Edited by HENRY REED, Ph.D.
February 11,   2010
The Secret behind the Success of Tatas

 

The Secret behind the Success of Tatas*

 

                                                                            

M.B. Sharan, Emeritus Professor, PIET, Rourkela

 &

Deepa Chatterjee, Senior Lecturer, RIMS, Rourkela

 

(Editor's note: India's Tata has had a reputation for involving dreams and intuition into their management process. Here is an invited account of that approach to business. Thanks to the authors for this contribution.)

 

Tatas at a Glance

 

When the world thinks of Indian corporate sector, the name that springs to mind is of the Tata Group. Across sectors, from manufacturing to services and beyond, the Tatas have spread their wings profitably while setting the highest ethical standards. The Gropup's handling of the changes unleashed by liberalization has been a critical factor in it taking the big strides it has. A close look at the genesis of the Company is required to get a clear picture of the corporate tradition and the way of working of the Tatas which would enable us to comprehend the secret of their success.

 

Jamsetji Nesserwanji Tata and his sons were products of an era in which bold and adventurous men made large fortunes by exploiting the scientific discoveries and inventions of the nineteenth and early twentieth centuries. While Jamsetji shared the spirit of entrepreneurship of men like Rockefeller, Krupp, Leverhulme, and Ford, he was of a special breed. When he saw that under the exploitation of colonial rule, his country was being bypassed by the industrial revolution, and Europe and America were transforming rapidly, he decided almost single-handed to launch India on the path of modern science and industry. Since he was successful in two textile ventures, many of his contemporaries thought that he would multiply his wealth by adding to his textile units. But he chose the unknown path to give India steel, hydro-electric power, good technical education, and a good hotel. Something had really happened to Jamsetji because much more was to come from his fertile genius. It was really a struggle for his successors to set up a steel plant and get under way the hydro-electric projects at that time. It was also a battle to establish a university of science and technology and a hotel for them. But, for Jamsetji, it was a dream project and the key to India's modernization. He proceeded with his steel and hydro-electric projects. He knew that he was 60 and time was running out. The result was: "India's leap from the Middle Ages to the threshold of the 20th century." Today, we are having about 100 national and international Companies of Tata Group working successfully throughout the world. Among all these, Tata Steel, Tata Motors, Tata Consultancy Services, Tata Power, Indian Hotels, Tata Chemicals, Tata Tea, Tata Coffee, Titan, VSNL, etc. are the best examples of top companies. Now, there are some basic questions: Why are Tatas doing so well? How is that Tata Motors has been successful in manufacturing and marketing a dream car (Nano) at the lowest price (Rs. one lac only) and  in dealing with Ford Motor Company to acquire its brand names like Jaguar Land Rover (JLR), Daimler and Lanchester? These questions are really difficult to answer. Scientific explanations alone perhaps may not be able to unravel this mystery. We, therefore, have to go for some spiritual explanations as well.

Jamsetji Tata: A Man of Courage, Vision, and Action

Jamsetji was born in 1839 in a family of Parsi priests in Gujarat. At the age of fourteen, he came to Bombay and at seventeen he joined Elphinstone College for doing graduation. He had love for literature and liked reading Dickens, Thackeray and Mark Twain. After initial trading ventures in the Far East and Europe, he started in 1868 -- at the age of twenty-nine -- a private trading firm with a capital of Rs. 21, 000. He and his associates obtained a contract to furnish suppliers required by the expeditionary force of General Napier in Abyssinia. The share of his profit was sufficient enough for him to launch his career in textiles. His earlier visits to Manchester had stimulated his desire to manufacture cotton goods. He bought an old oil mill in Bombay in partnership with a few friends, converted it into a textile mill, managed it himself, and within a couple of years made it a going concern. He sold it at a profit after two years. This way in 1874, he floated a company named The Central India Spinning, Weaving and Manufacturing Company with a capital of Rs. 1, 500, 000 subscribed by himself and his friends. Since then, he did not look back and went on doing one thing or the other. It has been rightly said by someone that "Tata had not put gold into the ground but had put in earth and taken out gold."

