Professional Documents
Culture Documents
1 PREAMBLE
There are two types of CEO transitions and, although they share some key elements, they differ in the challenges they present to the Board and in how they are implemented. One is the planned transition in which the CEO notifies the Board of an intent to leave, enough in advance to allow the Board and the organization to prepare. The second is a sudden departure whether by sudden change in circumstances, illness, death or termination by the Board. In either case, the organization needs to be prepared. Selecting a new CEO may well be the most important task ever undertaken by the Board. It is a pivotal opportunity. Two issues emerge (a) whether in their succession planning, theyd consider external candidates and (b) whether theyd consider non-Indian candidates. On the first issue, it seems quite clear that Indian firms prefer recruiting for top jobs from within their organization. In the TCS example, Mr. Ramadorais successor Chandra was long seen as the heir apparent. With respects to having a non-Indian at the helm, there arent many examples but the obvious one that comes to mind was that of Alan Rosling, who Ratan Tata appointed to coordinate strategy at Bombay House, the TATA HQ in India. There was a look of horror on other industry veterans, when Rosling was appointed and had to represent TATA in global industry platforms.
planned for these successors. Successors may be fairly ready to do the job or seen as having a long term potential By Wendy It is classified broadly into three types: a. Management Succession Planning b. Business Succession Planning c. Family Business Succession Planning Broadly, it is the process of identifying and preparing suitable employees through mentoring, training and job rotation to replace key players. A succession plan clearly sets out the factors to be taken into account and the process to be followed in relation to retaining or replacing the person. Succession Planning involves having senior executives periodically review their top executives and those in the next lower level to determine several backups for each senior position. It is not easy to give up power, particularly when you have been the object of so much adulation. I must say that Infosys has done a good job in bringing two such transitions before I leave the portals of this company, said Mr. Narayana Murthy in his farewell speech before he stepped down from the board in 2011 and became Chairman Emeritus. At the Tata Steel annual general meeting (AGM) in mid-August 2011, shareholders tributes for chairman Ratan Tata were louder than usual. Tata Sons, the holding company of the Tata Group, had just set up a panel to find a successor for Ratan Tata, who was the then chairman of the group and several of its larger companies. Dont leave us, implored one shareholder. We cannot lose our Ratan (jewel in Hindi), said another. Ratan Tata hoped that he will have some presence after that as someone sitting in the audience asking questions, he told audience members at the AGM. Thus Succession Planning is a bit of a painful process for both the Management and Shareholders of the Firm or Conglomerate.
fight and flight to another day; it keeps the hopes of the prospective CEOs alive.
took charge. Of the list *who quit ICICI Bank+, there is only one person who left because she was in the reckoning with Chanda Kochhar for the top job, he noted. Irrespective of who was selected, the others would have left. This happens time and again in all global organizations. It is naive and idealistic to expect anything else. The others were talented, but some had interests which ICICI could not have met given its institutional charter, a few had misplaced notions and thought themselves bigger than the organization. They were asked to move on by former CEO Kamath, and not Chanda Kochhar. They had no place in the way ICICI Bank was chalking out its future strategy. Ramkumar has his own take on the broader issue of insider vs. outsider. There comes a time when every organization has to fearlessly de-clutter its leadership and put in place a team which is relevant for the future, he says. Jack Welch, Paul Polman, Ratan Tata and Kamath, to name a few, have shown the way to do it. Purging and de-cluttering leadership is an important part of succession management and enabling the organization for the future. The key question here is: Does the organization have sufficient leadership depth and bench? If it is like GE, Unilever, Tata and ICICI, then it is possible to carry out this strategy. Look at Unilever. In 2008, the company appointed Paul Polman from Nestle but originally from archrival Procter & Gamble as CEO. He brought in a new chief financial officer Jean-Marc Huet. This is a clear case of an outsider taking over and creating enormous disruption in the system. If one examines the performance of Unilever over the past few years, the company clearly required that disruption. This is positive disruption. When Ratan Tata took over the Tata Group, he was an insider. In the early days, he was pilloried for taking on the satraps. In the first five years, he created a huge amount of disruption. It was needed. Similarly, Jack Welch spent his early years at GE cleaning out the cobwebs. Kamath at ICICI Bank was an insider-outsider. [Kamath had joined ICICI -- then the Industrial Credit & Investment Corporation of India, a development financial institution -- straight out of business school in 1971. He left in 1988 to join the Asian Development Bank. He was wooed back to ICICI as managing director and CEO in 1996.] Kamath also was a disruptive influence. He brought in a focus on technology and innovation. He continues: The point I am trying to make is that the debate should not be about insider vs. outsider. What is important is the context. What matters are the time and the
environment. Was Gandhiji an insider, outsider or insider-outsider? Does it matter? If Gandhiji had returned to India 20 years earlier when the political landscape was dominated by strong-willed people like Bal Gangadhar Tilak he would never have been the leader of the freedom movement.
