1. Ratan Tata-Cyrus Mistry spat: How change of guard can snowball into global controversy

Ratan Tata-Cyrus Mistry spat: How change of guard can snowball into global controversy

The Tata-Mistry tussle raises serious questions about the corporate brand’s genetics and how structural changes can snowball into a controversy of global proportions

By: | Published: November 29, 2016 6:05 AM
While the dust raised by the exit of Tata Sons’ ex-chairman Cyrus Mistry is unlikely to settle down soon, the controversy has marred the halo of invincibility around the 148-year-old Tata Group, which is known for its excellent management. (Reuters) While the dust raised by the exit of Tata Sons’ ex-chairman Cyrus Mistry is unlikely to settle down soon, the controversy has marred the halo of invincibility around the 148-year-old Tata Group, which is known for its excellent management. (Reuters)

While the dust raised by the exit of Tata Sons’ ex-chairman Cyrus Mistry is unlikely to settle down soon, the controversy has marred the halo of invincibility around the 148-year-old Tata Group, which is known for its excellent management. According to Brand Finance, Tata was India’s most valuable brand in 2015-16 with a brand valuation of $13.7 billion. However, its strong corporate persona now appears to be on shaky footing by the ongoing tussle between Cyrus Mistry and interim chairman Ratan Tata. “The case is more of a boardroom battle between personalities and corporate interests. But it certainly doesn’t portray the brand in a positive light,” says Samit Sinha of Alchemist Brand Consulting.

Communication gap

While many argue that Brand Tata may take a beating due to the ongoing boardroom crisis, the question arises if the group paid limited attention to structured communication and therefore appears to have inadequate control on the narrative.

“Tata is a complex, conservative and somewhat bureaucratic machine. It normally tends to be reticent about communicating at the group level, leaving individual subsidiaries to do the talking in their own sectors,” says David Haigh, founder and CEO, Brand Finance. “Such events have turned this on its head, with dirty laundry being washed in public, which is never a good policy.”

But Brand Tata has lot of positive equity and a residual goodwill. “Unlike many other big corporate houses, the Tata Group was never seen with suspicion,” says Sinha. So when the group comes under negative light, it affects a lot of sentiments. However, it is the brand architecture at Tata which may impact consumer perception.

Unlike HUL or P&G, here the corporate brand isn’t different from the product brand as many of its products actually bear the Tata name.

“In this kind of a scenario if there is any cloud hanging over the corporate brand, it will have a direct impact on the product brand,” says Sinha.

Any crisis at the top level does run the risk of percolating down if there is a single decision making authority or if the company is tightly controlled from the top. But some analysts say it isn’t the case with Tata. “This is not how Tata Group is structured. It has a firm advisory role with the executive council on top and individual companies have strong leadership and autonomy. Hence the long term reputation hit will be limited,” observes Ajimon Francis, MD, Brand Finance India. “However, a few company brands like Tata Tele, Tata Motors, Tata Steel, etc will have to conduct course correction as they seem to have been hit the most due to the change in leadership and important decisions which may get delayed.” If one observes the umbrella brand Tata, the big contributors to the group’s global reputation have been JLR and TCS which are relatively secure from this ongoing change.

Making way for the new

The leadership crisis at the top may impact the senior management of its group companies. However, it is unlikely that middle and lower management would be impacted except for the uncertainty regarding leadership and direction of the company.

“A crisis like this should be led by a strong CEO and managed effectively by a well groomed communications director. Unfortunately in this case the problem is with the CEO so it will take a while for the situation to settle down,” says Haigh.

Nevertheless the leadership crisis does raise questions about brand genetics and whether the decades-old way of working shifted under Team Mistry — how some initiatives started shaking the very pillars of governance set by the visionaries of this stellar brand. “To be sure, the current crisis does humanise the brand and bring home the point that the corporate world is not perfect. There are egos and different opinions and the Tata Group is no exception,” says Sinha. “We believe the autonomy granted to Mistry has been leveraged to an extent that the parent Tata Sons started getting jitters on the strategic direction being taken,” opines Francis.

The real concern is the direction Tata as a group is going to take. “It is to be seen if the successor will carry forward the old values of Tata Group — Mistry somewhere stood for modernising the culture with a focus on profits,” says Alpana Parida, MD, DY Works. One thing is for sure — the story is far from over yet.

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