When India was recovering from the after-effects of the Revolt of 1857-58, some powerful forces were working to change her and to have a new social consciousness. This awakening of India was two-fold: she looked to the West, and, at the same time, she looked to herself and her own past. Indians were asking themselves: why a foreign power had gained such supremacy over their ancient land. Was it because the culture of the West was superior to Indian culture? Or, was it because modern science and technology gave Europe a lead? Thus, a new class of Indians was emerging which was eager to learn English and benefit from the study of western ways and methods. Jamsetji belonged to this class. When he surveyed the untilled industrial field of India, he perceived the benefits it could gain through science and technology. His clear mind immediately grasped it and spelt out the three basic ingredients to attain it: Steel, Hydro-electric Power, and the Technical Education. Pt. Jawaharlal Nehru, the first Prime Minister of India, has rightly said that "When you have to give the lead in action, in ideas -- a lead which does not fit in with the very climate of opinion, that is true courage, physical or mental or spiritual, call it what you like, and it is this type of courage and vision that Jamsetji Tata showed."

Chairmen of Tatas and their Guiding Principles

Since Jamsetji was the first Chairman of Tata Group from 1887 to 1904, the Tata tradition was created primarily by him. He sought no honour, no privilege, but only the advancement of India. For him, success or failure was not a major issue. Therefore, he did what was needed to be done at that time. In 1902, five years before the site of the steel plant was finally located, he wrote to his son from abroad of what his dream city of steel should look like: "Be sure to lay wide streets planted with shady trees, every other of a quick-growing variety. Be sure that there is plenty of space for lawns and gardens. Reserve large areas for football, hockey and parks. Earmark areas for Hindu temples, Mohammedan mosques and Christian churches." In his last days, he also urged his cousin and other close family members to carry forward the work he had started: "If you cannot make it greater, at least preserve it. Do not let things slide. Go on doing my work and increasing it but if you cannot, do not lose what we have already done."

All these ideas have been translated into action by his successors: Sir Dorabji Tata (1904 to 1932), Sir Nowroji Saklatvala (1932 to 1938), J.R.D. Tata (1938 to 1991), and Ratan Tata (1991 to continue). From time to time, each Chairman and Managing Director has been adding something of his own which can be summed up as follows:

        Nothing worthwhile is ever achieved without deep thought and hard work.

        One must think for oneself and never accept at their face value slogans and catch phrases to which, unfortunately, our people are too easily susceptible.

        One must forever strive for excellence, or even perfection, in any task however small, and never be satisfied with the second best.

        No success or achievement in material terms is worthwhile unless it serves the needs or interests of the country and its people and is achieved by fair and honest means.

        Good human relations not only bring great personal rewards but are essential to the success of any enterprise.

After being appointed as Managing Director in 1992, Dr. J.J. Irani jotted down his guidelines as follows:

        Develop a personal vision -- what do I want to accomplish in life.

        Tell the truth about current reality.

        Do the tough things no one else wants to do.

        Restructure the TOP TEAM, if necessary.

        Build a powerful guiding coalition -- management and board.

        Guide the creation of a shared VISION.

        Take the responsibility of being the main change agent.

        Create endless opportunities for two-way communications.

        Create opportunities for innovations in the rank and file. Maintain Focus.

        Realign HR systems, overcome obstacles.

        Model the desired managerial behaviour -- above all maintain CREDIBILITY.

        Preserve the core values of TATAS (and my own).

Ratan Tata, the present Chairman, has also shared his business values as follows:

Integrity: We must conduct our business fairly, with honesty and transparency.               Everything we do must stand the test of public scrutiny.

Understanding: We must be caring, show respect, compassion and humanity for our colleagues and customers around the world and always work for the benefit of India.

Excellence: We must constantly strive to achieve the highest possible standards in our day-to-day work and in the quality of the goods and services we provide.

Unity: We must work cohesively with our colleagues across the group and with our customers and partners around the world, building strong relationships based on tolerance, understanding, and mutual cooperation.

Responsibility: We must continue to be responsible, sensitive to the countries, communities and environments in which we work, always ensuring that what comes from the people goes back to the people many times over.

Keys to Success: Scientific Explations

1.      Planning Ahead for Success: In the early 1980s, Dr. J.J. Irani, the then general manger, told J.R.D. Tata: "If we do not modernize the steel plant, in a few years time you and I will be standing outside the steel plant selling tickets to visit a steel museum." This was taken very seriously by the whole board and acted. The modernization was implemented from 1988 to 2001. The old machinery was replaced by new ones. This resulted in enhanced production and of making only special steels. By 2003, Tata Steel had the capacity to supply special steel to the whole of India at the price that was near to the cheapest in the world. This made J.J. Irani the managing director who proved that "It is people who build companies, not just ideas. For a company to survive for a 100 years, the organization should have at its head the right man at the right time."

