N Chandrasekaran & Tata Sons

Beyond The Obvious

Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.

– Marcus Aurelius

So it has finally happened. The TATA Group through its holding company, decided to move with alacrity to anoint N Chandrasekaran as the first non-parsi Chairman at the helm of the holding company TATA Sons. Given that the battle for control of the holding company shifted the field of engagement to the legal domain, there was considerable anxiety especially given that the group as a whole was losing reputation, value and equity on a daily basis. With the battle now shifting to the National Company Law Tribunal (NCLT), the matter is likely to come up for an express hearing given the sensitivity and the prestige of the matter involved. Chandra’s (as he is fondly referred to) elevation to the top job in the Group has not only been welcomed by the broader industry and markets, but is a reflection of the decisiveness with which the current leadership under the Interim Chairman Ratan Tata, seems to be reorganizing itself. Of course Chandra’s appointment is subject to clearances from NCLT as the matter pertaining to removal of Cyrus Mistry as the erstwhile Chairman is under consideration. Further a petition has already been filed to maintain status quo with respect to the affairs of Tata Sons, so Chandra’s selection is likely to need ratification.

So let us try and understand the significance of this decision. Chandra is a Group veteran having been with the crown jewel of the Group, Tata Consultancy Services, for over three decades now. He took charge of the company at a time when the global financial crisis had just hit and had left debris of institutions in its wake. Chandra not only skillfully managed this painful transition but also maneuvered TCS into a position of unassailable strength to become the most valuable IT company in the world just after IBM. TCS apart from Jaguar Land Rover happens to be the principal contributor to Group profitability and cash flows, accounting for nearly 80% of the Group profitability. Being India’s largest IT company with operations spread across almost 50 countries with a top line in excess of USD 16 Billion, TCS represents the pride, ambition and the excellence that the Group is known for.

The Obvious Gains –

Where does this appointment take the Group? Clearly there are obvious benefits and advantages this appointment brings, that come to mind. These include –

  • A TATA Group Insider – Has spent over three decades with TCS and TATA Group – understands the inner workings and dynamics of the Group
  • Relative young age – He is just 53 years and can potentially have a long innings at the helm
  • Strong Pedigree – Has successfully managed and maneuvered TCS – Group’s largest operating firm
  • Global Outlook – having straddled TCS operations across almost 50 countries, understands the challenges of running a global business conglomerate
  • Customer Centricity – More than half his time is spent traveling and visiting key clients across global markets
  • Managing Scale & Diversity – Successfully grew TCS into a USD 16 Billion global IT giant with over 3,50,000 employees
  • Leadership Style – Believes in collective and democratic decision making to augment leadership bandwidth and also improve decision making quality/ depth

TATA Sons faces a somewhat similar predicament and uncertainty as what TCS faced in 2008, given that only a handful of firms are contributing cash flows to the group kitty. Most of the firms are facing headwinds in varying degrees and there is a mountain of debt that needs to be serviced. The situation is quite demanding and needs careful and skillful handling in terms of managing the Group operating firms. It requires sharp focus, close attention and deep persistence to recreate a resilient business in shaping the destiny of the Group. More so, given that the Group is facing intense scrutiny both globally as well as locally, for the unwanted attention the removal of Cyrus Mistry brought in its wake. Given this complex background, it was evident that the Group needed a leader at the helm who was adept at managing challenging business environment and come with prudent, long term oriented strategic solutions. This is where Chandra’s ascent to the Chairman of TATA Sons assumes great significance.

‘Beyond The Obvious’ Value –

While the above are well distilled and broadly understood pointers, there are some deeper linkages that could perhaps become the vectors of building long term, enduring success at the TATA Group under Chandra’s leadership. These include –