In Tata Steel, Jamshed Irani became CEO in 1991 amidst tumultuous circumstances of the Russi Mody departure. In earlier interviews, Irani had mentioned that by the late 1990s, he presented to Ratan Tata a comprehensive review of possible successors; together, they zeroed in on a few possibilities. From this list, B. Muthuraman emerged as the CEO in 2001. Muthuraman, it is learnt, did a similar exercise and discussed it quite early on with Ratan Tata and the board while choosing his successor in 2009. He too accomplished a successful transition. In Tata Consultancy, S. Ramadorai took over from the legendary F.C. Kohli in 1996. He was filling big shoes. He grew the business dramatically over the next decade and a half, including the IPO of the company. By mid 2000s, he is reported to have made a short list of potential successors for discussion with Ratan Tata and the board. From this list emerged N. Chandrasekharan. Ramadorai walked out of his TCS office on the date of his retirement so that his successor would have a free hand. In Tata Chemicals, change was sought in 2001. Outsider Prasad Menon was recruited to succeed Manu Seth. Perhaps because of what he had learnt at ICI, his earlier company, Prasad Menon started to think about succession early on. Apart from pacing potential, solid internal leaders, the leadership brought in a young TAS officer into the company and tested him through hugely challenging assignments. All the identified candidates were watched, coached, talked about and nominated to Advanced Management Programmes. Finally a choice was made by selecting R. Mukundan, with a short bridging role by veteran Homi Khusrokhan. The successful transitions completed in the listed Tata companies during the last two decades are impressive: Titan (where Xerxes Desai gave way to Bhaskar Bhat), Voltas, Rallis, and Indian Hotels. The conclusion is that whatever the process, the Tata group seems to have got succession about right - not perfect, but it seems to be effective and deliver positive results. In 2011, Tata was in the midst of the mother of all successions, finding a successor to Ratan Tata. Instead of focussing on the possible candidates, it is purposeful to reflect on the streamlined and effective process of succession they had announced.
Firstly, a search committee was appointed with its composition and membership placed in the public domain. The choice of candidate was kept wide open: man or woman, Indian or foreigner, internal or external. Secondly, the search committee provided brief public updates of the status; it wasnt surprising that the details or candidates were not revealed. Thirdly, the search committee set itself approximate time targets so that their work inadvertently did not become desultory. Lastly, they internally adopted relevant criteria and a methodology, taking the assistance of a specialist firm. There seemingly wasnt much else to do by way of a process. Based on the recent track record of successful transitions and the transparent process for the chairman succession, the Tata group did have a good chance of getting the succession right. People had no choice but to wait for the search committee to complete its job rather than to keep speculating on names and individuals.
6 EARLY YEARS OF MR. RATAN TATA & THE EXIT OF THE SATRAPS
Ratan Tata was a surprise choice to head the group after JRD (as J.R.D. Tata was popularly known). He studied at Cornell University, specialized in architecture, and had an offer from International Business Machines Corp., but returned to India because his grandmother was unwell, and joined Tata Steel Ltd (then known as Tata Iron and Steel Co., or Tisco) as an apprentice on the shop floor of its Jamshedpur plant. The year was 1962. In 1971, he was appointed director-in-charge of the ailing National Radio and Electronics Co. While Tata managed to turn around the firms fortunes, it was to be a temporary success. In 1977, he was asked to turn around another troubled company, the Mumbaibased Empress Mills. Tata managed to do so, but was refused an investment he thought was required. The Mumbai textile workers strike led by Datta Samant also hurt the company, which eventually closed down in 1986.
