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Ryan Martis
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« on: December 07, 2010, 12:22:18 AM » |
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The amazing story of how Ratan Tata built an empire...!!!!!
He's packing his bags -- again. December 2012, when he turns 75, is the third scheduled retirement for Ratan Tata.
The Tata Group has been at this inflection point twice earlier, and stepped back both times. In 2002, when Tata was to retire at 65, the Tata Sons board promptly redesignated him non-executive chairman, which meant he could continue for another five years.
Three years later, the board upped the retirement age of non-executive directors to 75. The message is clear: Ratan Tata is indispensable.
And it's not just the board that feels that way. There were loud cries of support from shareholders at the Tata Steel AGM in August, held soon after the announcement that Tata Sons had created a panel to find Tata's successor.
"We can't lose our ratan (jewel)," said one shareholder, while others asked him to stay on as chairman emeritus.
Whether or not he acknowledges it openly, Tata must be feeling vindicated by this public recognition of his worth. When he took over as Tata Group chairman on March 25, 1991, critics were loud and unrestrained in their disapproval and scepticism.
Ratan Tata was considered to have gained his position purely on the strength of his surname; he was incompetent, raged opponents both within and outside Bombay House, and he didn't possess an iota of the charisma of his uncle and predecessor, JRD Tata.
Nearly 20 years later, Ratan Tata has achieved almost everything on his 1991 agenda. At Rs 3.46 lakh crore (Rs 3.46 trillion), Tata Group revenue is 40 times the 1991 level, while net profit has gone up four times.
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Ryan Martis
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« Reply #1 on: December 07, 2010, 12:22:32 AM » |
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 It is the largest Indian multinational conglomerate; more than 65% of the group's income comes from overseas and it has 98 operating companies (28 listed) spread across 56 countries in six continents.
In the past decade -- the decade that marked the glorious years of Ratan Tata -- nearly $18 billion was shelled out to acquire 22 companies worldwide, including Tetley Tea and Corus Steel in the UK, New York's Pierre Hotel and Jaguar Land Rover.
The Tata Group includes India's largest private steel company, the biggest auto manufacturer and the largest IT outsourcing firm.
"Ratan Tata outperformed JRD. He toppled people as strong as Russi Mody, thought out of the box and came up with path-breaking concepts like the Nano," says Bala V Balachandran, faculty member at Kellogg School of Management, and dean of the Great Lakes Institute of Management.
Not bad going for a man who was once likened to the clown in a circus (by his loudest detractor, Russi Mody). For Tata's successor -- whoever that turns out to be -- the bar's been raised sky high.
"Tata's job is the most difficult one in the country today. Whoever runs the Tata Group has to provide strategic leadership, direction and inputs on multiple businesses, which is hugely challenging," says Rajeev Gupta, managing director of private equity firm Carlyle India.
The new chairman may be relieved of the responsibility of running individual companies, but he or she will have to head a team of extraordinarily talented and able leaders.
Not only will the heir have to ensure continuation of the group's growth momentum, but also provide the direction and vision for future growth. It's not an easy task. But then, nor was Tata's. |
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Ryan Martis
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« Reply #2 on: December 07, 2010, 12:22:43 AM » |
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 A shaky start
Left to himself, Ratan Tata would probably have stayed on in the United States after training as an architect at Cornell University. But the son of deputy group chairman Naval Tata and the nephew of JRD Tata couldn't be allowed to work outside the group (he had an offer from IBM).
In 1962, Ratan joined the family business, working on the Tata Steel shopfloor at Jamshedpur, just one of several thousand employees.
He got his first independent assignment less than a decade later -- as director of National Radio and Electronics (Nelco), in 1971 -- but it was a mixed blessing. Nelco was in dire straits when Ratan came on board -- losses of 40% and barely 2% share of the consumer electronics market.
Just when he turned it around, the Emergency was declared. A weak economy and labour issues compounded the problem and Nelco was quickly near collapse again.
Ratan's next assignment was just as trouble-stricken. He was asked to turn around the sick Empress Mills. He did, but was refused the Rs 50 lakh (Rs 5 million) investment required to make the textile unit competitive. Empress Mills floundered and was finally closed in 1986 (by which time the infamous Mumbai textile workers' strike had also taken its toll).
The two 'failures' haunted Ratan for decades. His track record was suspect, he was jinxed, said his baiters. "My first directorship was that of Nelco and the status of that company has forever been held against me. No one wanted to see that Nelco did become profitable, that it went from a 2% market share to a 25% market share," Tata said several years later.
The attacks became more vicious after 1981, when JRD stepped down as Tata Industries chairman, naming Ratan his successor -- in one leap, Ratan had moved to the head of the queue for eventual leadership of the entire Tata Group, and that was completely unacceptable to many.
So much so, that at one Tata Sons meeting, when Nelco's losses were being blamed on Ratan (although he came to the company much later), JRD had to step in and deflect the criticism. |
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Ryan Martis
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« Reply #3 on: December 07, 2010, 12:22:52 AM » |
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 Later, recalling the incident, Ratan was to remark, "Jeh came to my rescue and slowly turned around the whole conversation."