  • TATA Brand – House of TATAs or the TATA Group is known as a proxy to Indian economy. It may not be an overstatement to suggest that it stands to represent ‘India Inc’ given its global footprint, size, scale, impact and touchpoints. So any adverse commentary on the Group is likely to negatively impact the potential of several other business groups. By decisively addressing the leadership challenge with an accomplished insider, TATAs will bring back the lost halo and prestige that the Group is known for.
  • Decisive Orientation – Chandra understands the importance and significance of achieving an internal orientation that aligns the objectives of the Trust, Holding Company and the Operating Firms into a unifying factor. This alignment will be defining to collectively gain promoter sponsorship for pushing through reforms as well as disruptive ideas
  • Institution Familiarity – Having spent three decades with the Group, as also led the Group’s largest business outfit for several years, he is familiar and aware of the institutional way in which the Group operates. Can hit the ground running with fast acclimatization and quick assimilation
  • Identity Supremacy – Is well versed with the underlying Philosophy as well as the Purpose that defines the priorities and pursuits of the TATA Group. He will be sensitive to the larger identity of the Group in terms of its defined outcomes, especially with respect to the social sector contribution. He has an acute understanding of connecting Purpose to Profit models and will use these effectively to forge closer synergies amongst operating businesses
  • Business Turnaround – Instead of taking the more comfortable path of looking at businesses as portfolio operation (which Cyrus Mistry tried to do at the expense of challenging the established collective identity of the Group), Chandra will bring a more nuanced strategic understanding to solve complex business problems and turning them around for enhanced profitability and value creation
  • Binding Force – Chandra is uniquely positioned to leverage global market access through the TCS platform and use it as a binding element to build deeper traction and linkages with global markets. Technology is a fundamental building block in virtually all businesses, thereby getting TATAs more invites to global high table of business
  • Deep Resilience – For a business group of the size of the TATAs, the most critical ability to drive through serious engagements is resilience. Critical changes will take time to demonstrate meaningful outcomes and given the fact that Chandra astutely navigated recent 4-5 quarters of difficult business period at TCS while managing stakeholder expectations, both within and outside, he will be able to bring that learning to good use
  • Team Builder – Chandra while being hands on, involved leader believes in giving sufficient latitude as well as autonomy to his management teams. He is known to build next generation leaders and has created extraordinary bench strength in a large business enterprise like TCS. Proof of this capacity building lies in the smooth transition of leadership mantle at TCS with his elevation to TATA Sons Chairmanship
  • Embraces Innovation – TCS under Chandra has been a proactive and significant investor in global innovation practices. This was made possible on account of successfully multiplying topline/ bottomline performances thereby creating sufficient capacity to channelise resources towards long term growth and value creating opportunities. Chandra will draw upon this significant strength and create a pan group, innovation culture to take the TATA Group into the next orbit

Clearly these are interesting times and the TATA Group has undergone an intensely disruptive event that may not only define its own destiny, but also the course of corporate trajectory in the country. In more ways than one it is seen as the template for managing diverse businesses that reflects abundant prosperity, shared objectives and long term value creation orientation. Chandra would be committed in his pursuits of the Founder’s vision and taking the Group forward towards higher purpose and sustainable growth.

The Road Ahead –

It is important to note that this will not be Chandra’s challenge alone. Given the adverse impact that the Group has gone through in the last 3 months, there is considerable effort required to bring it back to its glory days. It demands sharp internal alignment of purpose, priorities and pursuits in ensuring the entire team pulls its collective weight behind Chandra in this journey. He needs to assume the stewardship role in carrying the aspirations and hopes of the entire Group through the difficult waters. For that he will need to marshal all their support by commanding their respect and securing commitments unequivocally. It will not be easy but then Chandra comes suitably primed and prepared for the role. Given the overall situation and the challenges lying ahead, TATA Group could not have made a better choice.

Here is wishing N Chandrasekaran the very best in his new quest.

Independence Dilemma

Challenges for Independent Directors

Last few weeks have brought into sharp focus the role, responsibility and performance of Independent Directors on boards of Indian companies, especially the TATA Group. With clear division in the rank and file of the boards of different TATA Business firms, the spotlight is firmly on the understanding and definition of the term “Independence”.

The Companies Act 2013 as well as the SEBI Listing guidelines, have laid down specific criteria on who qualifies as Independent Director and generic definition of their fiduciary duties. While these are operative guidelines, and boards are expected to comply with these, the broader question is, how can one understand the intended role of Independent Directors. Most of the media coverage as well as exposure, since the board events at TATA Business firms started playing out, has been on trying to decipher the stated guidelines and decisions made by different sections of Independent Directors at the various operating firms. While the jury is still out on which side seems to be enjoying an upper hand in the high stakes of boardroom control, what has added to the mix has been the diverse interpretations and actions that have been executed at various boards of the operating firms. Clearly it appears that there is no one unanimous view/ interpretation on the role of Independent Directors with each version seemingly giving an articulated response for its stated position. And therein lies the difficulty – The “Independence Dilemma”.

To understand this dilemma or lack of clarity on what constitutes the duties of Independent Directors, we need to first comprehend their intended role as well as associated responsibilities. An Independent Director is someone who acts in trusteeship on account of every stakeholder in general and no one in particular. Most importantly, Independent Directors should not be seen to represent any specific constituent of stakeholder community. This means maintaining reasonable, sufficient and equal distance from every interested party connected with the enterprise while evaluating all information to arrive at considered, nuanced and informed decisions. In the process, ensure actions are taken without fear or favour to display equanimity and non-partisanship in orientation and approach.

Given this nuanced role, what therefore are the issues that the Independent Directors should be concerned with? Should they be restricting themselves only to discharge duties around strategy, performance management, business financials or should they go beyond the operational issues and task themselves with bigger challenges that confront institutions – defining distinctive identity, establishing institutional culture, create enduring business architecture, establish leadership depth and succession, managing forces of disruption and brand / reputation management amongst other key matters. It would appear that the present state of affairs at TATA Business firms have been the absence of an articulated role for Independent Directors that goes beyond mere compliance. And this issue is not limited to TATA Group alone. It just finds itself injected into public glare and intense scrutiny given the recent happenings at TATA Sons. Had the Board at these firms been seized of the more critical matters that deserve highest priorities, the present set of issues may not even have cropped up. These are matters that essentially define the soul of an enterprise. Without leadership attention on issues that define the culture and inner workings (spirit) of an enterprise, any performance measure will be short lived and the enterprise eventually will lose its way in the mindless quest for numbers. What brings sanity to numbers is an unquestioned leadership belief in bringing meaning to institutions’ pursuits.

