Five years ago, when Cyrus P Mistry was selected to succeed Ratan N Tata as the Chairman of Tata Sons but had not yet been taken office, a senior observer of the group who was then alive, the late Russi M Lala, said this of the coming change: “Ratan Tata kept his word and got out. I don’t know his successor Cyrus Mistry but what I hear from others is that Ratan has got a good man in. Cyrus has not asked for this job; I have no doubt that he’ll do full justice to it. The world will be more challenging in the future. And the new man will have to adapt himself to the changing environment. Some will argue that Cyrus has not shouldered such a big responsibility, that he has not travelled this road before. But that does not matter. Sometimes knowledge of the path is a help. Sometimes it’s a hindrance.”
In his own perceptive way, Lala, who had authored several books on the Tatas and was Director of the Sir Dorabji Tata Trust for 18 years, could capture the mood of optimism tinged with some apprehension on the road ahead for a group that remains till today the crown jewel of Indian corporate houses. Lala passed away two months before Tata retired and Mistry took over the reins at Tata Sons on Dec.28, 2012.
In the end, Mistry’s unceremonious sacking on Oct.24, 2016, less than four years into his term showed that the challenging future and the changing environment arrived not from some competitive forces or outside pressures but from deep within, underscoring the point that it is the unexpected direction and slow gathering of forces that makes the storm so difficult to predict or navigate.
The irony is that the two sides now locked in the dispute –Tata and Mistry – are both honorable leaders who no doubt want to do well and build value for the Tata group in the long term but are in the end destroying it in the near term to the point that the long term may become meaningless.
The loss is certainly deep and incalculable at this stage for the Tata group but also for the larger idea (sometimes dismissed as fanciful in modern times) that business can work with models that have woven into it the idea of values, purpose and service to society. In that sense, the losses go well beyond the fall in market cap or the loss of business in a particular quarter or the confusion that it may cause among the 660,000 employees of the group.
The greater loss is to the very idea that business is well beyond the numbers that sit on the balance sheet, and that the value of the business is in its tangible assets but even more in its intangibles like the goodwill of society, trust of consumers, and integrity with which the group is perceived to be run. In many ways, all of these intangibles are linked, each reinforces the other and each can equally disappear without the other.
The charges and counter charges now doing the rounds carry the risk of hitting at these intangible assets, and there is anecdotal evidence that this is already happening. To that extent, the Tata group is in a crisis, and the turn of events must be seen as a serious threat to the longer term stability of the Tata empire, coming as it does just at the time the group faces serious market challenges in many segments and a probable pressure on its best performing company, TCS, in the light of the protectionist policies coming from the Trump administration in the US.
The minutiae of who did what, of whether that constituted interference or not and whether Ratan Tata was overbearing to the point of derailing the very candidate he had groomed for a year, can be debated. Thus, one of the key arguments of Cyrus Mistry against Ratan Tata is that he was not given a free hand to lead the group, and that Tata retired but informally continued to exert control and tried to expand that control through his nominees on the board of Tata Sons. The argument is simple: how can the anointed head of a large and complex enterprise, in fact a set of enterprises caught in a challenging environment, be expected to lead when the scion who ushered him in never really left him free to lead? Equally, the Tata side argues that key information was not fully shared, that returns were poor and the business lacked direction.
While the dispute will play out in the full glare of the public eye, and numbers and positions will be argued by both sides, the core of the problem probably lies elsewhere –the two leaders failed to build trust. The relationship cooled off. And non-issues then began to become issues that could blow up and bring the house crashing.
It is amazing that group that has built trust over the years, with a wide base of stakeholders, had two of its senior most and well-meaning leaders unable to build trust, unable to discuss differences and unable to part ways with dignity and mutual respect.
The elevation of the widely-respected N Chandrasekaran, CEO of TCS, as the Chairman of Tata Sons has been welcomed by many and will hopefully mark the beginning of the end of what has been a downhill slide for the group, a slide well below the time mud dug up by the Nira Radia tapes sullied the Tata reputation and threw new light on what goes on in the name of lobbying and public relations.
But to stop the downhill spiral this time will require bolder steps, like reaching out, building new channels of communications, agreeing to bury the hatchet and giving in to some ideas even if they come from the “rival” side for the larger good of the group. This will be a difficult journey but is possible with a new leader at the helm.
(Dr. R K Pattnaik is Professor, SPJIMR. Jagdish Rattanani is Editor, SPJIMR. Views are personal) (Syndicate: The Billion Press)