Maybe because of these failures, few people understood why he was chosen as the person who would replace JRD in 1991. At the time, Tata was still perceived as an outsider in Bombay House, the groups headquarters. Several group companies were also led by individuals who had been given considerable autonomy by JRD and were, sometimes, more closely associated with their companies than the groups chairman himself. Among these executives were Russi Mody at Tata Steel; Darbari Seth at Tata Tea and Tata Chemicals; Ajit Kerkar, who transformed the Taj group (Indian Hotels) into a major hospitality chain; and Nani Palkhivala, a director on the boards of several Tata companies and chairman of the erstwhile Associated Cement Companies (ACC Ltd), in which the Tata group was one of the original promoters. It had been widely expected that one of these individuals would succeed JRD, and Tatas appointment resulted in some bitternessand not all of it remained unvoiced. Mody sparred openly with Tata. Kerkar and the new chairman had different views on the management of the chain. J.R.D. Tata had around him a team of senior managers, all of them people of substantial understanding in their respective spheres, Tata said in an interview posted on the Tata group website on 6 December for some time before being inexplicably taken down. While they may have acceded to his wish that I take over the chairmanshipand this happened suddenlyI must confess that I did not feel any sense of joyousness on their part, because some of them had aspirations to have the job themselves. In 1993, Mody was sacked after a messy scrap involving the appointment of senior executives. In 1997, Palkhivala quit, citing ill health. And Seth retired in 1995 and Kerkar in 1997, after Tata brought in a new policy that set the retirement age for directors at 70 and senior executives at 65. In my personal view, when JRD saw this scramble among the company chiefs to succeed him and the unpleasant innuendos that surfaced, he may have appointed someone who understood the Tata ethos, which was always very important to him; and, perhaps, he thought Ratan Tata was someone who could uphold this ethos, Piramal said.
She added that the concept of succession planning was nascent in JRDs time. Its only in the last five years that large business groups have realized the need for this, she said. Indeed, perhaps because of the rocky start that he had, Tata appointed a five-member selection committee, comprising N.A. Soonawala, Shirin Bharucha, R.K. Krishna Kumar, Cyrus Mistry and Lord Kumar Bhattacharya, to identify his successor. In hindsight, Tatas ascension in 1991 was the best thing that could have happened to the Tata group, according to a business historian and writer. Tata, like every Indian company, was suddenly in a new environment. It could not keep operating under the old market rules, the old certainties, said Morgen Witzel, a UK-based management writer and author of Tata: The Evolution of a Corporate Brand. Ratan Tatas strategy was to change Tata to help it keep pace with a changing India, he said. And, after spending nearly five years quelling the challenge of the satraps, thats just what Tata did.
The group also exited businesses such as cement, textiles and cosmetics even as it increased its focus on others such as software, and entered telecommunications, finance and retail. These divestments and investments helped the Tata group shake off the slightly fusty image it had built up in the 1980s and make it fit for purpose in the modern world, according to Witzel. Indeed, today, the Tata groups most profitable company is information technology firm Tata Consultancy Services Ltd (TCS), which boasts around $10 billion (around Rs.54,700 crore) in revenue and serves customers around the world. I think the creation of the corporate brand was quite important. The Tata corporate brand is one of the worlds most valuable global brands because it harnesses the power of the whole group and creates a strong image in the minds of the stakeholders, Witzel added. Tata himself sees the re-establishment of the group identity as one of his achievements. In the interview that was posted on the groups website, he said one of his most satisfying moments as chairman was the welding of the organization together in a more cohesive way than it had been in the past that it was able to identify itself more as a group. And, even as some of these efforts to establish himself, improve the operational effectiveness of some companies, and reiterate a group identity were bearing fruit, Tata went out and made a big-ticket global acquisitionthe Tetley group in 2000.
according to Tata LogEight Modern Stories From a Timeless Institution, a book by Harish Bhat, managing director and chief executive of Tata Global Beverages Ltd (earlier Tata Tea). The groups biggest acquisition to date is Tata Steels purchase of Anglo-Dutch steel maker Corus Group Plc in 2007. The company has since been renamed Tata Steel Europe. The acquisition of Corus, which was Europes second largest steel maker, catapulted the company into becoming the worlds seventh largest steel producer, although it hasnt been as financially remunerative as stock market analysts would have liked.
Another acquisition, and more fruitful than the Corus purchase to date, was Tata Motors acquisition of the iconic British car maker Jaguar Land Rover. The acquisition provided a hedge against the weakness faced by the companys domestic passenger car business. There have been several other acquisitions: TCS bought CMC Ltd; Tata Sons acquired a controlling stake in state-run Videsh Sanchar Nigam Ltd (now known as Tata Communications Ltd); Tata Motors bought the heavy vehicles unit of
Daewoo Motors in Korea; Tata Steel acquired Singapores NatSteel; and Indian Hotels Co. Ltd took over management of The Pierre in New York. But if globalization reflects the buy side of the Tata story, then efforts to innovate indicate the make side of it.
