How Tatas welcomed the world to Bombay House

Written by MG Arun | Baiju Kalesh | Mumbai | Updated: Jan 24 2012, 05:33am hrs
As Tata Group chairman Ratan Tata grooms his successor Cyrus Mistry before passing on the baton this December, he leaves behind a legacy of integrating group values with the 25 companies it purchased in the past 15 years across the globe through a process of osmosis, an organic phenomenon that is ingrained in the Tata ethos.

In all the acquisitions, culture, beliefs and values are not communicated through charts and letters or public notices, but are conveyed through a process of osmosis, Satish Pradhan, chief of group human resources at the $83.3-billion Tata Group told FE. There is no structured algorithmic process.

This slow, but effective, model has been the cornerstone of all acquisitions of the group, which now earns 58% of its revenue from abroad. Whether it was the Daewoo, Tetley or the Corus acquisition, the thinking of the business leadership was not that of deal-making, said Pradhan.

The group has to satisfy three parameters before it goes ahead for an acquisition. First, a post-integration scenario where the leadership team examines what the combined future looks like for the Tata group company; second, how that future can be more exciting; and third, how it can be more valuable and better for all stakeholders involved.

The purpose of deal making is clearly pre-set in the context of combined future value and viability of the two entities, said Pradhan. You dont jump into a deal only saying Theres money in it now. This approach had won Tata Steel British steel maker Corus in 2007, despite a counter-bid from Brazils CSN.

The groups biggest challenge was the cross-cultural integration and change management in acquired companies. In this context, the Tatas have been a game-changer and, hence, an accepted leader in different industries across the globe, said Monish Chatrath, consulting and markets leader, Mazzars India.

The osmotic process seems to work well for the Tatas, who have successfully acquired companies across the UK, US, South Africa, Latin America and Asia. The key here is not to strive to impose ideas to create a cosmetic sense of uniformity.

An underlying principle that developed during the early days and has not changed has been a search for unifying the group in terms of HR practices, but not necessarily seeking uniformity, said Pradhan. As a general trend, the need to standardise and make everything uniform becomes like a compulsive challenge. But for the Tata Group the sense, approach and principles matter.

You can go wrong when you randomly change management and insist upon the culture to be followed, said Arvind Agrawal, president, human resources development at the RPG Group, which has acquired several companies overseas. The acquirer needs to develop a trust with the management and nurture the larger talent pool. His comments are not specific to the story.

HR challenges to the Tata Group are akin to American conglomerate General Electric, a diversified firm ranked sixth on the Fortune 500 list. GEs revenues from overseas at $79.5 billion exceeded the $70.5 billion from home, with more non-American employees as it spread across the globe.

In the 10 years between 2001 and 2010, the number of American staff on its rolls dropped to 133,000, while non-American rose to 154,000.

Value alignment is a key factor in integration, said E Balaji, chief executive and managing director at Ma Foi Randstad, a human resources consultant. In any case, certain core values are commonly acknowledged, across companies and cultures.

There is no need to over-influence,said Shiv Agrawal, chief executive of ABC Consultants, an HR consultant.

Along with the search for unifying the group on certain best practices is a continuous review of business structures to ensure unwieldy and unproductive layers are weeded out. In a business behemoth the size of the Tatas group company Tata Consultancy Services or TCS alone had over 225,000 employees until December 2011 it is easy for such layers to creep in, affecting productivity.

One of the things we did was to ask ourselves whether we had too many levels of decision-making, and whether our structure is appropriate, are jobs big enough, or have they, over time, accommodated people to create multiple layers, said Pradhan. When the layers get reduced, the job becomes bigger, the capability gets stretched. Otherwise, people do not get the full challenge.

The seed to such practice was sown earlier to prepare for new challenges.

We were coming out of the protectionist raj, companies were looking to get more quick and agile, more competitive and focused; so the question was, are we organised in the right way and what are the HR tools available to make us more competitive, said Pradhan. The companies reviewed their structures as appropriate, and this is a continuous process.

Another endeavour of the group is to maintain a judicious mix of talent, coming largely from an internal pool, but blending it with external inputs wherever necessary.

At the forefront of this effort is the Tata Administrative Service or TAS, an idea conceived by JRD Tata, the late chairman of the group, to recruit the brightest talent, impart training, and nurture future leaders. Some TAS executives rose to the top ranks, while others are managing companies.

RK Krishna Kumar rose from the ranks to become Tata Sons director, while N Srinath is Tata Teleservices managing director, PM Telang is Tata Motors MD and Brotin Banerjee, Tata Housing MD and CEO. Roughly 30 TAS executives were inducted into leadership roles in group companies in the past five years and the group wants this to rise to anywhere between 40 and 50.

What made the Tata brand so successful is that the fact that they started off with a very strong set of values which were embedded in the group from the very beginning, right from the time when Empress Mills was founded by Jamsetji Tata, Morgen Witzel, the author of Tata The Evolution of a Corporate Brand, told FE in an earlier interaction. Strong brands are always built on strong values, principles and ethos and then communicating and sharing them with stakeholders.

The group did this consistently well, largely owing to a consistency in leadership it had only five chairmen in the past 140 years, said Witzel, now a business consultant with Winthrop Group of Business Historians.