Gurcharan Das
Ratan Tata ran a hundred-billion-dollar empire, but he never appeared on any billionaires list. This anomaly is explained by Tata Group’s unique structure where wealth is held by charitable trusts that reinvest the group’s profits in philanthropic activities―in education, health care and human welfare. In Ratan’s case, however, there is also a symbolic significance in the incongruity: he was not only a remarkably self-effacing, low-key individual but also he had a billionaire’s heart. His life’s lesson was simply that the real measure of success lies in serving society. He was universally respected because he was the conscience keeper of India Inc. It explains the spontaneous outpouring of grief, respect and admiration across India when he passed away on October 9.
Sometime in the late 1980s, I was privileged to be invited to join the board of one of the Tata companies. At a meeting in Bombay House one morning, the chairman, Freddie Mehta, invited a young man, whom he affectionately called ‘Ratan’. I didn’t know the stranger, but I remember him for his modest, shy manner. Nothing about him proclaimed that he was a mighty ‘Tata’. Fifteen minutes into the meeting, a dog entered the board room and without any fuss it sat down at Ratan’s feet. The broadminded board acted as though it was the most natural thing in the world. Later, I learned that the four-legged guest was one of the stray dogs that Ratan had picked up outside Bombay House a few days earlier and given temporary shelter in his office.
I next heard about Ratan Tata in 1991. He had just taken over from J.R.D. Tata as the head of the group. My first reaction was ‘nepotism’. The English word comes from the Latin, ‘nepot’, meaning ‘nephew’, and it is related to the Sanskrit word ‘napāt’. Ratan was J.R.D.’s nephew. My uncharitable reaction was natural. Ratan had little to show for his business life―only a failed venture, National Radio and Electronics (NELCO). Even his entry into business had been an accident. He had gone to Cornell University where he studied architecture. After that he had begun work as an architect, and had seriously thought of staying on in the US. But his ailing grandmother (who had raised him) brought him back to India two years later.
Fate had placed Ratan at the right place at the right time. Prime Minister Narasimha Rao had just opened the economy to the world and Indian business had been unshackled after two generations of ‘license, quota, inspector raj’. It was a time of opportunity. Before seizing it, however, Ratan had to first fix his own house. J.R.D. had left a loose federation of companies, and his successor worried that the group might fall apart because three powerful satraps were running three large companies as their personal fiefdoms―Russi Mody at Tata Steel, Darbari Seth at Tata Chemicals and Ajit Kerkar at Indian Hotels.
All three were extremely competent, but they had larger-than-life personas and they were feared. Even J.R.D. was in awe of the satraps. Thus began a battle in which the odds were stacked against Ratan. But he found his weapon and he won. Employing a little-known rule of retirement age, he eased them out. The world discovered that Ratan had an iron fist in a velvet glove. It turned out to be the right move as the Tata group began to knit itself together. There is a lesson here for India Inc. Just as ‘no one is above the law’ in a liberal democracy, ‘no one is bigger than the company’ in business. Both democracies and companies are best run by modest persons.
Care for all: Ratan Tata at the launch of Goodfellows, Indias first companionship startup for senior citizens | Getty Images
Next is the story of Ratan Tata the visionary, who went on to transform the Tata Group into a global name. He bought the UK’s Tetley Tea, the British steelmaker Corus and Jaguar-Land Rover from Ford Motor Company to become the largest investor in Britain. Corus, however, turned into a financial disaster after the global financial crisis. Domestically, after selling many businesses―including cement, textiles, cosmetics and pharmaceuticals―Tata executed audacious new moves: forays into telecom, retail and finance; the first indigenous car, Indica, and the cheapest, Nano. The Nano failed because of production and marketing problems. A car for Rs1 lakh might be the cheapest in the world but an aspiring family doesn’t want to be seen driving it.
By the time Tata stepped down in 2012, the group’s turnover had grown 25 times from $4 billion in 1991 to over $100 billion. Luckily, Tata Consultancy Services had become the biggest IT services company in Asia, accounting for 90 per cent of group profits. Yielding $4 billion in dividends a year, it became the group’s reliable cash cow.
Sadly, his tenure ended with a board room battle. Cyrus Mistry, whose family was the largest individual shareholder in the conglomerate, became his successor. But it didn’t work out, and Ratan ousted Mistry. But Mistry did not go quietly. He sued the Tata Group, alleging nepotism, ignoring minority shareholders and tolerating misdeeds. Initially, the courts ruled in Mistry’s favour, but the Supreme Court finally affirmed the legality of his dismissal.
The final lesson from Ratan Tata’s life relates to succession. An outstanding professional, N. Chandrasekaran, was appointed CEO in 2017 to manage the group. Ratan Tata remained the head of Tata Trusts, the de facto owner of the business. The family finally separated ownership and management, giving up running the business. This is an important lesson for India Inc where too many incompetent sons replace fathers. Too many Indian companies suffer from family fights. Indian business will only mature when founders of companies realise they must give up day-to-day control, and bring in the best person from the outside to run the company. It is common sense―a son may be competent, but he is unlikely to be best candidate in the world. The argument that a professional manager cannot be a risk-taker like a family member doesn’t hold. It only means that you haven’t selected the right CEO.
Writer was CEO of Procter & Gamble India and managing director of Procter & Gamble Worldwide (Strategic Planning)