Finding Ratan Tata’s successor

Finding Ratan Tata’s successor

The media—with the possible exception of this newspaper (although this column is, in effect, an exception to the exception)— is obsessed with the identity of the possible successor to Ratan Tata, the chairman of the Tata group. The change is to happen only in 2012, but given that this is the Tata group, and the possibilities are, at least in the mind of most reporters covering the conglomerate, endless, readers and viewers have been exposed to a literal parade of candidates.

Also Read R Sukumar’s earlier columns

This writer has previously commented on the succession, but believes the subject merits another dekko. Among the many experts sought out by television channels and newspapers to comment on the issue is Ashish Singh, the head of the Indian arm of consulting firm Bain and Co., and last week, I caught up with him for a chat. Bain has recently completed a study on board-level succession in Indian companies which, among other things, finds that structured searches such as the one commissioned by the Tata group, and nomination committees, again, such as the one set up by the board of group holding company Tata Sons, are all too rare in the Indian context.

I also spoke to a headhunter friend who operates solely in the exclusive level of CEO and board member searches to get a second opinion on some of the issues Singh and I had discussed. And it emerged that it really didn’t matter who succeeded Ratan Tata. That’s a contrarian conclusion, especially at a time when some of Mint’s rivals have been offering names such as Carlos Ghosn and Indra Nooyi as successors to Ratan Tata, but it’s also a logical one. Here’s why.

One, the Tata group looks to have made most of the large visionary bets it needed to make, for at the least the next decade and possibly beyond. Tata Steel Ltd and Tata Motors Ltd, for instance, have made, in the past three years, large global acquisitions. The next decade for these companies is likely to be one of steady-state consolidation and growth.

Two, in the last 6 to 12 months, the group has restructured its management— a move necessitated in some cases by the retirement of senior executives. Thus, Tata Global Beverages (formerly Tata Tea) has a new group CEO; Tata Motors, a new group CEO and also a new Indian managing director; Tata Consultancy Services, a new CEO; and Tata Steel, a new managing director. Shifting the time horizon further back by six months to a year throws up the names of more new appointments, among them the managing director of Tata Chemicals. This means that Ratan Tata’s successor, when he or she takes over in 2012, will not encounter, like the current chairman did, entrenched satraps used to running their companies pretty much like personal fiefdoms.

Three, and this is a slightly controversial thing to say, Ratan Tata was almost a non-entity when he took over in 1991. Sure, he had the Tata surname, but no one knew what kind of chairman he would make. As it turned out, he made a dashed good one and has grown the group’s revenue from $5.8 billion (Rs14,092 crore) in 1991-92 to $70.8 billion (Rs3.32 trillion) in 2009-10 and profit has risen from $310 million (Rs752.61) to $2.17 billion (Rs10,177.30 crore) in that period.

And around 60% of the conglomerate’s current revenue comes from global operations (the corresponding number for 1991-92 was not available). Going by that logic, the new chairman could be someone unheard of until now who goes on to have a great run at the helm of the group.

Bain’s Singh says he has just one recommendation: he’d like Ratan Tata’s successor to be an Indian.

His rationale: the Tata group, in some ways, represents the global face of Indian industry and it would be nice for it to have an Indian as chairman. The Japanese, when they went global, had Japanese as CEOs, he says. And the Koreans had Koreans. Then again, this is more or less what the English said about Jaguar Land Rover when the Tatas bought it— that a national institution couldn’t be run by someone from elsewhere.

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