2.      First in introducing a number of Labour Welfare Schemes: Tata Steel has been the first in introducing a number of labour welfare schemes. It could be eight hours work, workers' provident fund, or handling complaints and grievances, it did much before many of the countries/ governments could think of. The following Table gives a clear-cut idea when it was done by TISCO and when it was done by the Government:

  Introduced by TISCO  Introduced by Law    Legal Measure
Eight-hour Working Day    1912   1948 Factories Act
Free Medical Aid 1915 1948 Employees State Insurance Act
Establishment of Welfare Department 1917 1948 Factories Act
Schooling Facilities for Child 1917    
Formation of Committees for handling complaints and grievances 1919 1947 Industrial Disputes Act

 

Leave with pay 1920 1948 Factories Act
Workers' Provident Fund Scheme 1920 1952 Employees Provident Fund Act
Workmen's Accident Compensation Scheme 1920 1924 Workmen's Compensation Act
Institute for Training of  Apprentices 1921 1961 Apprentices Act
Maternity Benefit 1928 1946 Bihar Maternity Benefit Benefit Act
Profit sharing Bonus 1934 1965 Bonus Act
Retiring Gratuity 1937 1972 Payment of Gratuity Act
Ex-Gratia Payment 1979    

 

3.      Creation of a New Industrial Culture: At a time when captains of industry in advanced countries were exploiting their workers, Jamsetji was thinking of welfare of his workers. He cared to give them filtered water, sanitary hutments, cheap food grains, medical facilities, provident fund and accident insurance. It was this policy of Jamsetji which resulted in eight-hour day for workers in steel company in 1912 and in J.R.D. Tata's thinking of a company's responsibility beyond obligations to its own workers. In his Keynote address at a Memorial Lecture (1969), he suggested that "... the most significant contribution organized industry can make is identifying itself with the life and problems of the people of the community to which it belongs, and by applying its resources, skills and talents, to the extent that it can reasonably spare them to serve and help them." To put J.R.D. Tata's ideas into action, the Articles of Association of leading Tata companies were amended and social obligations beyond welfare of employees was accepted as part of the objectives of the group. For example, the Articles of Association of Tata Chemicals were altered to state that the company could subscribe to assist or to guarantee money to charitable, benevolent, religious, scientific, national, public, and political or any other useful institutions' purposes.

What is important is that the concern shown by the management has become today a part of the culture of the workers of different companies of Tata. They feel that they belong to the company and it is their responsibility to take care of the surrounding areas as well. As a result, they go to the villages nearby at regular intervals and do their best to help them in various ways. If there is any natural calamity, by and large, all are contributing at least one day salary. This amounts to several lakh rupees for a big company. The board of directors of the company either matches the amount given by the staff and workers or gives more. This shows how Tata is not only for business but also for many things beyond business. This has been rightly said that "There is a difference between making money for oneself and creating wealth for others." Tata has always created wealth for others -- for the nation.

4.      Tatas' Functioning: Like every successful business man, different Chairmen of Tata Group have been defining and redefining their styles of functioning from time to time. It's a fact that the business started with a single hand but gradually, on expansion, it went on changing in different hands. This way in 1938, when J.R.D. Tata took over as its Chairman, his style of functioning became quite different. He democratized the working of Tatas and became popular as a 'consensus man.' He went on to reveal the secret of his teamwork: "If I have any merit, it is getting on with individuals according to their ways and characteristics. At times it involves suppressing yourself. It is painful but necessary. To be a leader you have got to lead human beings with affection." When he was asked to define the house of Tatas, he said, "I would call it a group of individually managed companies united by two factors. First, a feeling that they are part of a larger group which carries the name and prestige of Tatas, and public recognition of honesty and reliability -- trustworthiness. Each company enjoys its share of the privilege. They use Tata emblem. The reason is, you might say, enlightened self-interest. The other reason is more metaphysical.  There is an innate loyalty, a sharing of certain benefits. We all feel a certain pride that we are somewhat different from others."

