Tatas Find Cyrus Ratan
More than a year ago when Ratan Tata pronounced that he was looking for somebody outside the group including expatriates to succeed him, it created a storm. This candid admission did not go down well among die-hard Tata Group fans and loyal shareholders, who were looking forward to another Tata, more specifically Noel Tata, taking over in natural succession. But when Cyrus Mistry was hosted as chairman-in-waiting, nobody was grumbling, though the announcement took everyone by surprise.
Cyrus as Tata Sons director was a member of the five-person selection committee and his candidature for the chairman’s post was least expected. But when the global search including internal candidates met with no success, the panel looked at Cyrus and found the next chairman in him. Selecting a worthy successor and leaving behind the group in safe hands was perhaps the biggest challenge before Ratan Tata, who is no stranger to putting big bets and coming out as a winner.
If he had fought bitter boardroom battles to rid the group from satraps such as Russy Mody, Ajit Kelkar and Darbari Seth, brought sanity in the business empire and relentlessly grew it internationally by taking big risks, it was equally important for him to hand over the baton to the right person and he is exactly doing that. The board of Tata Sons last week appointed Cyrus Mistry as deputy chairman of Tata Group, which in 2010-11 reported sales revenue of $83.3 billion (Rs 4.30 lakh crore).
Cyrus is the younger son of construction tycoon Pallonji Mistry, the chairman of the one-and-a-half-century-old Shapoorji Pallonji Group. Pallonji Mistry, the world’s richest Parsi, owns 18.5 per cent stake in Tata Sons and is the single largest individual shareholder in Tata Group’s holding company. Tata would groom Cyrus for a year and he would take over in December 2012 when Tata retires as per a retirement policy framed by him.
Cyrus (43) has been in the board of Tata Sons for over six years and is familiar with the strong values and business ethics of the Tata Group. Last year, a five-member selection committee was set up to choose Ratan Tata’s successor. It included Tata Group veterans NA Soonawala, RK Krishna Kumar, lawyer Shirin Bharucha and Lord Kumar Bhattacharya. Cyrus opted out when his name figured as one of the candidates.
The young Cyrus would lead the group for more than three decades and would continue the legacy of Ratan Tata, who has put the group on a high-growth path through global acquisitions such as British giants Corus and Jaguar Land Rover. Tata said that the appointment of Cyrus was a far-sighted choice. He has keenly observed Cyrus for the last six years at Tata Sons board and has been very impressed with the quality and calibre of his anticipation, his astute observations and his humility.
Both of them have the same personality and have a great chemistry at work. This would help a lot in driving positive change in the conglomerate. “He is intelligent and qualified to take on the responsibility being offered and I will be committed to working with him over the next year to give him the exposure, the involvement and the operating experience to equip him to undertake the full responsibility of the group on my retirement,” Tata said while selecting his successor.
Cyrus, currently Managing Director, Shapoorji Pallonji Group, is a graduate in civil engineering from Imperial College, London, and has a Master of Science in management from the London, Business School. He maintains a low profile and a recluse like his father. He is married to Rohika, the daughter of leading lawyer Iqbal Chabla. Cyrus Mistry’s elder brother Shapoor Mistry handles the real estate business of the SP Group. His sister Aloo is married to Noel Tata, the younger brother of Ratan Tata.
This is the second time that someone who does not have Tata surname would be taking over as group’s chairman. For a brief period between 1932 and 1938 Sir Nowroji Saklatwala was the group’s chairman. The challenges before the group have multiplied as it has ventured into overseas market in the past years. The group has over 100 operating companies and has operations in more than 80 countries. Over 58 per cent of its total revenue is now coming from business outside India. Tata companies employ over 425,000 people worldwide.
Upon his appointment Cyrus said that he was aware of the enormous responsibility he was entrusted with. “I take this responsibility very seriously and in keeping with the values and ethics of the Tata Group, I will undertake to legally disassociate myself from the management of my family businesses to avoid any issue of conflict of interest,” Cyrus said.
Cyrus is young and is the right person for a young country like India where the youth is leading the consumption boom. Like Ratan Tata, he is technology oriented and it gels well with the group’s philosophy of focusing on new technologies and innovation to drive business in India and internationally. The induction of Cyrus would lead to a smooth transition because he will get all sort of guidance from Ratan Tata for the next year to step into the mighty shoe. Because they share a great relationship, Tata would be available for any guidance even after retirement.
