Any assessment of how the year has been must recognize the basic premise that Chandra was catapulted to this position as a solution to a specific problem. And, without debating the right and wrong, the fundamental problem was of one of a DNA mismatch between two people. So on that count Chandra was destined to succeed as the cards had already been dealt last year, and no one could afford to play the game again.
I must credit Chandra with his decision to stay the course on the five “hotspots" as identified by Cyrus Mistry: Corus, Teleservices, Tata Motors, Power, Indian Hotels. The finalization of the actions on Corus and Teleservices reflected continuity on most of the steps taken earlier, and the settlement with DoCoMo was graciously handled. I must add that though the future drain on cash has been prevented, these transactions have not released capital of any significance to the group.
And therein lies the real challenge as I have written before in these columns last year. The thorny issues of unraveling some of Ratan Tata’s pet projects/decisions and dealing with underperforming assets have not yet fully played out. Capital allocation has been a key concern of the Tata Group and Chandra has publicly committed to correct it. How this intent will play out in the contentious plan to expand into the airlines business notorious for its capital inefficiency—committed by Ratan Tata—is yet to unravel. Charting new growth businesses in financial services and defence will require huge outlays, some of which will need to be generated from divesting peripheral businesses and reduce the operating companies from the unwieldy figure of 289 companies. Tricky! But all this is the “hardware" part of the transformation. There is no debate in “what" needs to be done given his background and intellectual competence…most leaders generally know this; it is the “how" aspect which determines success or otherwise given the culture, political dynamics and environment in which the transformation is envisaged. This is where Cyrus faltered, though his intentions were honourable.
Chandra too, like his predecessor, has assembled a team from outside the group and the jury is out on their efficacy to implement sustainable change. As many are from an investment banking background, his challenge will lie in monitoring their behavioural traits which could be an antithesis to the Tata way of doing things. The key differentiators of the Tata Group have been its single-minded focus to build the delicate balance between profits and social good in its decision-making ethic throughout the organization along with the “Tata way" of doing things, which are quite unique with commonality of ethical values with only a handful of large companies run by business leaders like Azim Premji and Anu Aga.
The “A" team Chandra has recruited largely comes from a certain culture which is known for its arrogance of leadership, financial profligacy and aggressive pursuit of profits at any cost. With the large-scale exits of many stalwarts from the group in the last one year—distinctive signs of centralization and a simmering, albeit perceived, discontent with the new “style" being imposed by Bombay House—he will not have the benefit of guidance on these core aspects, especially with Ratan Tata gradually fading into the background. On the other hand, the Tata Family Trust (which exercises control on Tata Sons by virtue of its 66% shareholding) has no “Tata" presence of consequence, and is presently controlled totally by its managing trustee, R. Venkataraman— past executive assistant to Ratan Tata—but with hardly the operating or managerial experience needed to oversee the complexities of the Group. It is common knowledge that he has emerged as a formidable power centre in the Group and has quietly consolidated power in a situation where the Trusts and Tata Sons are now substantively segregated—a new phenomenon in the 150-year-old history of the Tata Group. The balance of power is obvious where Tata Sons is now akin to being merely a special purpose vehicle of the Trusts.
In such a fluid situation, Chandra’s stance—both explicit and implicit—and his equation with Venkat, in the complexity of relations hidden behind the veil of gentility of corporate life, will shape the future of the Group. Being material to the final outcome, how he discharges this onerous responsibility will be closely watched. Such dynamics has no parallel in India: with the judgement of posterity business historians will record how such a significant transition played out, though much after my time.
Time and place have their own way of acting in the cosmic scheme of things as Chandra’s incredible rise demonstrates once again. Hindu scriptures teach us about “maya"—the illusion, and not the reality, which governs us. Einstein, too, had famously said that reality is merely an illusion. All leaders know that perception is the reality which finally matters. Chandra must factor this in the equation.
‘A clever person solves a problem. A wise person avoids it.’
It is all about the “software" of this transformational journey which will determine its ultimate outcome and determine whether Chandra is clever or wise…. or both. Till then sic transit gloria mundi (or thus passes the glory of the world).
A Sloan Fellow from the London Business School and a chartered accountant, Prabal Basu Roy presently manages a private equity fund, advises corporates and has formerly been a director and group CFO in various companies.