Thoughts on the TATA Group challenge

As a teenager, 23 years ago, I remember being struck by something unsual in the newspapers one day. All of them were carrying one single news story on their front page. It was the obituary of JRD Tata. And on the rest of the page, there were vignettes or anecdotes from JRD’s life.

Usually, political icons got such coverage. Why such a coverage for an industrialist then, I asked myself.  As I read and devoured everything in multiple papers and magazines, I got my answer. JRD was so much more than an industrialist & a business leader. JRD showed how much a business can contribute to a nation and society if it is driven by values & enlightened leadership. In your teens, you are moved more by ideas of justice and equality than by those of making money. To know that a business can reconcile such values & make money was a revelation to me. Reading about JRD made such a huge impact then.

As I read about what is happening at the TATA group now, I am not dismayed and disheartened in any way.

Leadership at the top matters. But there is something lacking in the substance and legacy of a group if that is the only thing that matters. The TATA group is too deeply embedded in the ethos of the country and is doing far too much good work, be it in businesses or social contributions, for all of it to be undone by one unseemly spat.

Having said that, it is equally true that as an enterprise or a social undertaking, you do not want to create a situation where a single ‘make-or-break’ decision surfaces in the first place. I believe that the actions of those involved in this internal challenge were to stave off such a situation. Of course, the irony is that such a pre-emptive move could precipitate the very situation they wanted to avoid. If we reach that situation, that is if everything pivots around the decision of who prevails, that actually is a slur on the deep-rooted strengths of the TATA group.

The present challenge is nothing but a powerful reminder of the need to continually ask questions about your ‘theory of business’ as Peter Drucker would have put it. For TATA group in particular, this theory has to address two fundamental and related challenges.

The first one relates to the changing world in which the TATA group has to compete. In earlier times, it was a simpler task to earn profits and do social good. The competitive landscape was stable and predictable. One could commit to the long-term because one could see revenues flowing in. There was no risk of an overnight disruption. Now, things have changed. No business can afford to take tomorrow for granted. If a business cannot be assured of its own survival, how can it commit to sustaining social good of any kind? This is a key question, it becomes key because of its umbilical link with the second challenge.

The second challenge relates to the governance structure within the TATA group. At the end of the day, the ultimate questions are asked of this governance structure. The TATA group is held together by TATA Sons, which in turn is dominated by TATA trusts. The idea of trusteeship reigns supreme in this scheme of things. Given that people who are a part of this governance structure are normal human beings, how they view reality is an integral part of the ‘theory of business’. It is they who collectively define the theory of business.Their assumptions about the environment in which the group operates,  their assumptions about the mission of the group, and their assumptions about the core competence of the group – all these assumptions come into play.

It looks like the assumptions of key people within the governance structure now diverge.

That is no surprise for a disruptive world is hard to predict and adapt to.

Here is an indicative example of how two opposing views can be offered in dealing with a competitive world.

One view would be that we have to do everything to remain profitable and viable. Goodwill earned by doing social good is predicated on the surety of profits. It is the profits that finance the social good in the first place.

A differing view would be that goodwill is the foundation of our corporate existence itself. Profits follow goodwill and not the other way round.

We can see that what business decisions one takes will depend on the view one subscribes to. Should you close down a loss-making product or unit given the implications of loss of livelihood? Yes, if you hold the first view. No, the goodwill is sacrosanct & will repay in larger ways – will be the second view.

What helps people converge is agreement around core purpose and values in such cases. That agreement has broken down.

There is one useful lesson to learn. Never stop questioning out of respect.

This is what the world did when Cryus Mistry was chosen in the first place. If the world was surprised, it means it was an unexpected decision. Which means the reasons for his appointment were not self-evident. Everybody articulated faith in the sagely wisdom of the ‘group of elders’ by saying that they must be knowing what they are doing.

This time around, if we simply take things at face value and explain away the decision on Mistry by saying, ” they must be knowing what they are doing”, we have not learnt anything.

Never stop questioning out of respect. Respect for history, respect for legacy, respect for wisdom. Nothing should stop us from questioning.

There is another key point to ponder.

Are ‘you’ indispensable as a leader & do you place the organization above yourself?

In choosing to fight it out, Cryus Mistry has to answer that question. It may well be that he was right. But, if the struggle to get vindicated can irreparably damage the organization and you know this, can you then choose to walk away? Can you lose in order to let the organization win?

Incidentally, Ratan Tata is also facing the same question.

The ultimate question, is of course, is a leader indispensable?

 

 

 

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