Today, Tata is known as an international company with Indian origin. Because the candidate has been selected on merit, it has given a very strong signal of continuity of Ratan Tata’s legacy, which has completely transformed the group in the last 20 years. Cyrus may not have the Tata surname but he is not new to the Tata ethos. His sister is married to a Tata and his father is the single-largest individual shareholder in Tata Sons.
At 43, Cyrus has over 16 years of experience in running diverse businesses of the $2.5-billion (Rs 13,000-crore) Shapoorji Pallonji (SP) group, which has operations in nine countries with 23,000 employees. As Managing Director of Shapoorji Pallonji Co. Ltd, the group flagship, he has grown the diversified group four times in the last five years. Like the Tatas, the SP group is known for trust and quality. He has acquired businesses, restructured operations and turned around companies.
Though he comes with the experience of running a much smaller group as compared to the mighty Tatas, he can easily fit in after the grooming as he has all the qualities to scale up. Even Ratan Tata had lacked the desired experience when he was selected as JRD Tata’s successor in 1990. But he turned out to be extraordinarily brilliant and rid the group of many evils and led it on growth path. The selection of Cyrus is to primarily ensure continuity of Tata Group’s legacy, the values it stands for and to carry along millions of Tata shareholders who are emotionally attached to the group for its ethical business practices and the trust it commands.
The successor was to be named by March 2011 but the complexities delayed the process. The task of the committee was to choose a candidate from among insiders, and outsiders including expatriates with global experience and someone who imbibed the core value of the Tatas. Despite criticism Tata had always insisted that only the best candidate on his own merits could succeed him, irrespective of the fact whether he is from the Parsi or non-Parsi community. So far only Parsis have remained chairmen and except for one case all chairmen were Tatas.
For Ratan Tata, the Tata is an Indian group and it should not be known as a Parsi group. For him the “successor should be the right person, not anti-Parsi or pro-Parsi”. Today’s Tata Group was not the group that Jamsetji Tata formed. It is no more an India-centric group. Ratan Tata since taking over in 1991 has grown it over 15 times and much of the growth has come in the past five years. The selection of Cyrus has been done in accordance with Tata Group’s articles of association that mandates a selection committee to choose the next chairman, who has experience and exposure to direct its growth amidst the challenges of the global economy.
Reportedly other contenders for this post included global professionals from Indian origin such as Indra Nooyi, CEO, PepsiCo; Arun Sarin, former CEO of Vodafone; Vikram Pandit, Citibank CEO and Carlos Ghosn, President & CEO of Renault Nissan. Over a dozen of internal candidates, including Noel Tata, who was the front runner, were also evaluated. In this battle for succession, Ratan Tata took a neutral stance. By putting the interest of the organisation and merit before bloodline, Ratan Tata has proved that he is above board.
In the annals of corporate history, Ratan Tata would go down as someone leaving the organisation in safe hands apart from making it a true multinational. Despite being a Tata, an insider and selected by JRD himself, Ratan Tata had to face stiff resistance from Tata Group satraps such as Tisco’s Russi Mody, Taj Hotel’s Ajit Kerkar and Tata Chemicals’ Darbari Seth who did not accept him as the chairman.
Tata had to fight a bitter battle to establish his supremacy and he took time to prove himself. It was only post-2007 that the group hugged international headlines for the acquisition of Corus, Jaguar Land Rover and invented world’s cheapest car—Nano. Twenty years ago, when Ratan Tata took over from JRD Tata, he was greatly confused. His dilemma was what he should be to fit into the mighty shoe of JRD. For two years Jeh had been with Ratan to groom him and during that period Ratan Tata was in great confusion as to how to conduct before JRD’s towering personality. “For me, there was always a public confusion,” Ratan Tata had once confessed about his early days as Tata Group chairman.
Fortunately, Cyrus would have a smooth sail. Ratan Tata unlike JRD has not created any celebrity CEOs, who would pose any challenge for his successor. Tata had to spend 10 years to bring in discipline, set in processes and imbibe scientific collective thinking for infusing synergies in the group to achieve quantum growth. For the Tatas, business is not about making super profits alone. They are known for their ethical and social values. And Cyrus is expected to jealously guard this.
By Jully acharya from Mumbai