The radical chieftain: How Ratan Tata broke the mould

Cyrus Mistry may be stepping into a corporate giant's shoes, but his job may be rendered somewhat easier by Ratan Tata's unburdening of the group's conservatism in many aspects.

Vembu November 24, 2011 18:19:31 IST
The radical chieftain: How Ratan Tata broke the mould

In recent years, whenever Ratan Tata sat down for media interviews, he would be subjected to de rigueur questions about his likely successor: who would it be, would he have to be a Tata, could he perhaps be not an Indian, what qualities would he have to possess...

That monkey is now well and truly off Tata's back with the announcement that Cyrus Mistry will take over from him in December 2012 as head of the Tata group. With that generational change, Tata will hand over stewardship of the business empire that he's commanded since 1991 and over which he implanted his forceful personality.

Tata's tenure at the helm of India's most recognised industrial group is almost congruent with the period in India's economic evolution when it opened up to the world, and unleashed an outbound entrepreneurial force that has, despite its many failings, dramatically altered the country's business landscape.

The radical chieftain How Ratan Tata broke the mould

Reuters

In that sense, Ratan Tata, who restructured the Tata group in ways that his rather more conservative forbears could - and would - never have done, is a tycoon of the times. And although he is not given to flamboyance, he has come to embody the quiet, can-do confidence - and perhaps even understated audacity - of an outward-looking generation of entrepreneurs who aren't constrained by the shadowlines of geography and for whom, therefore, the world is truly their oyster.

Anyone who reckons that Cyrus Mistry is stepping into a giant's shoes is perhaps less than considerate to the fact that this leadership transition is a walk in the park compared to what Ratan Tata himself experienced in 1991, when he took over from JRD Tata.

As a former director of IIM-Kozhikode has observed, Rata Tata's ascent was a bit like Sachin Tendulkar taking over the mantle from Sunil Gavaskar. It was also a time when India - and the rules of the game - were in the throes of big change, when the dour defence and classic strokeplay of an earlier generation would no longer be enough, and only inventive batsmanship would succeed.

Indicatively, India Inc's protectionist walls, from which the Tatas of earlier generations benefited, began to crumble the same year that Ratan Tata took over as chieftain. The Tata group itself resembled nothing so much as a conglomerate comprised of fiefdoms, each headed by forceful personalities, some of whom were given to public (and high-decibel) disagreements with Ratan Tata, whose grip on the group leadership was far from firm.

In 2005, asked by McKinsey Quarterly about the changes he had ushered in at the group, Ratan Tata recalled:

"We used to live in a world of just raising our top line. I would hope people will say that I've helped make the Tata companies more competitive and more conscious about costs and the bottom line. I would hope they remember me for bringing the group together, because we were often referred to as a loose federation of companies that competed and fought with each other. By creating a common brand and a codified framework for how we operate, I think we have brought the group much closer together. I would feel sad to be remembered for not being able to change the structure of the company more radically."

Ratan Tata perhaps calculated that the old ways of doing business would no longer work in a liberalising India. And the economic reforms that were initiated, even if somewhat haltingly, gave him the elbow room to "play like Sachin".

The mega acquisitions that the Tata group companies undertook, beginning with the purchase of Tetley in 2000 (the spadework for which had actually begun in 1995), all bear Ratan Tata's signature.

And Tata Steel's acquisition of the Anglo-Dutch steelmaker Corus, which was in its time the largest ever takeover of a foreign firm by an Indian company, was audacious in the extreme. Tata Steel was effectively bidding for a company that was four times its own size, and, in the opinion of many analysts, ended up overpaying and would eventually go bankrupt.

There were many who wondered if emotion was interfering with Ratan Tata's investment decisions. Was he, perhaps, getting carried away by India's growing influence, and therefore overbidding?

In 2007, Ratan Tata told Der Spiegel that the Corus deal was "primarily a strategic acquisition" - and although he himself did not see the deal as symbolic of anything, "maybe it shows that an Indian company now not only wants to play an important role in India, but also seeks to be a global player."

That same global ambition characterised the acquisition of Jaguar Land Rover.

But although Ratan Tata's demolition of the Tata mould of business conservatism has proved enormously successful - under his watch, the group has grown some 12-fold - it has also ended up dragging the group into the shadowy world where politics and business meet. This was starkly highlighted in the Niira Radia taped conversations: the corporate lobbyist, who counted on the Tatas as one of her clients, was doing her damnedest to ensure A Raja secured the telecom ministry, and acknowledged in one revealing conversation that "Mere client Tatas bhi bahut beneficiary thhe (in the 2G spectrum allocation)."

As Siddharth Varadarajan noted in The Hindu, "If the allocation of spectrum by the Manmohan Singh government in 2008 and 2009 is one of the biggest scams in independent India, then the involvement of businessmen like Ratan Tata, Sunil Mittal and Mukesh Ambani in lobbying for their choice of telecom minister when the UPA government returned to power in May 2009 is surely a very important part of the back-story."

In subsequent interactions, Ratan Tata claimed that he could say, "with my hand to my heart, that we have not, in fact, partaken in any clandestine activity." Yet, the widespread perception, based on the extensive recordings and circumstantial evidence, that the Tatas had, like a lot of other industrial groups, "outsourced" the dirty job of corporate lobbying - and everything that it entailed - in order to maintain deniability lingers.

Perhaps in the Age of Innocence, when the conservatism of the Tatas extended to every aspect of doing business untainted by guilt-by-association considerations, this may have been seen as symbolic of a corporate titan that had fallen off its pedestal.

Today, however, it's merely seen as the inevitable and acceptable price of doing business. In that sense too, Ratan Tata may have broken the Tata mould and shown himself to be a tycoon of the times.

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