Tough challenge lies ahead for the Tatas

The tremors that rocked Bombay House with the sudden ouster of Cyrus Mistry as Tata Sons chairman echo the shockwaves that rippled through the group’s HQ when J.R.D. Tata decided to name Ratan Tata his successor. Russi Mody, then Tata Steel’s chairman, fought tooth and nail to stake his claim by virtue of his long innings in the group and his experience to get the prestigious position, but he failed. The difference today is that Mr Mistry is the scion of the strong construction empire of Pallonji Mistry, so it’s likely that this isn’t the end of the story. This episode does, however, raise two issues: one about family-run groups and the other about change. The Tatas aren’t any run-of-the-mill group, they have an iconic image like no other and are a household name in India. The group has a culture and ethos built over 140 years, one of reliability and integrity. So there will always be problems of an outsider not adjusting to this perceived culture and ethos.

The issue that emerges seems to underline the problems that accompany resistance to the pace of change. While culture and ethos must be appreciated and maintained, the need to change to keep up with the times is also vital if any group has to survive. There is the current example of established information technology companies that failed to anticipate the advent of the digital era, and got left behind by the new kids on the block.

Mr Mistry, it seems, tried to bring in changes at a rapid pace and trod on many toes. The heads of various firms in this vast conglomerate are fairly independent and it’s almost like back to the days when then newly-appointed chairman Ratan Tata had to get rid of chieftans of various group companies who treated these as fiefdoms and did what they pleased. The only difference is that today’s CEOs aren’t of the same stature that Mr Tata faced.

Family-run businesses, even while professionalising their appointments, usually have a clear line of succession from father to son, etc, but this wasn’t so in the case of the Tatas. The attempt at professionalising the appointment at the top position has and will be challenging for the Tatas after the failure of the Mistry experiment. Besides, finding someone of Mr Tata’s stature will be even more difficult; but nothing short of this is required to handle an empire as vast and diverse as the House of Tatas. Perhaps when Mr Mistry decides to talk there will be a better understanding of what the problem was. A company like Infosys, much smaller than the Tatas, faced a problem after founder N.R. Narayana Murthy decided to retire. One can only imagine the problem that Mr Tata has on his hands.

The attempt at professionalising the appointment at the top position has and will be challenging for the Tatas after the failure of the Mistry experiment. Besides, finding someone of Mr Tata’s stature will be even more difficult