RATAN TATA- THE LEVEL 5 LEADER

“My legacy is a company on the move and the ability to move with the times. I have told my successor Cyrus Mistry how he should run the business in the future, that is entirely up to him”

Ratan Tata

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“Leadership is the activity of leading a group of people and establishing a vision for the group”. When it comes to real life, rthis mere statement is not enough to describe the leadership. Great leaders like M.K Gandhi and Abraham Lincoln have set examples and improved the lives of the people around. Similarly a leader is responsible for making an organization successful. Effective leadership helps the organization grow. They are responsible for developing the organization which in return benefits the whole system and growth and development takes place everywhere around.

WHY RATAN TATA

Ratan Tata as an individual has become a household name and he has made a place for himself as a leader and a visionary. There are certain aspects to his character that has contributed to his success. What is more fascinating about his career is the enormous variety of challenges he faced. He did not have a rosy path. His will to succeed and the level of humility have made him give all the credit to his team

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members, every time the company was crowned with success. The fifth chairman of the Tata Group has exhibited marvelous skills and abilities during his golden era. He has been successful in turning around businesses like JLR which was running under heavy losses. One of the brightest leader from the country has made dreams, that appeared impossible to others come true.

Company background:The Indian multinational conglomerate headquartered in Mumbai was founded by Jamsetji Tata. Each of its 100 companies is operating independently today. Tata sons and Tata industries are the promoter holding companies.

The history of Tata Group dates back to 1868 when the 29 year old, ‘ Jamsetji Tata’, who was a philanthropist found the private trading firm. People regard him as the “Father of Indian Industry. He learnt the lessons of business while working in his father’s banking firm. Trained in England he established the textile mills and a trading company in India. Under him the group’s the first luxury hotel in India, the TajMahal Palace came into existence in 1903. It is said that Jamsetji was determined to build it because he was not allowed to enter into one of the fancy hotels for being an Indian. The JN Tata Endowment, the first of many philanthropic trusts of the Tata group was started by him to help Indian scholars in taking up higher studies. He pioneered the philanthropic activities which later on were carried on over generations by the Tata family. Today these trusts control 65.8% of the shares of Tata Sons which is the holding company of the group. His elder son Sir Dorab Tata took over the charge in 1904 after he passed away. Under Sir Dorab Tata’s leadership, the group ventured into new industries that included aviation, education, electricity, steel and consumer goods. He established the first office of Tata Iron and Steel Company. The Tata and Iron Steel Company are today known as Tata Steel. He also accomplished the dream of his father which was to establish an Institution where Indians could get the education in Science. The Indian Institute of Science was set up in Bangalore in the year 1911. The library of IISc today is regarded as one of the best Scientific and Technical libraries in India. Under him the eight-hour working days plan for the employees was introduced. He started this much before it became statutory in many parts of

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the World. It was realized that the employees working in the organization were like a family and taking care of them is mandatory. Other than this many other facilities were provided to them.

After Sir Dorab Tata’s death, Jamsetji’s sister’s son, ‘Sir NowrojiSaklatwala’ was appointed as the chairman of the group. In 1938 after his sudden death, JehangirRatanjiDadabhoy Tata took over the position. Under him the company expanded into many new sectors such as marketing, engineering, technology, chemicals, cosmetics and software. JRD’s passion was flying planes. He was the founder of India’s first commercial airline, Tata Airlines which was nationalized in 1953 and came to be known as Air India. Under the leadership of JRD, Tata group earned International recognition. JRD was the longest serving chairman of the group.

The deregulatory environment of the post independence era in India couldn’t stop Tata Group from growing. They kept excelling and exploring.