But even JRD's backing wasn't enough to help Ratan achieve many of his ambitions for the group. Foreseeing expansion of capital markets, which meant easier access to money for new projects, Ratan helped draw up a group strategic plan in 1983.
Among other things, it emphasised venturing into hi-tech businesses; focussing on select markets and products; judicious mergers and acquisitions; and leveraging group synergies.
Accordingly, Ratan promoted seven hi-tech businesses under Tata Industries in the eighties: Tata Telecom, Tata Finance, Tata Keltron, Hitech Drilling Services, Tata Honeywell, Tata Elxsi and Plantek.
But elsewhere in the group, his blueprint gathered cobwebs as companies -- many of which were run by their CEOs as independent fiefdoms under JRD's benevolent leadership -- blatantly ignored it or at best, paid lip service to the 1983 plan.
New businesses and M&As in these companies, if they happened, occurred independent of Ratan, not because of him.
Ratan's spell of bad luck continued -- even as his successes grew. He was steadily finding a place on the board of many group companies, having become a director at Tata Sons back in 1974.
In 1988, he took over from Sumant Moolgaokar as Telco chairman -- and promptly found himself at the centre of a prolonged labour dispute, perhaps the worst industrial relations slide in Tata history. |
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Ryan Martis
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« Reply #4 on: December 07, 2010, 12:23:00 AM » |
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 Ratan stood firm and eventually the matter was resolved in the company's favour. In an interview some years ago, Ratan recalled that Telco was "the first company in which I could actually do something. In other companies, I was always put in a fire-fighting situation."
Back against the wall
Taking over from JRD as group chairman in 1991 didn't resolve matters either, even though it was a Tata Sons board decision to make him group chairman.
Tata Group historian R M Lala recalls speaking with JRD some 10 days after the announcement and asking whether Ratan had been chosen because of his integrity.
"Oh no, I wouldn't say that; that would mean the others did not have integrity," JRD replied. "I chose him because of his memory. Ratan will be more like me."
JRD may have seen his own reflection in his successor but others, both inside and outside Bombay House, did not, at least initially. "Who expected Ratan Tata to become such a towering figure in his own right? The first three or four years were engaged in struggles with the satraps," says Lala.
Individual company heads were larger-than-life personalities in their own right, and had ruled these satraps for decades: Russi Mody at Tata Steel, Darbari Seth at Tata Chemicals, Ajit Kerkar at Indian Hotels, and Nani Palkhivala at ACC. Getting them to toe a group line and work in tandem with other companies was next to impossible.
It didn't help that they were more experienced and, many believed, more deserving than Ratan to head the group. Indeed, in an interview a few years ago, Ratan recalled his surprise on hearing of his appointment: he had thought Palkhivala and Mody to be neck-and-neck in the race for the top post.
As it happened, Palkhivala's political views and Mody's clashes within the group worked against them. Mody, though, continued to be a thorn in the flesh of both JRD and Ratan. His battles with Ratan were loud, acrimonious and conducted in full public view, which went against the ethos of this low-key business house -- an inside joke at the time was that Russi Mody had become Rude-i Mody. JRD finally dismissed him in 1993. |
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Ryan Martis
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« Reply #5 on: December 07, 2010, 12:23:33 AM » |
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 Ratan enforced the long-dormant retirement age rule for all business heads and directors, which effectively dealt with Seth and Kerkar (ill-health hastened Palkhivala's departure).
But the crown remained shaky for several years -- there was conjecture as late as 1997 that Shapoorji Pallonji Mistry would oust Ratan and take over the mantle of Tata Group head. (Mistry is the single largest shareholder in Tata Sons and, incidentally, the father-in-law of Noel Tata, Ratan's half-brother and the frontrunner in the current succession race.)
Business as unusual
To his credit, Tata didn't let the criticism and internecine battles deflect him from his chosen path. On taking over in 1991, he dusted off the 1983 plan and updated it, taking the newly-opened economy into account.
Now, the thrust was equally on technology-driven leadership, global competitiveness and being among the top three domestically, regardless of the line of business.
That meant rationalising the Tata business structure. The remnants of the era of government controls combined with independent functioning of group companies in decades past could be seen in the way the group had grown till then -- unstructured, with overlapping business across multiple companies.
When Ratan took over, there were three group companies manufacturing cement; five were involved in pharmaceuticals, while nine companies operated in the IT space. One of his first acts was to sell Tomco; swift exits from pharma and textiles and, later, cement, followed.
Management consultancy McKinsey was brought on board to help with the reorganisation. The Tata Group is still a diversified, salt-to-software group, but now there is a method to the business expansion.
Tata also paid attention to brand Tata. By 1998, there was a single group logo and the Tata brand belonged to Tata Sons. Now, companies needed to sign brand equity and business promotion agreements with Tata Sons before they got use of the brand name.Go to The NEXT Page for More Pictures >>> |
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