his views on issues such as the country’s economic model, its growing population, or even its business practices. However, nobody ever doubted the nobility of JRD’s intent. He will always remain as a symbol of integrity and righteousness.

JRD Tata was one of the last of the great patriarchs of Indian industry. Referring to JRD as an industrialist is akin to calling Mahatma Gandhi a freedom fighter.27JRD considered his leadership of the Tata Group as complementary to his dedication towards championing the interests of India and her myriad people. He brought a rare dignity and sense of purpose to these twin undertakings.

When JRD Tata breathed his last at a Geneva hospital in November 1993, an epoch had ended. A true and noble bit of India (and Indian-ness) was gone forever.

Ratan Tata – The Era of Internationalization 

Ratan N. Tata (RNT) assumed the Chairmanship of the Tata Group when JRD passed on the baton to him in 1991. RNT was the son of Naval Tata, who had been adopted by Jamsetji’s younger daughter-in-law Navjibai Tata. Naval Tata was closely involved with the Tata Group for over five decades, and was elected to the Governing Body of the International Labour Organization (ILO) 13 times. 

RNT attended school in Mumbai. He completed a bachelor’s degree in architecture from Cornell University in 1962. Returning to India, he commenced work on the shop floor of Tata Steel. Ratan worked closely with JRD Tata for many years thereafter. He moved through Tata Textiles, NELCO, Tata Motors, Tata Industries and other Group companies – before being anointed as JRD’s successor at Tata Sons. 

Ratan Tata inherited a conglomerate that was characterized by a deeply entrenched silo mentality. There was very little operational coordination among the different Tata companies. The internal milieu in the Group was characterized by autonomy and delegation. A few of the Company Heads had assumed virtually absolute decision-making authority as well as governance responsibility. 

RNT’s first task was to introduce new controls and benchmarks, in order to ensure that all the companies upheld the lofty standards of the Tata Group. However, when he tried to institute some major changes that were aimed at centralizing certain aspects of management and policy, he faced tremendous resistance from the company “satraps.” 28

Appreciating that the organizational culture created by JRD made it impossible to rule by fiat, Ratan Tata decided to invest financially in each company. This helped to increase Tata Sons’ direct control of key Group entities. As the Chairman of the Tata Trusts that held majority stakes in several Tata companies, RNT utilized this additional indirect leverage upon these firms. These moves helped to re-establish productive ties with the companies, and helped to catalyze their mutual co-operation with one another.

In addition to acquiring a strategic financial stake in key companies, Ratan Tata promulgated the Tata Code of Conduct (TCoC) in 1998. This served to unite the (then) contentious individual companies in their adherence to a common purpose and set of values. It also helped to build a uniform ethical identity for the Tata Group and all its constituents. 29

In order to seal the task of integrating the Group, RNT instituted a corporate branding initiative. This was designed to reposition the Tata Group as a progressive Business House. It also served to clarify which companies constituted the Tata core. 

Under this novel scheme, each company was required to earn the right to use the Tata name through a Business Excellence and Brand Promotion (BEBP) agreement with Tata Sons. The BEBP document outlined the business principles that a Group company had to sign up for, before it was permitted to use the Tata brand or logo. Instead of the Tata name being imposed on the affiliated companies, this brand was leveraged to bring the divergent companies back into the Tata fold. 

These measures to assimilate the Group companies together, and to create a common set of business expectations and practices, were admirable. These were tremendously effective too, as they led to the House of Tata becoming whole once again!

Ratan Tata had taken over as the Group Chairman just prior to the liberalisation of India’s economy. While the Indian businesses were protected from external competition at that time, they were also limited by very tight government controls. RNT surmised that liberalisation was both an opportunity and a threat for the Tatas. While growth became relatively easier under the new regime, the Group was deeply vulnerable on account of several of its companies being over-manned and under-managed.

Further, the Tata Group’s brand identity, as well as business interest, was strongly rooted in the Indian national culture and history. However, when the markets gradually opened up as a result of the economic reforms, the Group swiftly moved to internationalize itself. 9

In the new millennium, Tata’s international acquisitions transformed the Group from a primarily Indian corporate into one of the world’s most visible conglomerates. The first major acquisition was that of Tetley Tea (one of Britain’s leading tea brands) in the year 2000. This move went almost unnoticed. In 2007, Tata Steel acquired the Anglo-Dutch steel giant Corus for an excessive $12.1 billion. That same year, the Indian Hotels Company renamed Boston’s venerable Ritz-Carlton hotel as the Taj Boston after acquiring it for $134 million. In 2008, Tata Motors acquired Jaguar Land Rover (JLR) for $2.3 billion. 

The changes were dramatic. From being identified with secure employment (“for shoes there’s Bata, and for jobs there’s Tata”), the Group now became obsessed with customer service of international standards. Over two-thirds of the Tata revenues were earned abroad during RNT’s time.

Meanwhile, the Group continued to pursue “frugal” innovation with new products that were designed to appeal to the poor people as well as the rising middle class. Tata Motors made small trucks that could replace three-wheelers, while Tata Steel constructed a prototype of a $500 house that could be bought in a shop. TCS designed an innovative software package that taught illiterate adults how to read in 40 hours. It also co-produced an inexpensive water filter (the Swach) using ingredients such as rice husks. 