For J.R.D. Tata, details and perfection were important considerations. Even at eighty-six, for the exact meaning of a word, he was consulting dictionaries. He never had any interest in making money but he was very meticulous about the use of money and the shareholders' funds. If there was anything of his topmost interest, it was human relations in Tata Steel. One day when he was seriously ill in 1943, he wrote from his sick bed a thoughtful note: "If we have 50, 000 machines, we would undoubtedly have a special staff or a department to look after them. But when employing 30, 000 human beings, each with a mind of his own, we seem to have assumed that they would look after themselves and that there was no need for a separate organization to deal with human problems involved." He wanted the workers to have a say in their welfare and safety, and he wanted their suggestions on the running of the company. The note resulted in the founding of a personnel department. As a further consequence of that note two pioneering strokes of Tata Steel came about, namely, a profit sharing bonus and a joint consultative council. These measures pre-empted any labour trouble and Tata Steel has enjoyed peace between management and labour since then.

Keys to Success: Spiritual Explanations

Like any other business story, Tatas' story is also the story of struggle, anxiety, adventure, and achievement. However, so far its success story is concerned; this cannot be explained fully only through the scientific explanations given above. It must be supported at least by the following two spiritual explanations:

1.      Tatas' Philanthropy: The word "philanthropy" has come out of a Greek word - "Fil-anthra-pi" -- which means love for fellowmen. It is not only in giving money to others, as we understand it today, it is also in showing concern for welfare of others.  Tata Group has gone for doing both the things from the very beginning. In 1989, Lord Reay, Bombay's popular governor, said in a convocation address that education could no longer develop if universities remained only examining bodies. He called for 'real universities which will give fresh impulse to learning, to research, to criticism, which will inspire reverence and impart strength and self-reliance to future generations.' Such advanced learning was not available in India at that time. So in 1892, Jamsetji endowed a fund for the higher education abroad of deserving students. Some of India's early engineers, surgeons, physicians, educationists, barristers, and ICS officials benefited from the endowment. In 1898, Jamsetji decided to set aside fourteen of his buildings and four landed properties in Bombay to establish a university of science. His donation was worth Rs. 30 lakh in those days, equal to over Rs. 10 crore of today. It was half of his entire wealth. Some of his fellow Parsis even regretted that the wealth of their community was being diverted to a scheme from which only a few Parsis would benefit. In reply to them, in an interview Jamsetji spelt out his views on philanthropy as follows: 'There is one kind of charity common among us which clothes the ragged, feeds the poor, and heals the sick and halts. This is patchwork philanthropy. But what advances a nation by lifting up the best and the gifted ones so as to make them of the greatest service to the country is the best charity. I prefer this constructive philanthropy.' Jamsetji was fortunate in his sons and successors. 'Trusteeship' was a by-product of the desire Jamsetji Tata and his sons had to tackle the needs of the nation. Their wider concern made them look beyond their business interests. It was rightly written in 100 Great Modern Lives by John Canning (Editor, Souvenir Press, London): "Probably no other family has ever contributed as much in the way of guidance, industrial development, and advancing philanthropy to any country as the Tatas have to India, both before and since independence."

2.      Integration of Logic, Dream, and Intuition

Tatas have been successfully integrating logic, dream, and intuition for arriving at a karmic plan. Through logic, they have been analyzing the situation scientifically by applying intelligence, reasoning, and common sense. But they have not been taking any decisions in haste just based on logic. They have been thinking of it again and again and have been applying their intuitive minds. They have gone for self analysis, quiet time reviews, meditation, dream, intuition and prayer. This has been helping them in establishing connections with the Spirit within. It is something like connecting into a Spirit World Internet which gives us full understanding of the situation and Divine guidance. And anything which comes through such guidance cannot be wrong. Perhaps, this is the reason why Tatas have been so successful.

Conclusion

It can now be safely concluded that Jamsetji Tata had a burning zeal to pitchfork his country among the great industrial nations of the world. His schemes for steel, hydro-electric power and the institute of science were geared to this one aim. So was his passion to train young Indians. Maintaining the same tradition, Ratan Tata, the present Chairman, has rightly remarked that "my successors would never compromise and turn to soft options to meet their ends, and never allow the Tata group to join the growing number of companies in India which have shed their values, forgotten about their integrity, and closed their eyes to maintaining ethical standards. If Mr. J.R.D. Tata was able to uphold the values of the firm and if I have been able to carry on that tradition through my tenure, I hope the future generations in Tatas will recognize these traditions as being critical to the fabric and the fundamentals on which our group was built and grew so successfully for over a century."

 *This article is based on the book, The Creation of Wealth by R.M. Lala published by Penguin Books India, 2004

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