Ratan Tata has been an inspirational leader. He would have stayed on in the United States after training as an architect from the Cornell University but destiny had something else in store for him. The nephew of JRD Tata was asked to join business in the year 1962. He started working in Tata steel shop floorin the same year. He got his first assignment in less than a decade when he was asked totake over as the director of NELCO. Ratan Tata turned the fate of the company for the better however he was not successful in steering success for NELCO and itcollapsed. This is an indication that the great man was also essentially human.He had to taste adversity and failures during his formative period of business rule. The second assignment of Ratan Tata was to take over the charge of the sick Empress Mills. Ratan Tata’s request forRs.Five millionas investment was turned down, the mills were closed resulting in workers strike. It took Ratan Tata decades to get over the pain of these two failures. People did not forget the failure of NELCO and when JRD Tata stepped down as the chairman of Tata industries with announcement of Ratan Tata taking over, many criticized the takeover plan. In Bombay House Ratan Tata was considered as an outsider.People are rigid to change and that’s what happened when JRD Tata passed on the baton to Ratan Tata. On asking JRD about whether Ratan was chosen because of his integrity, the

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Tata group historian RM Lala recalls his statement. “Oh no, I wouldn’t say that; that would mean others don’t have integrity. I chose him because of his memory. Ratan would be more like me”. When Ratan Tata was chosen to lead the group there was three other individuals who were in the race. RussiMody at Tata steel; Darbari Seth at Tata Tea and AjitKerkar, who had a major role in transforming Taj group into a hospitality chain. One of these individuals was expected to take over after JRD Tata. The unexpected appointment of Ratan Tata led to a lot of conflicts.

The group was not at all ready for the liberalization that took place when Ratan Tata took over. Ratan Tata however was a visionary and he could foreseein which direction the economy and the policies were going. Ratan Tata initiated changesto help the Tata group to help keep pace with changing India. Gradually the murmurs about the succession issue settled. Ratan Tata emphasized on improving operational efficiencies of the group’s manufacturing companies. His main focus here was on TISCO and TELCO. The results of his efforts were so fruitful that soon TISCO emerged as one of the lowest steel makers in the world. The two companies were also renamed as Tata Steel and Tata Motors. His other step was to convince the group companies to pay royalty to Tata Sons for building the Tata brand name. He also moved towards increasing the promoters’ shareholding in key group firms.

In order to excel priorities of the industry was re- chalked and re-drawn. Cement and textiles got the exit order cosmetics brand LAKME was owned by his step mother Simone Tata was ebbed out in the year 1996. Now the group turned its focus on software. Tata Group then entered telecommunications, finance and retail field.These divestments and investments helped the Tata group “shake off the slightly fusty image it had built up in the 1980s and make it fit for purpose in the modern world”, according to Witzel.

Tata’s first global venture the 2000 February purchase of Tetley was a great move. Tata Tea was a $114 million company and it acquired the global brand Tetley worth $415 million. It was three times the size of Tata Tea. This acquisition defines the growth of India as well as Tatas.

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The Corus deal is yet another example of a strategic stake. It was Ratan Tata who had opened the ideal recourse to buy the company. Ratan Tata’s action in this regard was spearheaded to produce steel for the future to define industry requirements. Even when others were asking him to back out he went ahead with the deal.Hemendra Kothari considered to be by many the doyen of investment banking had said “ he is a very discerning person when it comes to decision making and once he has made up his mind, he is prepared to go out to achieve his objective, be it Corus or Nano”. The corus deal was not heartily welcomed as a successful venture in the initial period of its launch and the share prices plunged to 11%. The Indica was the first. People did not believe him when in 1995, Tata spoke of building a passenger car with “the Zen size, the ambassador’s internal dimensions and the price of Maruti 800”. The thinkers at the top were skeptical about this project and they felt to keep out Ratan Tata out of this project by not naming him as being involved. In the words of Ratan Tata “ even within Tatas, people kept asking me to distance myself from the project so that when it failed I wouldn’t be stuck with the blame and when I refused to do that they distanced themselves from me”. Ratan however proved his critics wrong and Indica went on to become Tata Motor’s success saga, a million cars have been sold since the year 1998. The Jaguar Land Rover deal is yet another one of the ventures that raised question marks. This take over was perceived to be the launch of a disaster. When Tata took over less than 5 % of the group’s revenue came from the overseas. Anyway Ratan Tata proved the wiser and clinched the deals in his favor in the long run. Today JLR is generating huge profits for Tata Motors.