Independent Directors, more than any other class of stakeholder representative, have a fiduciary responsibility to provide stewardship of the highest standard to an enterprise. Being independent, they have the necessary courage and motivation to focus boardroom agenda on long term value creation goals. They need to leverage this unique position to drive through institutional models that are timeless in their impact and relevance. It is in helping design an institutional identity and vibrant business architecture of enterprise that they ensure a firm’s autonomy while securing its long term economic objectives.

Lessons from the TATA Sons episode clearly highlight that it is not enough to just comply with stated regulatory guidelines – time has come wherein Independent Directors become more assertive in discharging their duties and move towards deeper institutional commitments. This calls for recalibration of orientation and mindsets on how an Independent Director role is viewed, both inside and outside the boardroom. What is required is to bring transformation inside the boardroom that looks to establish institutional supremacy over ownership representation – whether major or minor. It is only when decisions get formulated beyond the limitations of a select group, can there be long term sustenance of an enterprise that looks over and above special interests.

We would therefore all do well to remember that the role of Independent Directors is not a “good to have” showpiece but can be the very difference between enduring prosperity and short lived promises. Advantaged would be the boards that empower their Independent Directors in taking proactive, bold and forward looking roles that goes beyond the limited defines of law. This means having faith, conviction and confidence in Independent Directors to take on the role of sentinels by becoming guardians of an institution’s rich legacy and inspiring spirit. It is only by safeguarding the soul of an institution that they protect its legacy and honour its traditions – Things that give a unique sense of identity and purpose to establish and secure its relevance across the shifting sands of time.

Will the Independent Director please stand up?

TATA SONS – THE M(I)STRY SAGA – Part 5

What really went wrong?

Continuing from our previous post (Part 4) we present our concluding views on issues leading to the trust deficit at Tata Sons Boardroom and Mistry’s ouster.

 

Trust Deficit –

Trust is an extremely vital driver and determinant of a healthy relationship at the Board level. A deep trust reservoir can play an invaluable role in holding the institution together and in making crucial business decisions. While it is critical to have diverse and varied opinion to make informed decisions, true stewardship is established only when there is deep trust amongst members of the Board.

The seeds were sown early on when the Articles of Association of Tata Sons were modified once Mistry came on Board. Clearly this was a clarion call on how the Group was preparing to manage the transition between Ratan Tata and Mistry – moving from promoter led leadership to a professionally managed leadership. While it may have been undertaken for valid business reasons, it clearly sent out a different message to Mistry. It is important to remember that behaviour is a collective reflection of intentions, communication and conduct.

Given the challenging business circumstances and the vital signs of the Group companies, it appears Mistry took certain radical steps that clearly were a departure from the established ideology of the Group. Under his leadership, there was constitution of the Group Executive Council that had a mix of people from within the Group as well as outside professionals. The GEC started taking decisions on critical business matters that were clearly to be placed first with the Board for consideration, discussion and approval. This was in line with the modified AOA that were approved in terms of the curtailed autonomy that was granted to Mistry.

Additionally, Mistry made serious attempts to dispose off assets as part of rationalizing the Group’s business portfolio. Clearly this thinking did not sit well with the established ideology of the Tata Group that has prided itself on working closely with all stakeholders in turning around businesses and nurturing them to enduring profitability.

Under Mistry, the Group perhaps made the maximum provisioning in the balance sheet and also took hits on account of impairment given the rapid change in the business landscape thereby negatively impacting the competitiveness of the Group businesses. This had serious downstream implications for the Tata Trusts (the significant and majority shareholder of Tata Sons) as they principally relied on dividend earnings to finance and support their social sector initiatives. The reduction in dividend income and the absence of other revenue streams meant the Trusts’ ability to fund social sector projects were severely impacted and compromised.

Belied Expectations –

There is considerable speculation in terms of what has really transpired behind the scenes. This is bound to happen given that no official reasons have been forthcoming on why the decision to remove Mistry as Chairman of the Board was necessitated in the first instance. At best what we have is conjecture or imputed motive. Given the prestige of the institution and the reputations of the individuals involved, it is unlikely that there could be issues around integrity, propriety or ethics. It would also be circumstantial to assume that it may be a result of clash of culture and value systems between Mistry and the Tata Sons Board, given his long term association with the Group at the Board level.

Having said that, there is no denying the fact there were serious fault lines that developed between Mistry and the Tata Sons Board. These were definitely not intended but given the chasm that opened up and the failure on part of the leadership team to plug the breach, it has led to an untenable situation wherein the Board decided to take decisive action by voting to remove Mistry from Chairmanship of Tata Sons.

It would also be important to remember that the TATA Sons Board would have been aware of the potential implications of the decision, in terms of its impact on the brand and reputation of the Group. The fact that they made an infirmed decision despite the potential risk to the brand indicates the willingness on part of TATA Sons leadership in biting the bullet to arguably secure the ethos and the future growth potential of the Group. This in itself is a demonstration of character of highest order.

