Ratan Tata: Leading the Tata Group into the 21st Century - Research Paper Example

Ratan Tata: Leading the Tata Group into the 21st Century. The Tata group, alongside Reliance and Birla conglomerates, is a household in India. The group had risen to this prominence through its enterprising, innovative and ethical leadership over the course of more than a century. First under the auspices of Jamshetji Tata and later under the inspirational leadership of J.R.D. Tata, the group has earned its fame through the management ethos that is passed from one generation to the next. Since 1993, Ratan Tata, the nephew of J.R.D. Tata assumed the top leadership position for the group. And in the 17 years of his leadership, the group has ascended new heights and looks set to continue in this vein in the immediate future too. This essay will critically discuss the leadership of Ratan Tata and evaluate his successes and failings by setting them in right context. The essay will also attempt to identify areas where the Tata group lags behind and propose measures to improve those. The year 1993 when Ratan Tata took over the reigns of one of India’s largest conglomerates is a crucial time for the country as a whole. It was two years before, in 1991, that the Congress government, under the leadership of Narasimha Rao, made a radical policy move that would change the complexion and dynamics of the Indian economy. Prior to 1991, Indian economy was highly protectionist, with a regulatory framework that was indifferent to business interests. In the competition between the public sector and private sector, the former always held an edge. And some of the private sector enterprises too reflected the lethargy and incompetence of the public sector. Even amid the major business houses, the Tata group had garnered notoriety for representing this form of work culture and attitude. So Ratan Tata was met with two major challenges: the first is to adapt the group to the changing economic environment and secondly to change the work culture of his own organization (Case 10, Center for Management Research, 2008). And after seventeen years of his role at the top, there is measurable progress in both these areas. And as a result of that, despite how successful his leadership would be in coming years, his legacy as a stalwart leader is already assured. In his early days as Chairman, Ratan Tata had to confront issues of power politics within the organization. For example, many of the individual companies and subsidiaries functioned as independent entities, without reflecting the core values and principles of its founders. This lack of cohesion manifested in the form of CEOs clinging on to their position way beyond reasonable tenure, thereby thwarting opportunities for the next generation of managers. Ratan Tata’s initiative to turn around this situation was met with stiff opposition from below, but he stood by his principles and managed to shake up the top management of the group in a matter of few years. This result proved to be a beneficial one, as the newly appointed managers were better equipped to utilize business opportunities created in the neo-liberalization era. The inefficiencies and quality issues that were commonplace previously, were set right under this program of leadership change. So Ratan Tata truly deserves appreciation for readying Tata group to embrace globalization under the neo-liberal policy framework. (www.economist .com, 2007) Ratan Tata also has to be credited for making the conglomerate trimmer and fitter by pulling out of businesses that were unwieldy and unprofitable. At the same time, the Tata group expanded into new industries such as Information Technology and Telecommunication, where it has been very successful. Hence Ratan Tata’s legacy will not be for pulling out of certain businesses, but for venturing into new business domains as well. And behind this change in the composition of the conglomerate is the philosophy of risk espoused by Ratan Tata. For example, in his own words, “You can be risk averse and take no risks, in which case you will have a certain trajectory in terms of your growth. Or you can, while being prudent, take greater risk in order to grow faster. I think, as a Group, we were risk averse and we hardly grew because either it was not safe or no one else had done it before. I view risk as an ability to be where no one has been before. I view risk to be an issue of thinking big, something we did not do previously. We did everything in small increments so we always lagged behind.” (Case 10, Center for Management Research, 2008) But, it should also be noted, that two of the major acquisition moves in recent years have been high on risk and uncertain on returns. The acquisition of Corus by Tata Steel and the acquisition of Land Rover and Jaguar by Tata Motors were met with skepticism by business analysts. Especially, the drain them imposed on the financial resources of the group is of high magnitude. It will be after many years from now the merits and demerits of these big deals will be realized. While his critics were right in being skeptical about these big moves, one should appreciate Ratan Tata for standing by his stated philosophy on risk (www.economist .com, 2007). Moreover, while he may have risked the financial prospects for Tata Steel and Tata Motors in the future, there is no doubt about the personal legacy that he will leave behind. To elaborate further, in evaluating the leadership of Ratan Tata, it is important to take into account his philanthropic inclination. Despite being a profit-driven enterprise, the Tata group stands out from the rest in terms of its contribution