They werent good, but I told myself, Its an Indian company, its doing something; we should support it. The Indica would change the trajectory of Tata Motors, but it was also more than just a car. Recent history is partial to the Nano, the Rs.1 lakh car launched by Tata in 2009, but it was the Indica that started it all. The launch was a sign that Tata Motors had made the transition to serious carmaking, an indication of the manufacturing and operational renaissance that characterized the Tata group in the late 1990s and the early 2000s. In many ways, the Indica started a trend in the Tata group. Every year since, Ratan Tata has feted individuals or teams that have worked on an interesting project even if it didnt succeed, under a programme called Dare to Fail. The Nano is, of course, the pinnacle of this innovation journey, but there have been other successes as well. Among them is Swach, a low-cost water purifier aimed at making clean drinking waterhard to find in rural areasavailable to the economically weak. Swach began as a corporate social responsibility initiative by TCS and soon became a business idea, commercially viable on its own. He (Tata) has played a strong role in encouraging innovation, but he has not been alone in this, Witzel says. Tatas leadership style is to suggest ideas, offer encouragement and motivation, not to lead the charge. Its clearly an approach that has paid off. The groups aggregate sales at the end of 2011-12, at Rs.4.51 trillion, are 43 times the turnover in 1992-93, the first full fiscal after Tata took over as chairman. Net profit growth in the same period has been even more spectacular, rising 51 times to Rs.33,664 crore. The aggregate market capitalization of the group at Rs.4.54 trillion in fiscal 2012 is 33 times higher than it was in 1992-93. In the same period, the Sensex, the benchmark equity index of BSE, grew nearly eight times. The Tata groups closest competitor, in terms of turnover, is the oil-to-yarn and retail conglomerate Reliance Industries Ltd (RIL). RILs net sales in fiscal 2012 were Rs.3.58 trillion and it had a net profit of Rs.19,747 crore. Though RILs revenue
growth in these two decades has been much higher than the Tatas, having grown 90 times, its net profit growth is lower. The result of Tatas strategic thinking reflects in the groups market capitalization, Piramal said. What Tata did after taking over wasnt very different from what Kumar Mangalam Birla did with the Aditya Birla Group after his fathers death. Kumar Birla took over as chairman of the group in 1995 at the age of 28 after his fathers sudden death and is credited with transforming the Indian business group into a multinational conglomerate.
10 THE DOWNS
It hasnt always been smooth sailing for Ratan Tata or the Tata group. A case in point is the Corus acquisition of 2007, which wasnt panning out too well for the company. Sales and profitability at Tata Steels European operations had taken a hit, due to the 2008-09 financial meltdown and the subsequent euro zone crisis. Company executives did not expect the situation to improve soon. The Nano wasnt a huge success either. Tata, in his interview on the group website, said the Nano was marketed like other cars, but as a minimal automobile at a low price. I would love to have a chance to implement a new marketing plan for the product, if that were possible, Tata said. The emergence of a strong rival to Tata Motors in the passenger car segment, Mahindra and Mahindra Ltd (M&M), was another cause of concern articulated by Tata at the companys last shareholders meeting in August. We should do a great deal of introspection as to why M&M is ahead of us. I have great respect for the company. But we should look at this in sadness that we let that happen, Tata remarked. The conglomerate was also sitting on a debt pile of $26 billion (around Rs.1.42 trillion), a number that was causing concern among some investors. This needed to be seen in the context of the 29 listed group companies combined net worth
of Rs.1.43 trillion, and cash and cash equivalents of Rs.36,289.38 crore, according to data from Capitaline.
telecom field, it had to grapple with a nascent industry which is still plagued by policy uncertainty. The controversy surrounding the infamous Radia tapes went on to show that what would have been considered a minor transgression by any other business house proved to be a demoralizing factor, somewhat sullying the groups pristine white image. Referring to the airline fiasco, he claimed in a press interview that he was rather proud of the fact that he could not handle political manipulations.