RatanTata : The great visionary

In the year 1995, Ratan proposed a fee scheme whereby for the first time, Tata companies would have to pay for the use of the Tata brand name

Ratan Tata epitomizes as a level five leader in more ways than one. Ratan Tata’s life provided us the example of personal humility and endowed professional will. Ratan Tata had eye for the future, he could visualized the kind of country India would be in the next 30-40 years. In a way Ratan Tata was unpredictable . All his project and acquisition are example of leapfrog from the conventional roots. Rattan

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Tata however never became too big for his shoes as his fortunes mountaineer higher and higher. He maintained the same clam benign that characterize him as a young man. One is reminded of RatanTata’s words when the Tata Nano was launched. He said “a promise is a promise “and the Tata Nano was made available to the Indian mass at a comparatively low price to on his promises made earlier.

Professional will in the case of Ratan Tata is made out on the basis of his up brining and training as a young man. Ratan Tata has evince interest in gadgets and he is an engineer himself. Most of the acquisition which happened during Ratan Tata’s era saw the professional will to succeedand create a bench mark of enviable proportions. Therefore we witness the science of the great genius when he took over jaguar land rover and Corus.

There is yet another aspect to RatanTata’s character that probably has not been explored. The emotional ties with Bengal had been an important factor in motivatingRatan Tata to choose Singur for manufacturing Nanocars and work station. In the words of RatanTata ,” If there is something that I could do to be involved in Eastern India, I would welcome that. You see, I lived in Jamshedpur for 06 years very close to Kolkata and I used to be in Kolkata of and on.” Presently Ratan Tata has plans to build a cancer hospital in Kolkata.

He had spent hours on the shop floor energizing workers at Jaguar and Land Rover. The presence of Ratan Tata spelled magic on the work floor and Mr.Tata on his own humble way inspired millions. RatanTata is himself a strictdisciplinarian however he never misusedthe power and authority to infuse standards. The level five leader conduct was exemplary and his work acumen inspires the common man to achieve laurels. RatanTata is also an“avidlistener” he takes every one’sadvis

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REFERENCES

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e but at the end the decision is his own.This in a way typifies the great man to take decisionsand be responsible for them. He would never eat his words or go back on his promises. His people management skills are also unique. If somebody asks him to sack a person who is not working well he would look at that person in totality. “Company performance can go down one year or another but the stays with it and that sustaining power gives him the ability to look beyond numbers”.

The hard research work of Jim Collins led him to come across the factors that make a good company a great company. In this a good company is the one that has a level 5 leader. He categorized the leadership styles into 5 types-

LEVEL 1- Highly capable individual: makes productive contributions through talent, knowledge, skills and good work habits.

LEVEL 2- Contributing team member: contributes to the achievement of group objectives; works effectively with others in group setting.

LEVEL 3- organizes people and resources toward the efficient pursuit of predetermines objectives

LEVEL 4- Catalyzes commitment to and vigorous pursuit of a clear and compelling vision; stimulates the group high performance standards.

LEVEL 5- Builds enduring greatness through a paradoxical combination of personal humility plus professional will.

Jim Collins did a study on 1435 companies. Out of those 1435 companies , 11 had level 5 leaders. A level 5 leader is the one who has the qualities of all the other level leaders. He is responsible for making a good company a great company. The combination of personal humility and professional will in this kind equips him with the skills and attitudes that turn out to be a blessing for the company. A level 5 leader is the one who would do anything for the organization. He would strive hard to achieve the organization’s goals and in the end would not hesitate to give the whole credit to the team. These leaders always work to build a strong organization by improving the people in within. The will of the level 5 leader encourages him to succeed in every project. They would go to any extent to

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achieve the goals of the organization and at the very same time the personal humility that makes them a good individual would make them follow the rules and the law and work for the benefit of the people of the organization and the environment .