It would seem that while neither side intended for the actions to be so precipitous, things did reach a boil. So while the Board of TATA Sons may have followed all the rules, it does appear they were found lacking in the spirit of its application in terms of making it appear even handed to present Mistry with an official opportunity to make his case to the Board. Of course, based on reports it would appear that several attempts were made to enable Mistry make a dignified exit from the position on his own volition, without much headway. It appears Mistry was willing to go for a scrap and prepared to dig in his heels, despite losing the confidence of the Board. It appears this decision was ill advised and against the ethos as well as the spirits of what the Group stands for.

Unfortunately the damage is as much to the position / institution as it is to the individual.

Clearly, there are no winners in this face off.

 

TATA SONS – THE M(I)STRY SAGA – Part 4

What really went wrong?

Continuing from our previous post (Part 3) we try to piece together the specific issues that could have contributed to the trust deficit at Tata Sons Boardroom, leading to Mistry’s ouster.

 

Leadership Definition –

In case of Tata Sons Board, it appears there was a sharp disconnect in understanding what defines Leadership. Leadership is about making a difference through identified philosophy and purpose. In the absence of these, markers, business remains meaningless at best and useless at worst. In a storied institution that too at the holding company level, the term leadership essentially stands for Trusteeship and Custodian of legacy, reputation and brand. It is about nurturing and nourishing something substantial that has created a USD 100 Billion conglomerate over 150 years. So the way to make a difference is to deepen and broaden this legacy through institutional markers that have withstood the demands of time.

This is about pursuing Identity led Leadership (Institutional) instead of Personality Led Leadership (Individual). Identity led Leadership is about giving strategic leadership direction based on the philosophy and purpose of the institution. This is about acknowledging the supremacy of the institution’s identity that acts as the marker for leaders to chart their course and define the broader direction for the Group’s business. Essentially the timeless principles of governance and leadership.

Mistry perhaps made an error of judgment in pursuing a Personality led Leadership style. If an assumption gets made that to establish one’s mark on the institution legacy, one needs to look for alternative approaches that perhaps appear to challenge established principles, then the leader is not enhancing proven legacy but looking to establish a personal imprint on the institution. Further in pursuing a personality led leadership instead of identity led leadership, Mistry may have alienated both the Board as well as influential business heads.

Leadership Orientation –

Alignment of Orientation (approach) is perhaps more critical than alignment of objectives. Leadership orientation is about defining the method of operation that finds resonance with the broader mindset and the cognitive construct of the Group. Orientation becomes even more decisive in situations that need to manage complex business issues across an empire that enjoys rich legacy and with an active global footprint. Orientation is what defines stewardship in an institution by giving collective expression to its pursuits.

While there might have been an alignment of broader objectives and goals, what is more crucial is alignment of orientation in pursuits of these objectives. Alignment needs to be established both for objectives as well as orientation else it leads to management conflicts. In fairness to Mistry, this orientation expectation should have been translated with full clarity while defining the broader business objectives. It could have saved the Group plenty of blushes.

Origin (where we begin – legacy issues), Orientation (accepted Group philosophy) and Objectives (outcomes that are collectively agreed upon) are the three essential attributes that determine whether the leadership is being positioned for success. Absence of any of these attributes could result in misaligned priorities and outcomes, resulting in expectations mismatch.

Misfired Intentions –

Mistry had already spent around 6 years as Director on the Board before accepting the role of Chairman of the Group. This is a sufficiently long period at highest levels to understand each other and working style. Having been party to business decisions by virtue of being a Director on Board of Tata Sons, Mistry should have been aware of the depth of problems that were facing the Group.

Instead Mistry took a hard nosed view of business as a portfolio operation, thereby missing out on the larger picture of building a network effect by driving deeper linkages amongst Group firms for greater synergy and improved performance. Managing business is not the same as portfolio rationalisation. Managing business needs deep understanding, application, skill, patience and conviction in turning around a business situation and setting it back on course to growth and profitability.

Given a mixed bag of business slate, it was vital for Mistry to have taken a long term, collective approach to decision making instead of charting out an independent path. Clearly this has been a case of flawed leadership orientation where greater emphasis was put on fixing business numbers rather than on improving quality and sustainability of business.

In our concluding and final post (Part 5) we will share the remaining set of factors that contributed to the issues at Tata Sons Board.

TATA SONS – THE M(I)STRY SAGA – Part 3

What really went wrong?

Continuing from our previous post (Part 2) we try to piece together the specific issues that could have contributed to the trust deficit at Tata Sons Boardroom, leading to Mistry’s ouster.

 

Group Mindset –

To unravel and unfold the present mess, it is essential to first understand the circumstances where it all began. It is about reflecting on the leadership mindset and motivations of Tata Group as well as its philosophy and purpose.

