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Change in Leadership: Is a forward looking move for future success!!!

‘Tata- Leadership with Trust’ is India’s largest multinational conglomerate. Tata group is a global enterprise, headquarter in India, comprising over 100 independent operating companies, has mission 'To improve the quality of life of the communities we serve globally’, through long-term stakeholder value creation based on Leadership with Trust'.  TATA has been known for their corporate ethics, corporate culture, goodwill and reputation. The base of ‘Tata’ is strong and large... It is said that” The Organization’s culture is influenced by Leaders in turn results in long-term effectiveness of the organization.” Culture in turn shapes leadership. They both drive performance. Tata is an extraordinary business group. Over its long history, there has been the remarkable evolution of a group which symbolizes the aspiration of the country. Tata has a huge array of production, manufacturing, services rendered and  reflected as diverse as steel, telecom, aviation, salt and fertilisers to software but also for a business model marked by certain values and perceived standards of integrity.

Ratan Tata’s timeline of leadership (1991-2012)
Ratan Naval Tata had taken Tata Group to new heights and under his leadership, groups revenues have grown manifold in his chairmanship (1991- 2012). He became Chairman of Tata Companies – Tata Motors, Tata Steel, Tata Power, Tata Consultancy Services, Tata Tea, Taj Hotels, Tata Chemicals and Tata Tele service. Under the chairmanship of Ratan Tata ‘Tata’ companies have achieved global leadership in their businesses. For instance, In every sector TATA is ranked amongst top 10, whether it is telecom industry ‘Tata DoCoMo’ -international voice provider or automotive industry as ‘Tata Motors’ – the largest commercial vehicle manufacturer, Tata steel-   best steelmakers in the world or the IT company TCS which is second largest IT services provider company by profits and market cap and never the less Tata global beverages – is second largest Tea company.

Thrust was equally on technology driven leadership, global competitiveness and being among the top three domestically, regardless of the line of business.. By looking at the way he expanded TATA brand it prominently shows his leadership style. He is visionary, adaptable with positive attitude, creative, holistic, honest, out of the box thinker, competitive, risk taker, strategist and initiator.
Ratan Tata set the context within which organizational members strive for excellence and work together to achieve organizational goals. Employees under his influence are inspired by vision. Know where the organization is headed, how it will get there and their role in helping to achieve the vision…. The entire purpose of leadership is to evolve a standard organizational culture. In a large and well-established organization .It can be difficult for a non-Tata to implement a new culture, so is happened, when he appointed Cyrus Mistry an ousted chairman of Tata sons (2012-2016).

Cyrus Mistry’s timeline of Leadership (2012-2016)
In December 2012 Cyrus Mistry had become the sixth chairman of the Tata Group, replacing Ratan Tata. Mistry had been the director of the company since 2006. Earlier Mistry was managing director of the Shapoorji Pallonji Group. On Nov 23, 2011 Mr. Cyrus Mistry was selected as Ratan Tata’s successor and appointed Deputy Chairman, to be groomed by Mr. Tata for a year, later Mistry was appointed as the chairman of Tata Sons in 2012. He was picked after a 15-month search led by a team of Tata veterans. Additionally, he was also chairman of all major Tata companies including Tata Industries, Tata Motors, Tata Consultancy Services, Tata Power, Tata Teleservices, Tata steel, Tata Global Beverages and Tata Chemicals.

Tata tensions over ethics and strategy led to Mistry’s ousting
Cyrus Mistry’s abrupt ousting as chairman of the Tata Group has set off ripples .Tata Sons Board’s decision to replace Cyrus Mistry with Ratan Tata as the Tata group chairman (interim) has taken the corporate world by a storm. The decision to replace Cyrus Mistry was ‘performance-based’. Tata Sons decided to remove Cyrus Mistry as the chairman in the larger interest of the group. “Over the past few months, serious differences had emerged between Ratan Tata and Cyrus Mistry. A legal battle with the DoCoMo could be one of main reasons for ousting Cyrus Mistry. Mistry’s office issued a statement saying all decisions on the telecom joint venture with DoCoMo and the following dispute were taken with unanimous approval of Board of Tata Sons. The handling of the USD 1.17 billion compensation slapped by an arbitration panel over breach of agreement with DoCoMo is said to be one of the triggers for Tata Sons sacking Mistry last month. Tata’s allegation is DoCoMo issue was mishandled by Mistry, harmed Tata culture, image in global market and values. Tata Sons said Cyrus Mistry had made unsubstantiated allegations which cast aspersions on Tata Sons Ltd.

Mistry said, from fiscal 2011 to 2013, the number of clients increased who contributed $100 million or more to TCS .Annual revenues got doubled in his chairmanship. Mistry took over in December 2012 from Tata.

Mistry also said that as TCS chairman, he had helped to improve the IT major’s finances and declared a special dividend of Rs 40 a share in fiscal 2015. Mistry said the special dividend was declared “without compromising (TCS’) firepower for acquisitions”. Cash and cash-equivalents too doubled during the same period to Rs 20,500 crore. 

It is probably the 2nd big and serious board room battle after Ambani’s Reliance group split in 2005.Both the sides are hitting their allegations and counter allegations and engaged in intense media war. Cyrus Mistry has been after proving how he took the decisions for betterment of the group where he is a shareholder (18%) whereas Tata doesn’t want any change in structure which he built in his 22 years of chairmanship. Mistry’s conduct had caused enormous harm to the Tata Group.

The real obstacles to culture change are internal obstacles, false ego, complacency, fear and preconceived ideas create a negative environment. Removal is the result of conflicts between two leadership styles. When change is introduced there is resistance, even when the change is positive.

Leadership can positively affect culture. There are three requirements of empowerment: responsibility, accountability and authority, where Cyrus Mistry could not prove himself as per Ratan Tata’s justification. He also remarked, his return for “maintaining stability and continuity of leadership” and promised to give the group “a classic leader”

Points for Discussion:                                                                 
A) The conflict between Ratan Tata and Cyrus Mistry of the Tata Sons board predecessor, is probably much more serious. Is it non-performance by the existing leadership Or Ego? Where is the TATA heading?
B) A seeming breakdown of communication and perhaps conflict of values between the chairman and the main promoters. How it will effect on the organization? What kind of leadership style is being observed?
C) For the $103-billion business conglomerate, whose revenues add up to six percent of the country’s GDP and many of whose companies have come to symbolize trust and ethical values. Is it the worse time for the huge empire like TATA?
D) Will ‘One man’s ego’ put many Tata jobs at risk?

References: (Ref:
(Ref: The Indian Express:By: Editorial | Published: October 26, 2016 12)
(Ref: The economic times: By PTI | Updated: Nov 17, 2016)
Editorials of Times of India, Mint, Financial Times, Economic Times

Created By: Dr. Amit Sinha (Associate Director MITSOB)
Pallavi Deshpande (Research Associate MITSOB)