to the greater common good of Indian society. Two of the most prominent charitable institutions in India were founded by the Tata family. What makes this exercise of goodwill more impressive is that they were kept running even during the most acute periods of economic recessions. No other major business house, either in India or abroad, would have jeopardized its business interest or catered to public interest. While this charitable tendency runs down generations, starting with Jamshetji Tata, special credit has to be given to Ratan Tata for accommodating it during dire economic times (www.forbes.com, 2005). Moreover, some of the apparent business decisions were based on social concerns on his part. The widely known anecdote behind the conception of Nano (the world’s cheapest car that costs only Rs.100,000) is a further testimony to the values promoted by Ratan Tata. On a rainy day in Mumbai, Ratan Tata was moved by the sight of a family of four traveling precariously on a bike. Then and there he decided that a safer alternative has to be offered to the Indian middle class. And the Nano car is the product of this thought. As Nano was unveiled last year, it met with stupendous public reception, as the first installment of cars was booked in record time. Even analysts were impressed with the efficiency and reasonable comfort offered by the Nano, making it a dream come true for the Indian middle classes. Again, as analysts rightly point out, it will be many years of sustained sales of Nano, before Tata Motors will show impressive profits. This also means that the shareholders in Tata Motors can only hope to see moderate returns on their investment in the medium term. But what emerges from these risky ventures on part of Ratan Tata is the fact that he always puts the social good ahead of immediate profits. And in this respect, he really does stand out from the rest of Indian business community (Business India, 2001). On a more critical note, as his detractors have repeatedly pointed out, Ratan Tata has failed to bring greater representation of women in the top brass of the group. Despite him being an inspirational leader and having been responsible for shaking up the top management in his first few years as Chairman, this failure will be a blotch on his otherwise impressive resume. Similarly, while Ratan Tata is credited with rightsizing the various companies under his reign and bringing renewed focus on innovation and change, some commentators still feel that the Tata group lacks a compact business portfolio and that it has its presence in too many business domains. This too might come across as a small negative point in what is an exemplary career so far. And this complaint is not likely to be set right in the future too, as the group plans for more expansion, both in terms of newer markets and newer business verticals. (Talgeri & Srinivasan, 2008) What makes his career so exceptional is the simple fact that aspiring young managers in India today look up to him than anybody else. The year 2008 has been an especially tough one for the group. His brainchild, the Nano project, was set back by political disturbances in Singur, West Bengal, where the manufacturing plant was sabotaged by political protestors. There was also the terror attack on the city of Mumbai, where the Taj Mahal Palace Hotel (owned by the Tatas) was held hostage by terrorists. These have not only harmed the group’s business interests, but have also taken an emotional toll on Mr. Tata himself. Yet, he has remained as calm and collected as he is renowned for; and has never let his bad fortune affect his adherence to core principles and values of the Tata family and the Tata group. More than any other aspect of his business career, it is for his personal aura that he will be most remembered. Even if the acquisition of Corus and Land Rover don’t prove to be as fruitful as they were meant to be, his work ethic, his conviction and their translation into bold actions, will continue to be a source of inspiration for the new crop of managers in India. And it is fitting to end this essay by quoting R.GopalaKrishnan, Executive Director of Tata Sons on Ratan Tata’s style of leadership: “Rather than telling them (executives) what to do, he (Ratan Tata) asked them what they liked to do and how they would advance that goal. It is a very empowering form of leadership, rather than a directive form of leadership.” (Case 10, Center for Management Research, 2008) And despite being very patriotic, Ratan Tata has not limited his vision to India alone. For example, Ratan Tata’s perspective on going global was not just to increase profits,; it was also intended to “creatively engage” in the economic development of the countries of operation. Classic examples of this vision are countries such as Sri Lanka and Bangladesh, where the Tata group is set to make major inroads. It would be a fitting end to his illustrious career, if the Tata group can really become a global brand and create presence in different parts of the world. References: “Tata Juggernaut Stirring”, Business India, www.tata.com, April 30-May 13, 2001. “The Shy Architect”, www.economist .com, January 13, 2007 Kunal N. Talgeri & Sriram Srinivasan, “The Countdown Begins Now…”, www.outlookbusiness.com, February 09, 2008. Robyn, Meredith, “Tempest in a Teapot”, www.forbes.com, February 14, 2005. “I Always Envisaged Tata Could be a Global Group: Ratan Tata”, www.markets.moneycontrol.com Official website for the Tata Group: www.tata.com, retrieved on 1st June, 2010 Center For Management Research, Case 10: Ratan Tata: Leading the Tata Group into the 21st Century, 2008 Read More