Ratan Tata who had spent 21 years helming the affairs of the Group, was scheduled to demit the post of Chairman of Tata Sons upon achieving superannuation in 2012. Here was a man who through sheer willpower and single minded pursuit succeeded in bringing disparate set of businesses, which were initially functioning as personal fiefdoms of the original satraps handpicked by JRD Tata, under a common banner to leverage cross industry operations and also build deeper synergies in Group operations. This was principally driven with an objective to not only build synergies but also propagate Group philosophy and purpose across all businesses. This not only required the Group companies to be brought under common command structure, but also create tight alignment between the objectives of the Trusts (Tata Trusts), Holding Company (Tata Sons) and the Group Companies (Tata Businesses). It is this pursuit that became the defining legacy of Ratan Tata in institutionalizing the governance, leadership and business practices across the Group. A pursuit that went on to define the mindset of the Group in remaining steadfastly committed to the founder’s philosophy and purpose.

It is in the background of the Group mindset that the current issues at Tata Sons need to be seen.

False Start –

The Group had undertaken major expansion steps in not only spreading its business operations but also deepened their market offerings through acquisitions and new launches. This was undertaken on the back of anticipated global economic boom right up to the run up to the global financial crises that took place early 2008. Most of the inorganic expansion plans were driven through ambitious borrowings/ debt (Total debt stood at USD 26 Billion) that seemed to make business sense on the back of expanded global economic activity. The global financial crises took the wind out of the sails of most of these plans and the Group was saddled with expensive assets that needed to be serviced. The need of the hour for the Tata Sons Board was to seek a successor candidate as Chairman who had considerable experience in managing complex businesses in disparate geographies. Someone with deep understanding of driving business synergies, raise performance and productivity, introduce cost rationalization, support business growth and financial restructuring capabilities. Additionally the individual had to remain true to the philosophy and purpose of the Group and ensuring tight alignment amongst the various stakeholders. This was a delicate balance

Mistry was on the Board of TATA Sons since 2006 since his father demitted office. He had spent close to 6 years on the Board and was well saturated and steeped in the TATA culture and way of doing things. In fact there is a distinctive possibility that this consideration could have been a clincher in terms of his appointment as Ratan Tata’s successor. Which brings us to the moot point – did the selection committee tasked with identifying a successor err in appointing Mistry without sufficiently assessing his fitment from a mindset perspective to lead the Group, especially in the aftermath of the global financial crisis?

This is a critical issue to consider and decipher before arriving at any conclusion on what could have contributed to the current precipice at Tata Sons Board.

Marking Legacy Issues –

It was evidently clear that there were serious legacy issues that were inherited by Mistry in the run up to his appointment as Chairman. It included Tata Steel Europe (Corus), Tata Nano, NTT DoCoMo share buyback, TATA Power Mundra project amongst others. These challenges were in active mode for sometime and were featuring in the leadership radar of the Tata Sons Board. Challenges that were extraordinary both in terms of complexity and scale. Given that these were complex business issues that needed deeper engagement of the Board, the need of the hour for Mistry would have been to ring fence these issues for active consideration from immediacy perspective. It would have been of great significance if Mistry had constituted a separate committee (as an extract of the Board) to handle and manage these complex challenges. This would have ensured the Board as a whole would have assumed collective accountability for finding lasting solutions for these issues thereby insulating Mistry from possible backlash.

Mistry could have prepared a strategic plan that used differentiated approaches to handle legacy issues from the regular business issues of the Group. This would have won him considerable support from Board members while giving him bandwidth to drive the normal business objectives with greater latitude. By not marking out the legacy issues, Mistry created an entrapment for himself by taking on issues that clearly needed more heads to closely engage.

The criticality of the legacy issues that turned into management hotspots might have played an active role in pushing Mistry into taking business decisions that were perhaps contrarian to Group ideology and philosophy, thereby building trust deficit between Chairman and the Board.

In our next post (Part 4) we will continue with the factors that contributed to the issues reaching precipitous state at Tata Sons.

 

TATA SONS – THE M(I)STRY SAGA – Part 2

Decoding The Signals –

In our earlier post (Part 1) we had tried to give a chronology of events that led to the decision of removal of Cyrus Mistry as Chairman of Tata Sons Board. This is a continuation of the same piece.

It would perhaps appear that the seeds of discomfort were sown long time back. The chasm and the faultlines only widened with time resulting in complete breakdown of communication. It appears that there was serious trust deficit amongst the principal protagonists – Ratan Tata and Cyrus Mistry – over a host of issues. The signals have been there for more than 3 years now.

The best indicators of relationship going south can be gauged from the fact that at several instances the Articles of Association of TATA Sons was modified to strengthen and protect the interest of TATA Trusts – the dominant shareholder of TATA Sons. The timeline of the amendments to the AoA would indicate that the screws were tightened and the grip on the affairs of the Group was consolidated to severely curtail the latitude that was originally available to Mistry. This could only have happened based on several factors – misaligned objectives, leadership orientation, departure from established philosophy, unbridled aspiration, “significant minority” shareholder activism amongst others.

It would make interesting read to understand the specifics of the amendments to the articles that were carried out at different points in time. The ramp up of the amended resolutions in terms of impact perhaps would have been in tandem with the growing chasm between the two protagonists, thereby necessitating the changes in AoA to protect rights and benefits of TATA Trusts, the principal and majority shareholder.

