Mallen Baker says the next head of Tata needs to keep the company’s sustainable character intact

Ratan Tata, Tata Group’s larger-than-life chairman, will step down in December 2012. A committee has been formed to identify a successor.

Meanwhile, the appointment of the reclusive Noel Tata as managing director of Tata International has sparked speculation: perhaps he is being groomed for the top job. Perhaps not. Tata says it will consider candidates from inside and outside the company.

Tata Group is a towering example of social responsibility. Not because of some policy change it implemented during the past ten years, but because of a centuries-long history where the Tata values, exemplified in the refusal to pay bribes in a business culture where such practices were (and are) endemic, have been a strong ongoing part of its success.

In recent years, Tata has taken its place on the global stage. UK prime minister David Cameron noted during his recent visit to India that Tata is now the UK’s largest manufacturing employer. And the company startled, charmed and alarmed the world in equal measure when it launched the Tata Nano – the cheapest car in the world designed to improve the quality of life of people in India. Ratan Tata has been the highly visible presence during this time.

Any change of leadership is a time of opportunity and risk. Every Tata manager would protest that the values are too securely embedded within the company to be at jeopardy from a new man at the top. They’d argue that only someone that would lead from the basis of those values will be acceptable.

At present, the only statement about the leadership succession is that the panel will consider “someone with experience and exposure to direct … growth amid the challenges of the global economy”.

But leadership is important. If an outsider joins the company with his or her own view on the challenges of the global economy, the danger is that Tata’s unique heritage may be seen as a peculiarity of its family origins and its India context and as something outdated in view of the company’s global ambitions.

It seems absurd to say it now, but in a world where the one constant is change, you have to actively ensure that the change you bring about is the change you expected.

Tata’s best chance is to appoint an insider – not necessarily someone who bears the family name – but someone that has spent the past 20 to 30 years doing business the Tata way. Or someone whose performance in their current role elsewhere has been notable for a strong values component.

Sticky situation

After all, remember what happened at 3M.

3M was lauded by many as the most innovative company in the world, and it had only ever appointed insiders that had come through its unique culture. Then James McNerney was appointed, having previously been part of the GE empire. McNerney proceeded to do at 3M what he had known at GE, namely the Six Sigma quality process.

In so doing, he pretty much stifled what made the innovation engine work. Six Sigma was suited to turning out defect-free products in an efficient way. It wasn’t suited to coming up with brilliant wacky ideas and giving someone the space to try to make a product out of them.

In the seminal management book Built to Last, James Collins and Jerry Porras say they thought the 3M culture was so firmly embedded it would survive changes of leadership because they would have to learn to do things the 3M way. That thesis was proved wrong, and it took McNerney’s successor George Buckley to begin to back away from some of the implementations of Six Sigma that had sent the company’s creativity off the rails.

Tata Group needs to heed the lesson. Nothing is forever unless you actively organise to make it so. Those guiding the Tata succession must be clear that the new chairman will lead on the basis of those historical values, and that this is as important to the board as the international expansion.

Tata, after all, grew more slowly than many of its early competitors all those decades ago because of its refusal to pay bribes. But its insistence that the values came first was one of the factors that led it to outlast and outgrow those same competitors.

This lesson is more, not less, relevant as Tata continues to consolidate its role as a global force to be reckoned with.

Mallen Baker is founder of Business Respect and a contributing editor to Ethical Corporation.
mallen.baker@businessrespect.net
www.businessrespect.net