Lessons from the battle for Bombay House

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# Lessons from the battle for Bombay House

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Introduction

In the last week of October, the board of Tata Sons, the holding company of the $103.51 billion Tata group (~ Rs. 677,556 crore) in 2015-16), removed chairman Cyrus Mistry and put Ratan Tata back at the helm, albeit temporarily.

The ‘abrupt ouster’ of the Group Chairman led to a controversy that probably is one of the most unfortunate incidents in Corporate India.  Notwithstanding the impending legal trials and media trials, it is the businesses and the brand that will be on the toughest trial and bear the brunt of increased public scrutiny.

The boardroom war at the Tata Group is providing unexpected, and probably some of the best, live lessons for the next generation of business leaders. These range from issues pertaining to corporate governance to conflict management and succession planning

While it is too early to comment what led to the ouster of Mr. Cyrus Mistry, we might as well derive a few cautionary lessons.

Let us discuss

This is not the first time ever that a family patriarchs has come back from retirement as a pilot. History is replete with examples of the likes of Michael Dell, Steve Jobs, Howard Shultz and Narayana Murthy coming back to salvage the situation. But the manner in which ‘dirty linen’ has been washed in public, the spate of allegations and counter allegations emanating from rival camps have taken most observers by surprise.

Even if you think you have done a great job you can be subjected to very harsh criticism from other lens.

If we recall the 2016 Hollywood movie, Sully, Tom Hanks plays the role of a pilot who became a hero after landing his damaged plane to save the flight’s passengers and crew. Sully, however, was shaken to his core when the doubts started pouring over his heroic manoeuvre and questions were raised if Sully was a hero or a fraud.

Sully

Coming to Mr. Mistry, academicians state that he inherited a group where TCS and JLR were delivering the bulk of profits and deals like Corus, Indian Hotels, Tata Global Beverages and so on were straining the group’s balance sheet.

Newspapers report that four months before he was ousted i.e. on June 28, the nomination and remuneration committee of the Tata Sons board had not only lauded Cyrus Mistry’s performance but also recommended a substantial salary increase. It also expressed appreciation of his “multifaceted initiatives aimed at preserving and promoting cohesive functioning of the group in accordance with its distinctive values”, as per the sources cited.

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One may tend to believe that Cyrus Mistry is probably that Sully.

You need to be in constant touch with the air traffic controller, no matter how much flying hours you have under your belt.

“Be Your Own man”- that’s the advice Ratan Tata, Chairman of the Tata Group, gave to his successor Cyrus Mistry while handing over the baton in 2012. But probably Mr. Mistry took it too seriously

Alignment of values is equally, if not more important, than performance contribution.

The controversy at Bombay House seems to be about vision. The long term vision that led to the acquisition of Corus and other global corporations by the group seems to clash with the more shareholder and short term quarterly numbers friendly regime that came after Ratan Tata.

Only time will tell whether the cross border deals were financially flawed or were driven by differential or contrarian thinking.

Probably it was a case of a vision beyond the horizon which is beyond the obvious; a vision far away from numbers and words.

Cyrus Mistry may have had a perfect 20/20 vision, but did he fall short of what was demanded by the board?

Playing a game of golf one may visualize all the 18 holes. One wonders whether Mr. Mistry got limited to the 18 holes.

Need to a codified governance system

The Tatas have a tradition, a culture and values that they have often spoken of and held up over the years. So, it is possible that some of these values and ethics are not written down and are communicated through interaction.

Since Cyrus Mistry hasn’t worked his way up through the ranks at Tatas, perhaps the desired transmission of values hasn’t taken place. I

If he would have read Tatayan, a biography about the Tata group in Marathi, before accepting the chairmanship, Mistry could have taken a hint from what Bombay Dyeing’s Nusli Wadia said while declining JRD Tata’s offer of chairing the Tata Group in the late ’80s: “I am anything but a Tata and prefer to remain a Wadia,”

Thus it is best to have everything written down so that there is no room for doubt or assumption. Before taking up the job, one should insist on the written word.

“If a free hand to the CEO comes with certain lakshman rekhas, be upfront about them. If these are breached, demand a course correction through a direct conversation. Nothing can be more damaging than backroom manoeuvring and creation of alternative power centres in such situations,” says Ramesh Vaidyanathan, managing partner, Advaya Legal.

 Succession Planning- How top leaders decide on the right candidate?

Countries, companies, and cricket teams, all get this choice wrong more times than they get it right. It is a malaise that has laid low companies such as Citigroup Inc., Walt Disney Co., and Infosys Ltd.

Apart from going wrong by picking someone unsuitable for the role, companies can also go wrong by mistiming the move—often by not picking a successor until it is too late. But why do smart companies, run by smart people, go so wrong when it comes to succession? And who is responsible?

Tata Sons had gone through a 14 month long search for Mr Ratan Tata’s successor. Should recruitments take such long? Do they guarantee results?

In a 2011 article in Forbes soon after Mistry was named Ratan Tata’s successor, the famous chronicler of the Tatas, the late Jehangir Pocha, wrote: “For RNT (Ratan N Tata), Tatas is life; the companies, the family, the trusts and the employees all deeply intertwined into his very being. How else could he have written his first strategic plan for the group from the bedside of his dying mother, almost as a testament and tribute to her?

He ended that article by saying: “Tatas has a heartbeat and power of its own. If they (Cyrus Mistry and Ratan Tata) tap into it, and stay true to it, the rest will take care of itself. “

Then why couldn’t the results be as expected

Job Insecurity

Top lesson is about the growing job insecurity. Everyone is under the threat to lose job any day and anytime. No one’s job is secure, even if you think, you are the boss and are performing quite well

On a lighter note, that is the reason why we keep posting all the jobs in the government sector for finance professionals.  http://cajobportal.com/psu-jobs

Conclusion

In India, 67% of all listed companies are family owned—and such businesses create around 65% of the GDP and thus management of family businesses assumes utmost importance.

We all hope that the passage of time proves that the 148 year old Tata group emerges resilient and unscathed.  Family run businesses that have been built over must flourish to see a better day.