Further, the fact that Mistry took nearly four years to put together a Strategic Business Plan (SBP) for the Group itself is an indicator of the widening trust deficit between the two sides. The SBP was to be presented to the Board immediately upon Mistry assuming charge as Chairman. However, fro reasons not known, there was no forward movement on presenting the plan, despite several follow-ups on this count. This could also have contributed to the widening rift between the two sides as the Board was totally in the dark about the broader plans that Mistry was willing to put together.

So when the SBP was finally presented to the Board in September 2016, it was rejected outright on account of several issues that were either missing or perhaps included measures did not go well with the long term, broad ethos of the Group. The failure to gain acceptance and pass muster with the SBP became the proverbial final straw that precipitated the need to take the tough decision of removing Mistry as Chairman. Clearly there was no one single event of catastrophic proportions that would have resulted in the inglorious exit of Mistry from TATA Sons.

In our next post (Part 3) we will try and decipher specific issues that could have led to this tumultuous relationship and painful outcome.

 

TATA SONS – THE M(I)STRY SAGA – Part 1

Winston Churchill had famously remarked about women – “A riddle wrapped in mystery inside an enigma”

It perhaps aptly describes the inner workings of the average corporate Board room. It would appear that even the revered TATA Group was not immune to this phenomenon. Or is there more to it than what meets the eye?

The TATA Chronicles –

The dust is yet to settle on the Tata Sons Board Room saga. By the time this piece gets published, enough dissection and analysis of the trail of disbelief and destruction of the happenings at Bombay House (headquarters of TATA empire) would have been carried out. After all, it is not often that one comes across hair raising episodes in a 150 year-old, USD 100 Billion global conglomerate with a storied reputation and sheer gravitas in the annals of corporate India. An institution that is known as much for its contribution to the national GDP as it is known for its national GPA (Gross Philanthropic Activities). An institution that is admired respected and looked up to as a beacon of best practices – a peerless institution exhibiting highest standards of corporate governance. An institution striving to live up to the defining promise and purpose of its founder Mr. Jamshedji Tata, considered as the torchbearer of timeless leadership and governance practices.

Circa October 24th 2016 – In an unprecedented move in the annals of corporate India the Board of Tata Sons through a residual resolution decided to vote in favour of removing its incumbent Chairman, Cyrus Mistry. The move sent shockwaves through the Indian business and financial ecosystem, as well as raising concerns in the minds of global financial investors. Mistry who was just four years into this assignment was an old Tata hand having spent close to 10 years on the Board of Tata Sons. Incidentally, Mistry’s family has close to eight decade old business association with the Tata Group and directly owns close to 18% shareholding in Tata Sons, the Holding/ Flagship Company of Tata Group. This decision on the face of it appears to have been taken at lightening speed including subsequent actions thereafter to remove any reference to Mistry in terms of his association with the Group in his capacity as Chairman of the Board. There was a lot that was happening behind the scenes and unfolding at express pace. Where was this headed?

Clearly the Board lost confidence as well as trust in Mistry’s leadership and was keen to make a swift and decisive separation on his continuation as the Chairman of the Board. This set in place a chain reaction of allegations and counter allegations, with both sides digging their heels in anticipation of a protracted legal battle. While no specific reason was attributed to this sudden decision, it appeared Mistry had lost trust of the Board and was increasingly operating in an isolated environment. Not very conducive to run a storied conglomerate that is a significant contributor to India’s GDP and is considered an epitome of highest standards of corporate governance.

Whatever may be the case, we have not heard the final word on this matter yet. That brings us to the most important matter under consideration – what really happened and are there learning from this episode for corporate India.

Torrential Disbelief –

Each passing day seems to only deepen the mystery around this entire affair leaving in its wake destruction of brand, reputation and shareholder value. There is understandably considerable anxiety, concern, fear and hurt in the collective minds of India Inc as well as broader business community given that Tata Sons Board has arguably stood for highest levels of corporate governance, definitely in relative terms.  As a crusader and custodian of governance principles with some of the finest minds from business community at the helm of its affairs, the sudden and enforced exit of Cyrus Mistry as Chairman of Board has cast serious breaches in the halo surrounding the Group. This is not so much about whether Tata Sons Board was within its legal rights to effect this change but more importantly the manner as well as the spirit with which it conducted its affairs. While there would have been merit to the decision arrived at through the combined wisdom of the Board, the undue rigour and speed demonstrated by the Board in removing Mistry did come as a shocker. Perhaps it could have been handled in a better way. Perhaps there could have been pressing issues that could have reached a tipping point leading to this sudden move which if left unaddressed, could have created a precipitous impact on the group and its operations – predominantly from its global standing and reputation perspective.

It appears we are in for a protracted behind the scenes battle which is likely to cause considerable damage to both individuals and institutions alike. From the looks of it, things will only get worse before they become better.

Our next post (Part 2) will help decode some of the issues that have possibly contributed to the current crisis at Tata Sons.

 

My Leadership Agenda for 2015 – Part 2

Are we consciously establishing institutional legacy through definitive Leadership Practices?


