Ratan Tata: Leading the Tata Group into the 21st Century
Ratan Tata: Leading the Tata Group into the 21st Century

Ratan Tata: Leading the Tata Group into the 21st Century

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  • Pages: 3 (1417 words)
  • Published: November 5, 2018
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The Tata group, alongside Reliance and Birla conglomerates, is a household name in India. The group had risen to this prominence through its enterprising, innovative and ethical leadership over the course of more than a century. First under the auspices of Jamshetji Tata and later under the inspirational leadership of J.R.D. Tata, the group has earned its fame through the management ethos that is passed from one generation to the next. Since 1993, Ratan Tata, the nephew of J.R.D. Tata assumed the top leadership position for the group. And in the 17 years of his leadership, the group has ascended new heights and looks set to continue in this vein in the immediate future too. This essay will critically discuss the leadership of Ratan Tata and evaluate his successes and failings by setting them in right context. The essay will also attempt to identify areas where the Tata group lags behind and propose measures to improve those.

The year 1993 when Ratan Tata took over the reigns of one of India’s largest conglomerates is a crucial time for the country as a whole. It was two years before, in 1991, that the Congress government, under the leadership of Narasimha Rao, made a radical policy move that would change the complexion and dynamics of the Indian economy. Prior to 1991, Indian economy was highly protectionist, with a regulatory framework that was indifferent to business interests. In the competition between the public sector and private sector, the former always held an edge. And some of the private

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sector enterprises too reflected the lethargy and incompetence of the public sector. Even amid the major business houses, the Tata group had garnered notoriety for representing this form of work culture and attitude. So Ratan Tata was met with two major challenges: the first is to adapt the group to the changing economic environment and secondly to change the work culture of his own organization (Case 10, Center for Management Research, 2008). And after seventeen years of his role at the top, there is measurable progress in both these areas. And as a result of that, despite how successful his leadership would be in coming years, his legacy as a stalwart leader is already assured.

In his early days as Chairman, Ratan Tata had to confront issues of power politics within the organization. For example, many of the individual companies and subsidiaries functioned as independent entities, without reflecting the core values and principles of its founders. This lack of cohesion manifested in the form of CEOs clinging on to their position way beyond reasonable tenure, thereby thwarting opportunities for the next generation of managers. Ratan Tata’s initiative to turn around this situation was met with stiff opposition from below, but he stood by his principles and managed to shake up the top management of the group in a matter of few years. This result proved to be a beneficial one, as the newly appointed managers were better equipped to utilize business opportunities created in the neo-liberalization era. The

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inefficiencies and quality issues that were commonplace previously, were set right under this program of leadership change. So Ratan Tata truly deserves appreciation for readying Tata group to embrace globalization under the neo-liberal policy framework. (www.economist .com, 2007)

Ratan Tata also has to be credited for making the conglomerate trimmer and fitter by pulling out of businesses that were unwieldy and unprofitable. At the same time, the Tata group expanded into new industries such as Information Technology and Telecommunication, where it has been very successful. Hence Ratan Tata’s legacy will not be for pulling out of certain businesses, but for venturing into new business domains as well. And behind this change in the composition of the conglomerate is the philosophy of risk espoused by Ratan Tata. For example, in his own words,

“You can be risk averse and take no risks, in which case you will have a certain trajectory in terms of your growth. Or you can, while being prudent, take greater risk in order to grow faster. I think, as a Group, we were risk averse and we hardly grew because either it was not safe or no one else had done it before. I view risk as an ability to be where no one has been before. I view risk to be an issue of thinking big, something we did not do previously. We did everything in small increments so we always lagged behind.” (Case 10, Center for Management Research, 2008)

But, it should also be noted, that two of the major acquisition moves in recent years have been high on risk and uncertain on returns. The acquisition of Corus by Tata Steel and the acquisition of Land Rover and Jaguar by Tata Motors were met with skepticism by business analysts. Especially, the drain them imposed on the financial resources of the group is of high magnitude. It will be after many years from now the merits and demerits of these big deals will be realized. While his critics were right in being skeptical about these big moves, one should appreciate Ratan Tata for standing by his stated philosophy on risk (www.economist .com, 2007). Moreover, while he may have risked the financial prospects for Tata Steel and Tata Motors in the future, there is no doubt about the personal legacy that he will leave behind. To elaborate further, in evaluating the leadership of Ratan Tata, it is important to take into account his philanthropic inclination. Despite being a profit-driven enterprise, the Tata group stands out from the rest in terms of its contribution to the greater common good of Indian society. Two of the most prominent charitable institutions in India were founded by the Tata family. What makes this exercise of goodwill more impressive is that they were kept running even during the most acute periods of economic recessions. No other major business house, either in India or abroad, would have jeopardized its business interest or catered to public interest. While this charitable tendency runs down generations, starting with Jamshetji

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