Common people around the country who had a chance to see or meet him during the course of Ratan Tata’s business journey, always appreciated and respected Ratan Tata for his humbleness. His down to heart attitude has always won the hearts of the people around the globe. Be it a receptionist or a CISF guard, he has always respected every individual who has come across him. He has continued to respect the traditions of integrity and commitment to human values throughout. The personal humility of Ratan Tata is well documented. Ratan Tata never presents himself to be the cynosure of attention. The level of humbleness this man has always helped him to make a place in the hearts of the people around him and gained him the respect. The cultural parenthesis is yet another facet to his character. Ratan Tata is also well known for his philanthropic activities. The CSR activities he has done for the people of the country and the world, has always set examples. The Self Help Groups formed by Tata Steel through CSR provides sustainable livelihood to approximately 3000 rural households, no mean achievements indeed. Tata Group spends on an average an amount of Rs. 800- 1000 crore per annum for CSR activities. Educational institutes have also been a big beneficiary and research institutes have been given grants for research work to large proportions. Because of the benevolence of the Tata group good things have happened to the people around the globe. For instance Harvard has also been given grants on a number of occasions. The grant of $ 50 million given to Harvard Business School recently is one of the examples. The Tatas have always cared for the employees working in the organisation. They consider the employees as a part of the family. Ratan Tata has carried this on. They are considered as an employee friendly organization today which has grown big over the past few decades.

When there is a will there is a way. The appointment of Ratan Tata was highly opposed. JRD’s backing gave Ratan Tata a confidence but it was not enough. He had the will to succeed. This will helped him to keep improving even after the change in the policies after 1991. They adapted to changes.

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Acquiring a company that is three times the size is not a easy work. Tetley was acquired by Tata Tea in 2000 and it was said that this step would be the start of the development of Tata group as well as the country.

A promise is a promise. The Tata Nano priced at Rs. 100000 was delivered to the people of India as a means of locomotion. This venture to provide a cheap car to the people. It was at that juncture that Ratan Tata envisaged the idea of providing a cheap car to the people of his home country. The people’s car was seen as a safe and affordable car within everyone’s reach. This innovative product which is hitting the Indian roads today shows in a way the man who is quiet and calm with no frills but bent on being a guardian angel to the masses. Ratan Tata had said on launching the car “ the aim is to create products for that larger segment- good and robust products that we are able to produce innovatively and get to the market place at lower cost. When Ratan Tata saw four people of a family travelling on one scooter he came up with a concept of a car that would cost Rs. 100000. It appeared to be a dream project but he fulfilled his promise by making it possible. People around the globe were stunned by this achievement. On the other side the company incurred much higher cost than anticipated. The plant was set up in Singur and the land acquisition controversies erupted. There was a civil unrest in Singur and the protests by the Trinamool Congress made them stop the work. Work delays and heavy loss was a result to this. On October 3 ,2008 the group announced that they are pulling out of Singur. They moved out of West Bengal and established a plant in 14 months in Sanand, Gujarat. The Tatas were open heartedly welcomed in Gujarat and after sometime Ratan Tata’s dream of Nano came true.

The Jaguar Land Rover acquisition is yet another example. When Tata acquired it from Ford it was said that it would be a mistake. It was a $2.3 gamble. That time JLR was running heavily under loss. As they came up with its new Range Rover Evoque model things changed. It led to creation of jobs in the UK. The result was in favour of the group. sales was generated and the model was successful especially in the North America and China. Now JLR is generating profits for Tata motors. Analyst today say, Tata has done something that a few companies from emerging market have been able to do- turn around and successfully run a troubled company.

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There were challenges but they never stood in Ratan Tata’s way. He always turned around the difficult situations. His high degree of will always helped him to achieve what a very few could even dream of. These are the qualities that have made him a level 5 leader and this is what has changed his group of companies from good to great.Ratan Tata was open and considered a trusting man and he never showed off his affluence. He is considered by many as a shy and soft spoken individual. Ratan Tata is characterized by his unfailing ethical values and he believes that the means justifies the end.