In my previous post on this topic, I had posed specific issues that are plaguing Leadership across Boards / Corporations. Having understood the nature of issues confronting leaders, I now share the specific directives and steps leaders need to consciously take to bring sustainable, enduring change.

So what ails the current Leadership Framework and what can leaders consciously do to establish a strong institutional legacy and culture?

My Top 10 points that should define the agenda for Leaders and Corporations to focus on are as follows –

  1. Total Leadership – It is important for Leaders to first undergo “Mental Orbit Shift” to become successful change agents. Leaders will be better served by wearing different hats for different occasions – ‘Motivator’, ‘Manager’ and ‘Maker’. Each role brings different sets of competencies to the front and needs to be judiciously used. Leaders need to reinvent themselves and have to undergo several changes as required to deal with each situation and individual in a specific manner. Uni-dimensional leadership is history.
  2. Enduring Credibility – Biggest issue facing Leadership today is one of “Credibility” of its own actions. Leadership at the highest level is about demonstrating decisiveness, moral courage and integrity – it pays dividend to be morally upright every time, at all points in time, across all situations and across hierarchy. One cannot play favourites on this front. Leaders need to invest in personal equity through the harder, longer road. There are no shortcuts here
  3. Purpose Principles – Purpose is the fuel that drives our life engine, both as corporations and individuals – ‘Purpose is Life’. Purpose of Existence defines who we are, what’s our philosophy and what represents our core identity. An institution without Purpose is like an anchorless and rudderless ship that just floats around without meaning or substance. Leaders need to realize without purpose, they are just playing for luck.
  4. Go Long Go Deep – Today’s world is charaterised by myopic vision leading to short term orientation and decisions. This singular malaise has corroded our thinking cells to an extent wherein everyone expects instant gratification in terms of results, outcomes and benefits. To see enduring results and play for the high stakes, it is important to have a foundation that is deep and farsighted enough to make provisions for adjustments that are likely to come by during the course of a journey. Leadership needs to readjust their ‘scopes’ and sharpen focus on long term decisions and mental orientation.
  5. First Principles – Basic rule of any high quality ideation is – never make any assumptions. What appears to work today is already dated and be aware that it is functioning on borrowed time. Rate of obsolescence of an existing idea (however good it may appear) happens at a pace sharper and exponential than Moore’s Law. Leaders need to realize this basic rule and ensure they encourage disruptive thinking and ideation across all levels of corporation. First Principles represents this thinking and which has become main street courtesy Elon Musk who is a great exponent of this thinking practice.
  6. Exploration Mindset – One of the greatest test (acid test, if I may) of Leadership is how they treat and define failure. Ability to encourage and motivate teams to overcome fear of failure through a prescribed process is extremely crucial and priceless. It is this ability that sets up a culture of innovation and prepares individuals and corporations to be on the cutting edge of constant exploration. Leaders need to quickly learn and realize that they are only as good as their last credible exploration.
  7. Frugal Innovation – Innovation is a much bandied about term these days. It is assumed that innovation by definition involves deep resources and infinite capacities. I am afraid this could be not be any further from the truth. Frugality is the mother of all innovation. True innovation is about aligning competencies, existing resources, immense belief and a strong ‘can do’ mindset. Leaders need to cultivate a couture that seeks to judiciously and intelligently bring diverse competencies and resources together and create self-compression ecosystem that will disgorge invaluable ideas.
  8. Gamification Approach – Excellence is pursuit of internal motivations – passion and belief in making a positive difference. Current breed of high performers are looking for purposeful engagement beyond the standard trappings of a high paying job. This is where Gamification Thinking comes in. This is about applying game mechanics and game design technique to engage and motivate people to reach their objectives. Forward looking leaders globally are now increasingly turning towards Gamification techniques to motivate and fire up the passion of their teams.
  9. Holacracy Setup – Holacracy, an upcoming leadership paradigm, offers a comprehensive model for structuring, governing and running enterprises in a purposeful and meaningful manner. It moves away from the current command-and-control management system in a way that Purpose becomes the anchor point of corporation’s and leader’s objectives. Corporations such as Zappos have embraced this culture and are benefiting from it immensely. We need to encourage our leaders to start adopting this practice sooner than later.
  10. Open Collaboration – When was the last time you truly collaborated? This is not about getting a few individuals with diverse backgrounds into a room and expecting miracles. Collaboration happens only when we have deeply engaged people bound together by a common and shared set of objectives. And this collaboration does not happen in isolation in a garage – it happens when the Thinkers, Adopters, Makers and Users come together on a common platform. What we then have is sheer magic. It is this purposeful engagement that seems to be missing from our collaboration efforts. Leaders need to see this signal much earlier so that priceless time, efforts and resources can be channelised for superior outcomes.

Active Engagement and Communication with stakeholder community will form the bulwark for the Leadership Agenda 2015

While it would my endeavour to encourage leaders to focus on the above 10 Point agenda, Leaders and Corporations will do well to focus on some basic issues as well. In the age and time that we live in, it is important to treat all constituents of our stakeholder community (not just shareholder, who to a large extent is very well taken care of) with compassion, respect and dignity. This means, putting stakeholder engagement back on the prime business table of the Leadership and ensuring they are not only doing good, but are seen / heard to be doing good.