Tata Nano was the Rs. 1.5 lakh car that was the Group’s best-known frugal product. However, it was erroneously marketed as a cheap car. This positioning turned out to be disastrous because people mistook it for being sub-standard in quality. After various flip-flops over the years, the Tata Nano is now set to make a comeback as an electric car with a new name and identity. 30

In December 2012, Ratan Tata assumed the title of Chairman Emeritus after relinquishing his position as the Head of the Tata Group in favour of Cyrus Mistry. This was the first instance in history when the Group Chairman was drawn from outside the Tata family. This was a remarkable feat, that spoke volumes about the level of openness that the Tata Group had embraced during RNT’s tenure.

Cyrus Mistry – The Era of Consolidation

Cyrus P Mistry was appointed as the Chairman of Tata Sons in December 2012, at a relatively young age of 44 years. As the successor to Ratan Tata, Cyrus Mistry was the sixth Chairman in the relatively long history of the Tata Group. He was only the second one from outside the immediate Tata family. 31

Known for being decisive, Mistry was restrained, analytical and thoughtful during his four years at the helm of the Tata Group. A revival strategy for the Group had been outlined around three contours: 32

a) Nurture group companies by leveraging the parenting advantage of the Group Centre;

b) Harness synergies to maximize the performance of the companies, and

c) Optimize the Group portfolio for sustained future performance.

Innovation was one of Cyrus Mistry’s pet themes. A Group Technology and Innovation Office was created to lead research and deliver innovative products and services across the Tata Group. The domains of energy, food & wellness, digital consumer products & services, and digital factory & fleets were identified as its focus areas. 

After the remarkable expansion that took place under his predecessor, Cyrus Mistry undertook some steely measures in the interest of consolidating the operations of the Group. The dire necessity of these initiatives also arose from the fact that the Group had by now begun to bleed. 

Tata Steel Europe was put on the block, while some of the overseas properties of Indian Hotels Company were sold. Several other loss-making Group companies (or parts of their operations) were also in the line of divestment, after a writing-down of their value. However, there was no sign of the emergence of an expansive vision that has been the hallmark of the Tata leadership in the past.

In October 2016, in a relatively sudden and highly controversial move, Cyrus Mistry was “replaced” as the Chairman of Tata Sons – the parent company of the Tata Group. 33

While no cogent reasons were provided for the move, it was alleged that Cyrus Mistry had eroded the values and the ethos of the Tata Group. He was also accused of dismantling its governance structure in order to centralize the power in his own hands. There were counter-allegations of corruption, constant interference in operational functioning, poor corporate governance, and the lack of empowerment towards taking tough business decisions that appeared to be the need of the hour for the Group.

Natarajan Chandrasekaran – The Era of Aggression?

Upon Cyrus Mistry’s untimely dismissal, Ratan Tata became the interim Chairman of the Group for a period of four months. The erstwhile chief of Tata Consultancy Services (TCS) Natarajan Chandrasekaran “Chandra”was thereafter anointed as the new Chairman of Tata Sons on 21st February 2017. A computer engineer who joined TCS from campus in 1987 and became its CEO in 2009, Chandrabrought with him an unparalleled track record of value creation and visionary leadership that was the need of the hour for the Group. 

It is premature to assess how the House of Tata shall shape up under Chandrasekaran’s watch. Under the watchful eye of the Chairman Emeritus, heis attempting to transform the Tata Group into an agile business that is intensely focused upon profitability. However, only time will tell whether Chandrasekharan would manage to retain the illustrious sheen of the Tata heritage or the Group shall remain benevolent but indifferently performing Indian corporate. 34

Concluding Reflections

The Tata Group has done business across the world for a century and a half in a spectacularly unique way. Its combination of developing-country experience and socially progressive business values has given it a distinctive edge. If the Tata business model continues to be financially sustainable, the Group shall remain a beacon for other corporations that seek to maintain growth, build a reputation as true global citizens, and above all fulfill their own sense of purpose.

The Tata culture of probity has helped to insulate it from India’s endemic corruption in the past, and guided its behaviour when standards have slipped. For instance, when the Group discovered widespread irregularities in Tata Finance in 2001-02, it blew the whistle on itself. 35

However, the Group has not escaped unharmed from the 2G spectrum allocation scandal in 2008. RNT chose to personally move the Supreme Court in 2010 against the publication of his taped conversations with the corporate lobbyist Niira Radia, on the grounds that it was a violation of his right to privacy. 36 Also, the ruthlessness with which Cyrus Mistry was divested of his Board positions within the Tata Group despite unclear reasons reflected poorly upon the corporate governance within the conglomerate.

Nevertheless, these are mere aberrations in an otherwise remarkable record of excellent corporate citizenship. The Tata leadership sticks to the familiar argument that “doing well by doing good” makes immense business sense. While the Group does not have clear evidence of success for its philosophy, it really knows of no other way of conducting itself.

As JRD Tata once said, If we had done some of the things that some other (Business Houses) have done, we would have been twice as big as we are today. But we didn’t, and I would not have it any other way.” 37

References

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  2. Milestones – Heritage – Tata group [Internet]. Tata.com. [cited 1 May 2016]. Available from: http://www.tata.com/htm/Group_milestone.htm
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