13 FOCUS ON PEOPLE
The average Tata manager is sober, knowledgeable, mature, restrained, dignified, humane and downright ethical. He does not boast of, but is quietly aware of, being part of a group which has always conducted its affairs in a transparent and ethical manner. There is an in-born self-belief that the values Tatas follow are not a mere statement of pious intentions; rather, these form a blueprint which guides and permeates all the activities the group. Tata Steel had several firsts to its credit in the realm of labour welfare. An eighthour working day was introduced in 1912 itself, whereas the law mandated it only in 1948. Likewise, free medical aid, establishment of a Welfare Department, formation of a Works Committee for handling employee grievances and leave
with pay, provident fund, etc. were introduced much before the relevant laws came into being. The social welfare measures across various Tata companies may vary, but the standards set by them somewhat exceed the legal requirements. Tax planning, yes; tax evasion, never. The groups foray into education, fine arts and other socially relevant projects was planned and executed at a time when CSR norms were not even heard of. How closely the value of compassion is cherished became very clear in the aftermath of the 26/11 terrorist attack on The Taj Mahal Hotel. The conduct of the employees during the attack and the subsequent support they received from the management is a case study in organizational behaviour and employee motivation.
The activities of the group were and are overseen by two bodies. The Executive Office reviews business activities of all group companies. Besides Ratan Tata, it had R Gopalakrishnan, Ishaat Hussain, Kishor Chaukar and Arunkumar Gandhi. Then there is the Group Corporate Centre, which reviewed policy issues related to growth and took decisions on entering new areas. It also promoted the Tata brand and provided advisory services to group companies in human resources, finance and legal affairs. It comprised Ratan Tata, JJ Irani, R K Krishna Kumar, R Gopalakrishnan, Ishaat Hussain, Kishor Chaukar and Arunkumar Gandhi. The members of both these groups were then in their 60s and 70s. Tata Steel's acquisition of Corus, Tata Motors buying Jaguar Land Rover and TCS going public were some of the significant milestones after Mr. Ratan Tata took over from JRD as Chairman of the group. The Tata Group comprises over 100 operating companies in seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. The group has operations in more than 80 countries across six continents, and its companies export products and services to 85 countries. The total revenue of Tata companies, taken together, was $83.3 billion (around 379,675 Cr INR) in 2010-11, with 58 per cent of this coming from business outside India. Tata companies employ over 425,000 people worldwide. The Tata name has been respected in India for 140 years for its adherence to strong values and business ethics. Every Tata company or enterprise operates independently. Each of these companies has its own board of directors and shareholders, to whom it is answerable. There are 31 publicly listed Tata enterprises and they have a combined market capitalization of about $77.44 billion (as on November 17, 2011), and a shareholder base of 4.3 million. The major Tata companies are Tata Steel, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Global Beverages, Indian Hotels, Tata Communications, Tata Teleservices and Titan. Mr. Tata has taken the group to great heights and we hope the new Chairman will take it to greater heights, said an official closely associated with the selection committee. The five-member committee held 18 meetings over the last on-and-ahalf years and interviewed a large number of candidates, both Indian and expatriates.
Mr. Tata had a tougher clean-up exercise where there were many powerful individuals who were running their own fiefdoms. He managed to do this while carving out a new global agenda for the Group. The new Chairman will have a relatively easier job on his hands, an industry veteran said. Much like the few erstwhile Kings who chose a successor based on merit alone, the group had invariably followed the principle of meritocracy when choosing a successor in the past. What the new Chairman would have had to take over from Mr. Ratan Tata was a much more well-knit and cohesive group, united by a shared philosophy, vision and identity.
AUTOMOTIVE The big disappointment was the Nano which was clocking modest numbers. The car business needs to rev up though commercial vehicles had been doing well. The Tatas were and are the market leader in trucks and buses but a lot depended then on the state of the economy over the next few months.
TELECOM In the telecom sector, the Tatas had their hands full with major challenges for both Tata Teleservices and Tata Communications. Tata Tele was now the fifth largest telecom player in a crowded market with as many as 14 in the arena. But the overall telecom sector was witnessing disturbing trends over the past year. All the operators' revenues, including Tata Teleservices, were stagnating, profitability was declining, and investments were slowing and costs were rising. Tata Teleservices undertook a major restructuring exercise in bid to cut costs and rationalize operations. The Successor had to ensure that this paid off in the long term. Apart from the tough market conditions, there were a whole host of regulatory issues especially those related to spectrum. Tata Teleservices still did not have GSM spectrum in key markets like Delhi. The company's 3G roll out was also under a cloud with the Government raising questions over roaming agreements. On the Tata Communications front, the worry was to bring the company back into profitability. The company, which once had a monopoly over the international long distance segment, had to reposition its strategy with more focus on foreign markets. While this paid off to some extent, the then ongoing dispute with the Government over funding and land sale put the company's expansion plans on hold. Another immediate challenge for the new Chairman was to be able to steer the company away from all that happened with Ms. Niira Radia and the 2G scam. Although there were no business implications, the Tatas had taken a major hit on its image, which the new Chairman would have had to build.
