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."
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
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:
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.
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
relations not only bring great personal rewards but are essential to the success
of any enterprise.
appointed as Managing Director in 1992, Dr. J.J. Irani jotted down his
guidelines as follows:
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.
TOP TEAM, if necessary.
powerful guiding coalition -- management and board.
creation of a shared VISION.
responsibility of being the main change agent.
opportunities for two-way communications.
opportunities for innovations in the rank and file. Maintain Focus.
systems, overcome obstacles.
desired managerial behaviour -- above all maintain CREDIBILITY.
core values of TATAS (and my own).
Ratan Tata, the
present Chairman, has also shared his business values as follows:
We must conduct our business fairly, with honesty and
transparency. Everything we do must stand the test of public
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.
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.
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.
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:
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
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
Eight-hour Working Day
Free Medical Aid
Employees State Insurance Act
Establishment of Welfare Department
Schooling Facilities for Child
Formation of Committees for handling complaints and
Industrial Disputes Act
Leave with pay
Workers' Provident Fund Scheme
Employees Provident Fund Act
Workmen's Accident Compensation Scheme
Workmen's Compensation Act
Institute for Training of Apprentices
Bihar Maternity Benefit Benefit Act
Profit sharing Bonus
Payment of Gratuity Act
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.
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
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:
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:
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."
Integration of Logic, Dream, and
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.
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."
article is based on the book, The Creation of Wealth by R.M. Lala
published by Penguin Books India, 2004