This means apart from being decisive and action oriented, Leaders need to exhibit deep empathy and reflections for stakeholders. Further it is imperative they frequently communicate through myriad channels that are available (offline and online) these days on the specific forward looking engagements that have been taken by the Board. This makes for credible, accountable and communicative leadership that believes in empowering the constituency through active engagement.

It is clear that corporations and leaders who are committed to develop, design and execute an integrated, holistic and cross-level Leadership Ecosystem will make significant advancement and headway in establishing a Breakout Business paradigm. This is very much achievable and is waiting to be leveraged and exploited to unleash the true potential of people, processes and systems. This needs radical changes to our current approach and challenge the established paradigm and assumptions that form the basis of our decisions. In the VUCA environment that we live in, these 10 Points for Leadership Agenda will provide the necessary leadership strength to future ready our businesses.

May the force (and the Leadership) be with you.

My Leadership Agenda for 2015 – Part 1

Are we consciously establishing institutional legacy through definitive Leadership Practices?


As 2014 draws to a close, the varied and myriad sets of experiences flash through the mind. As in any other period, 2014 has also been a combination of hits and misses – from regulation & policies, to market performance, to business models to the outreach / impact of social media amongst other defining attributes. It would be safe to say that the world is definitely in a different shape compared to where it was a year back.

In the last year, Corporations and Leaders have done reasonable well in terms of stitching together path breaking deals, making strategic acquisitions, growing topline/ bottomline performance and expanding market opportunities through new market entry. The global growth & consequentially the center of gravity seems to have definitely shifted towards Asia, while US continues to lead the way in terms of providing access to capital pools at a fast clip.

While technology permeation and business sentiment (at least in India) keeps growing by leaps and bounds, what has not significantly changed or shall I dare say improve, has been the overall emphasis on quality of Leadership. The innate obsession and focus on numbers as measure of business performance is deeply disturbing to say the least. While numbers are important in the context of ensuring viability of an enterprise, where we all have collectively failed is in understanding the deep imprint and impact that Leadership has on human relations, sustainability, long term value creation and designing enduring institutions.

Let me pose a few rudimentary but important questions we need to ask ourselves, before I get down to the Leadership Agenda in 2015.

  • Do we as leaders understand our responsibility towards the larger community that extends beyond the immediate confines of our respective businesses?
  • How do we make our Leadership engagement style more attuned to the current demographic realities?
  • Do we as Leaders have the courage and conviction to take a mental deep dive and introspect to understand the impact our decision have on businesses and communities?
  • Do we encourage our leaders to have a deeper connect and lead with their souls – being more human?
  • Do we challenge conventional mindset of decomposed & fragmented approach to problem solving instead of a holistic & composite approach?
  • Are we preparing our teams to embrace failures in pursuit of true innovation and disruptive thinking?
  • Do we understand that what makes customer feel valued is not ‘customer centricity’ but a full on ‘customer engagement’?

Would encourage all of you to give the above careful thought and attention to understand centrality of issues affecting Leadership today across markets and geographies.

In my following post, I will share my Top 10 Leadership Agenda items which according to me could alter the leadership paradigm as we understand today.

Building Vanguard Leaders For The New Economy

Alamy Images

Alamy Images

Leadership and corporations need to do deep introspection and redirect their moral compass to business issues beyond immediacy of profits. The need of the hour is to transform leadership wherein people are encouraged to go beyond call of duty and engage in responsible behaviour that establishes real world people connections and help them realise their true inner potential

The last 20 years has seen rapid erosion of leadership values in blind pursuit of short term profits.  For long there has been serious erosion of intent and authenticity in how Boards have governed institutions that they are supposed to protect and nurture leadership and governance structures. The ‘destruction rate’ of institutional moral fabric is a direct outcome of linking leadership compensation structures to a culture of greed. This has propagated a vicious cycle and blindsided leadership to the pitfalls of short termism and instant gratification.

Leadership priorities and expectations need to be seen through the lens of long term decisions that help establish enduring business institutions.  Great leaders can intuitively connect their actions to the social impact of doing business. They understand building enduring businesses requires emotional maturity, impulse control and the ability to eschew instant gratification; something similar to the famous Marshmallow Test that was propounded by Stanford University in 1960s.

Strong leadership believes in the gift of reason and demonstrates courage to take decisions that have far reaching implications on societies in general and corporations in particular. They realize that decisions made today will irrevocably alter the business mindset and cultural fabric of businesses, people and therefore by extension society. It is here they demonstrate attention to a higher call that establishes personal equity and reputation through value systems. They understand that values lead to value creation

The need of the hour is to transform leadership priorities wherein people are encouraged to go beyond call of duty and demonstrate behaviour that establishes courage and conviction in doping the right things. It is about real world connections and help people in realising their true inner potential. This can only happen when individuals start introspecting about their “Purpose”.

Question is – are we prepared to bring this transformation for a better tomorrow?