IT SERVICES The offshore IT/BPO players were grappling with macro uncertainties in key overseas markets such as the US and Europe, and, at the same time, coping with currency volatility back home. For TCS, the largest Indian IT Services Company, the challenge was also to sustain its pole position in a market that had already started seeing a reshuffle in the pecking order of Tier-1 vendors, said Mr. Sanjeev Hota, Associate Vice-President Institutional Equities at Sharekhan. Also given its over two lakh employee base, TCS had to chase, perhaps even more aggressively, the non-linear growth strategy (beyond adding employees). Deals such as the recent $2.2-billion contract from Friends Life (a British financial services firm) will be critical in this regardIf TCS wants to scale up further, it will be important that the revenue growth outstrips the employee growth, noted Mr. Harit Shah, Senior Research Analyst at Nirmal Bang Institutional Equities. Though the company had been growing at a scorching pace in the last few quarters, the euro zone crisis and the rupee volatility were the key challenges. Mr. Tata's acumen when it came to the business of technology was well known. Would the new Chairman's lack of expertise in the technology space be a deterrent going forward? was a key question to be considered. I do not think soat the top level people settle into their roles pretty quickly. Sometimes a complete outsider can bring a completely new perspective to the business of technology, TCS sources had said.
March 2008-2009) came from outside India, so this was a significant responsibility. Additionally, Noel Tata was the son-in-law of Pallonji Mistry, who owned 18.4% in Tata Sons, which made him the single largest individual shareholder (most of the equity being held by charitable trusts). But others were in the race, too. The Economic Times speculated that the internal candidates include Tata Sons executive directors Ishaat Hussain and R. Gopalakrishnan; and B. Muthuraman, Ravi Kant and S. Ramadorai, vice chairmen of Tata Steel, Tata Motors and Tata Consultancy Services (TCS), respectively. The younger group included the CEOs of TCS (N. Chandrasekaran) and Titan (Bhaskar Bhat). But they were long shots at best, observers had reported. There was also a speculation that, given the groups increasing global focus, the choice need not be an Indian. The Times of India said that the candidates could include Indra Nooyi of PepsiCo, former Vodafone head Arun Sarin and Renault Nissan chief Carlos Ghosn. The selection process would consider suitable persons from within the Tata companies, other professionals in India as well as persons overseas with global experience, said a Tata Sons press release. Ratan Tata had also clarified that the new chief need not have to be either a Parsi or a Tata. (The Parsis are a wealthy business community in India, and the Tata chief has traditionally been a Parsi.) The Parsis are a shrinking community. Birth rates are very low and women who marry outside the community are excommunicated. There are now less than 60,000 Parsis left in India, and it is inevitable that the Tata baton will pass on to a non-Parsi sooner or later. It was evident that it would have to pass on to a non-Tata, too. The Tatas are a small clan. Apart from Ratan, there was his 80-year-old French stepmother, Simone, who was obviously not in the running for his job. His brother, Jimmy, who was close to 70 and had retired from Tata Power. Aloo Tata (who was by birth a Mistry) wouldnt have got precedence over her husband, Noel. And their three children Liya, Maya and Neville were still studying. So, Noel was the only Tata who was eligible. The composition of the selection panel had some critics speculating that the choice of Noel was pre-decided. It consisted of Tata Sons directors R.K. Krishna Kumar and Cyrus Mistry (who was Noel Tatas brother-in-law), Tata veteran N.S. Soonawala, group legal advisor Shirin Barucha and independent member Lord
Kumar Bhattacharya of the Warwick Manufacturing Group of the U.K. There was only one external member, said Pradeep Mukerjee, founder-director of Confluence Coaching and Consulting. Mukerjee, who had worked for several years in the HR area with Citigroup in the U.S., says that in the West, such selection panels have many more external members. What good is a panel stuffed with internal members? I wonder what the true purpose is. Thus, the panel did have to face some criticism but it was worthwhile to keep a panel that was in keeping with the core values of the Tata Group for such a strategic decision-making which would bear fruit in the long run.
