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Book excerpt: Tata’s Leadership Experiment | “Cyrus Mistry wanted a ‘Brains Trust’ around… – Moneycontrol

Cyrus Mistry was chairman of Tata Sons from 2012 till October 2016. (File image)

Tata’s Leadership Experiment: The Story of the Tata Administrative Service by Bharat Wakhlu, Mukund Rajan, and Sonu Bhasin, is an in-depth examination of the Tata Administrative Service (TAS), a programme that J.R.D. Tata himself launched to identify and train “people with calibre and intelligence who could help him grow the group”.

In a chapter titled ‘A New Chairman’, authors and former TAS officers Wakhlu, Rajan and Bhasin write about Cyrus Mistry succeeding Ratan Tata tatas leadership experimentas Tata Sons chairman in 2012, Mistry’s vision for a new leadership and his five-member Group Executive Council. Excerpt:

Cyrus (Mistry) had served on the Board of Tata Sons since 1996. He had, however, never played an executive role within any Tata company, and to that extent, could be expected to bring in a fresh and objective perspective. His first priority was to create a new generation of leadership in the Tata Group, following the retirement of almost all of Ratan Tata’s earlier colleagues.

Cyrus wanted a ‘Brains Trust’ around him that would act as his sounding board when making critical decisions for Tata Sons and for the Group companies. This resulted in his nomination of a five-member Group Executive Council (GEC). Cyrus was clear that he wanted a change from Ratan’s system of appointing insiders on the Board of Tata Sons. He wanted to keep the GEC separate from the Tata Sons Board and preferred to have independent professionals with a reputation for integrity and strong business instincts appointed to the Board.

In the GEC, very similar to the manner in which Ratan had years earlier created the GEO with talent drawn from both within and outside the Tata Group, Cyrus sought a mix of insiders and lateral hires so that balanced perspectives could emerge on all issues in future. The appointees to the GEC were Dr Nirmalya Kumar (strategy); Dr N.S. Rajan (HR); Madhu Kannan (business development and public affairs); Harish Bhat (portfolio—retail); and Dr Mukund Rajan (brand, ethics and Corporate Social Responsibility [CSR]).

Among the three lateral entrants to the Tata Group, Dr Nirmalya Kumar was a Professor at the London Business School and one of the most cited Marketing Professors in the world; Dr N.S. Rajan led the leadership practice at Ernst & Young for many years and had consulted with most of India’s leading corporates; and Madhu Kannan was a former Managing Director of the Bombay Stock Exchange, having earlier interacted as an officer of the New York Stock Exchange with many of India’s leading corporates when they were considering a possible foreign listing on that exchange. From within the ‘old hands’ of the Tatas, in a reflection of the still-considerable cachet that the TAS commanded in the Tata Group, Cyrus selected two TAS officers, Harish Bhat (TAS 1987) and Dr Mukund Rajan (TAS 1995).

Both Harish and Mukund were Tata ‘lifers’, having spent their entire working career in the Group and moved across different Tata companies. Harish had spent a number of years in companies like Tata Tea, Tata Coffee, TTSL and Titan, and had served in senior positions such as President of TTSL, Managing Director of Tata Coffee and Chief Operating Officer of Titan, before moving to the GEC. Mukund had been Ratan Tata’s Chief of Staff for twelve years, before moving to TTSL (Maharashtra) as the Managing Director, and then setting up the Tata Capital flagship private equity fund, the Tata Opportunities Fund as the Founding Managing Partner, and overseeing the private equity business at Tata Capital.

Since there was no template for the GEC, which was a new construct in the Tata Group, the members collectively proceeded to invent things as they went along. They created a Group Policy and Strategy Forum, comprising the CEOs of the Group’s largest companies, to act as a sounding board for the GEC. In a departure from the Ratan Tata days of an overly powerful corporate centre, the GEC was especially conscious that good corporate governance meant that Group companies could not be mandated or instructed to toe a particular central line. Instead, it needed to win their confidence and allow time for the individual processes of engagement with and between the CEOs, Boards and shareholders to deliver the outcomes it was keen to see.

There are very few parallels to the Tata Group’s structure anywhere in the world, with an unlisted holding company—which in turn is principally owned by charities—controlling significant stakes in large listed enterprises. Fundamental questions about the appropriate roles of owners and managers across different entities, such as the Tata Trusts, Tata Sons and the Tata Group companies, could confuse even the brightest of lawyers. At the GEC, Mukund indicates, ‘We put our heads down and focused on what we could do well, leaving it to Cyrus to work out the mechanics of engagement between the Tata Trusts, Tata Sons and the Tata companies.’ Sadly, as events would turn out, achieving a working arrangement on this proved beyond Cyrus’s reach.

The GEC took some time to find its feet. The lateral hires from outside the Tata Group were perceived to be arrogant and lacking in civility by some of the TAS officers who interacted with them. They were also seen to be quite inadequate in their own operating experience. One TAS officer tartly comments that these hires did not appear to have gone through any serious check on their values orientation and certainly did not have to jump the kinds of hoops a TAS officer would have had to before being selected.

Mukund admits that mistakes were made by the GEC. However, he believes that through extensive engagement with Tata people across the Group, the GEC was able to make good progress in developing a fairly accurate understanding of organizational needs and was able to secure broad endorsement of the mission and vision the Group had embarked upon under Cyrus’s leadership.

Mukund observes that there was a high degree of continuity that Cyrus sought to maintain with the past, particularly in preserving the Tata Group’s strong values and reputation for good corporate citizenship. This was reflected in the role that Mukund himself was assigned within the GEC, that of serving as the first Tata Brand Custodian. As Mukund puts it, ‘This entailed responsibility for the Tata corporate brand owned by Tata Sons as well as oversight of corporate communications at the Tata Group. In Cyrus Mistry’s view, the Tata brand had been built on the twin pillars of commitment to giving back to society and good corporate governance,

and so he additionally tasked me as the Brand Custodian to serve as Chairman of the Tata Global Sustainability Council, with oversight of Group CSR activities, and as the Chief Ethics Officer of the Group.’

Cyrus’s creation of the role of Brand Custodian, and the responsibilities he entrusted under the ambit of this role to a TAS officer, was forward-looking. Today, as corporations are increasingly tasked to focus on Environment, Social and Governance (ESG) issues, there are valuable lessons they can take away from the Tata experiment.