Selection, not Cyrus Mistry, was the problem at Tata Sons
Just what were they thinking, the five wise men who chose the new Tata group leader to replace Ratan Tata in 2012?
One year after Cyrus Mistry was axed as chairman of the Tata group, it still boggles the mind how the group got its most crucial leadership selection so wrong. After all, the group is renowned for its ability to spot, nurture and build leaders through its formal and informal processes. Indeed, germinating future leaders is so much a part of the group’s core competence that it could well have built a global business around it. The Tata Administrative Services programme is considered one of the top nurseries for mentoring young people aspiring to be top managers; its management training centre in Pune has been a great place for recharging mid-career managers.
The longevity of leaders at its various group companies, the fact that most have been Tata lifers, bears ample evidence of the success of the system. Tata Steel Ltd’s former vice-chairman B. Muthuraman, for instance, had spent 48 years with the company when he retired in 2014 at the age of 70. There have been many others, notably R.K. Krishna Kumar and Bhaskar Bhat, each a legendary institution builder in his own right.
The man finally chosen as group chairman in February this year is another perfect example and regardless of how one views the sacking of Mistry, there is no denying the stability new chairman N. Chandrasekaran has already brought to the proceedings. In the light of various disclosures from insiders including the latest salvo by Nirmalya Kumar, a member of the now disbanded group executive council under Mistry, it is now evident that discontent and discord had been simmering within the walls of Bombay House for long before it came to a head a year ago.
It had impacted decision-making, even where the right decision was known. Mistry had, for instance, flagged the cash-guzzling telecom business as a drag on the group’s performance. Yet, he could do little about it even if one assumes he was keen on doing something. By contrast, within months of taking up the job, Chandrasekaran pulled the group out of the mess, selling Tata Teleservices Ltd to Bharti Airtel Ltd in a cashless transaction which saved the group further losses. He has also proposed a similar deal for Tata Power Co. Ltd’s loss-making coal-fired Mundra power plant, offering a 51% stake in it for a nominal one rupee to the Gujarat government.
The paradox is that going into the job five years ago, Mistry would have seemed a more natural fit for the position of chairman. He was part of the family, a key factor at that point of time for the group. As a member of the board, he knew enough about the business and its operating principles.
By contrast, Chandrasekaran is the ultimate outsider, an executive who rose through the ranks, an IT industry lifer with little exposure to businesses like steel, power, automobiles, chemicals and foods that form the bulk of the group’s $103 billion in sales. The one thing Chandrasekaran had going for him was performance. As CEO of Tata Consultancy Services Ltd (TCS), he had built the company into a behemoth that accounts for over 55% of the group’s $137.7 billion market capitalization.
The fact is Mistry, despite being the chosen one, didn’t really fit the bill and that is no reflection of his leadership abilities. Successful leadership, as experts now tell us, is contextual. At different times, a company needs a leader who’ll blend in, conforming to the existing style and mood. That usually happens when a company is in cruise mode and a holding act is needed. In 2012, the Tata group, after 21 years under Ratan Tata, possibly needed a mover and shaker, one who could kick-start the creative destruction that had become inevitable.
Mistry, as those close to him don’t stop reminding anyone who cares to listen, articulated many of the things which are obvious problem areas. But lacking an overarching vision, he got bogged down by a real or imagined persecution mania.
Chandrasekaran came in with a clear view of where he wanted to take the group, a view in which scale is a key determinant. The long-promised pruning of the portfolio of companies acquires more clarity against the backdrop of that logic.
Just about 10 months into his role, Chandrasekaran has a long way to go before he can prove himself to be the leader to transition this iconic group into the kind of nimble entity that can take advantage of emerging opportunities even while it defines many of them. Fortunately for him, in TCS, he’s pretty much built the prototype of that future.
Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider will look at current issues and trends in the corporate sector every week.
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