Mr. Mistry had been a Non-executive Director of Forbes Gokak Limited since June 23, 2003. Mr. Mistry is Fellow of the Institute of Civil Engineers. He holds a BE in Civil Engineering from Imperial College, London and a Master of Science in Management from London Business School. He holds a Bachelor of Commerce from Mumbai University. An avid golfer, Mr. Mistry is also a founder member of the Construction Federation of India. He is a trustee of the Breach Candy Hospital Trust, Mumbai. He is also on the board of Imperial College India Foundation.
(Courtesy: PTI on Nov 23rd, 2011; Published by the Hindu Business Line) Cyrus Pallonji Mistry succeeded Ratan Tata at the helm of Tata Sons. He was appointed as Deputy Chairman and worked with Mr. Tata for one year as per the plan chalked out for him as a successor, before taking over in December 2012. 43-year-old Mistry was a director of Tata Sons and Tata Elxsi (India). Ratan Tata retired in 2012 when he turned 75. He joined the Tata group in 1962 and was the Chairman since 1991. Mr. Cyrus Mistry took over from a man who over the last two decades transformed the Tata Group into a global enterprise.
Endorsing the appointment then, Mr. Tata had said, "The appointment of Mr. Cyrus P. Mistry as Deputy Chairman of Tata Sons is a good and far-sighted choice." (Courtesy: Press release from Tata Sons) "I will be committed to working with him over the next year to give him the exposure, the involvement and the operating experience to equip him to undertake the full responsibility of the Group on my retirement," Mr. Tata had added. Mr. Mistry had said that he was deeply honoured by his appointment. "I am aware that an enormous responsibility, with a great legacy, has been entrusted to me," he had reported in a statement. He announced that he will legally dissociate himself from the management of his family businesses to avoid any issue of conflict of interest. Shapoorji Pallonji Mistry, the father of the new deputy chairman, was owner of 18 per cent stake in Tata Sons. The Shapoorji Pallonji Group is into construction, textile, water treatment and other businesses. Cyrus Mistry was the managing director of the two billion dollar SP Group. Apart from the Tata Group, he also serves as a director on the board of several other companies, including Shapoorji Pallonji & Co, Forbes Gokak, Afcons Infrastructure and United Motors (India). Mr. Mistry was also a part of a search panel appointed last year to find Mr. Tata's successor. He withdrew himself when his name was suggested. He then entered the process as a candidate. The 5-member panel also comprised of N A Soonawala, vice-chairman, Tata Sons; R K Krishna Kumar, non-executive director, Tata Sons; Lord Bhattacharya, a businessman based in the UK who runs Warwick Manufacturing; and Shirin Bharucha, a lawyer for the group. The committee is said to have met 18 times before announcing the succession plan.
acquisitions weighing on the firm. Problems with Tata Steels European operations persisted and the current dynamics of the steel business at home werent too exciting either. Tata Sons, a holding company (which is the only unlisted from among the group), needed not just a professional executive but a smart fund manager as well at the helm of affairs. Mistry had to manage to do both. While a year of working and learning closely with Mr. Tata before taking the full responsibility of the group in December 2012 did help, the responsibility was enormous. But to begin with, he had showed good intentions by announcing a legal dissociation from the management of his family businesses (Mistry was MD of SP Group which was into construction, textile and water treatment etc.) to avoid any conflict of interest. His selection was important in the sense it sent some important signals - Tata Group will choose the one it considered responsible and worthy enough to run the group, even if it were a non-Tata (Mistry had been chosen over Noel Tata, Ratan Tata's half brother who had served as the managing director of the retailing company- Trent and is now serving as non-executive chairman - to merge some Tata Group retailing operations). Especially then when Tata Group holdings were high enough to be insulated from takeover threats. While Cyrus doesn't bear the name Tata, he was no outsider to the group. He had served as a Director of Tata sons and was expected to have a strong hold over the group values. Besides, roping in someone who belongs to a family that has significant holdings in Tata sons (Cyrus being son of Mr. Pallonjee Mistry, who has largest 18% stake in Tatasons) made good strategic sense as shareholding is the key to control for the group like Tata which is more global than ever. Thus, Mistry didnt just have big shoes to fill, he also needed to hit the ground running.