Ratan Tata’s aggressive policies created the first mover advantage and he targeted India,s large population of 1.14 billion people. Today Nano cars have hit the Indian roads in great numbers. They are also being exported. The sales proceedings have not rocketed sky high because there have been technical snags reported by end users. Of late there has been promotion campaigns to position the cars appropriately in people’s minds.

The Tata Nano is again an instance in point about how a leader takes responsibility for bringing in better quality of life to people in and around him. Probably this is the reason why the retirement age of the chairman of Tata group was revised everytimeRatan Tata packed his bags earlier.Ratan Tata’s interests are manifold. He is also the one who been taking parts in the aero shows flying fighter planes at the age of 70s. This man has lived by his principals and ethical values which has stood by him through thick and thin.

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When it comes to leading the Tata empire, we all know how important it is for the leader to be outstanding. Tatas today are not only one of the businesses of the country. They have become the face of the nation. Ratan Tata has not just been the chairman of the Tata group but he has nourished and nurtured the empire. He possesses every quality of what Jim Collins, the wizard of OB, calls a level 5 leader. The combination of personal humility and professional will.

Change in Leadership- Cyrus Mistry taking over

On 28th December 2012, Cyrus Mistry succeeded Ratan Tata. Right now everybody is eying his moves and the level of expectation is very high from him. The 44 year old businessman is the youngest son of Indian construction tycoon, PallonjiMistry. His sister is married to Noel Tata, the half brother of Ratan Tata. He graduated from the renowned Imperial college of London with a BE in civil engineering and holds a Master Science in management from the London Business School. Ratan Tata, the level 5 leader has left a very healthy legacy for Cyrus Mistry. In order to choose the right successor for Ratan Tata a high powered panel was created. The panel included lawyer ShirinBharucha, N.A. Soonawala, vice chairman of Tata Sons and British businessman Lord Sushanta Kumar Bhattachharrya, who runs Warwick Manufacturing. The 18-month search led to the selection of Cyrus mistry as the appropriate successor. His varied experience of

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managing businesses, ranging from finance and Power, construction and entertainment makes him understand every aspects of business. When he was selected as the successor, Ratan Tata said that the “quality and caliber” of cyrusmistry has always impressed him. He praised his “astute observations and humility”. When asked, what advise he would give to mistry, Ratan Tata replies, “Be your own man, you should take your own call and you should decide what you want to do”

He advised him to be driven by the fact that “every move you make has to stand the test of public scrutiny,”.Mistry worked under Ratan Tata for one year to learn more about his work. He was trained under Ratan Tata. Besides serving as a director at Tata Sons, Mistry is also the senior Vice president of production of DQ Entertainment, Plc. He has served at Tata Elxsi and Tata Power. He has served as a non-executive director of Forbes Gotak ltd and was associated with convergence media Pvt Ltd as senior vice president, operations and planning, and UTV Toons India. He is a trustee of the Breach Candy Hospital in Mumbai and is on the Board of Governors of the National Institute of Construction Management and Research. He is also on the board of the Imperial College India Foundation. This lover of golf who stays in a sea facing house keeps a low profile. He has the qualities that are a perfect mould for India’s largest industrial house.

There are a number of challenges that Cyrus Mistry is going to face right now. He has to steer the Tata group out from the losses that are being incurred in Telecom business. The hotal business has been posting losses for last four quarters and hence this issue needs to be tackled. Ratan Tata believed that Corus acquisition is significant as in the long run, the steel business is going to turn out to be the backbone of the group. Even after the opposition, he acquired Corus. This is going to be another big assignment for Cyrus Mistry. According to the shareholders it is very crucial to increase the return on equity across the group companies.Everybody is eying his moves right now. Ratan Tata has left behind a healthy legacy for him and he has set a very high benchmark for him.

The diversified business is going to be a very big challenge for Cyrus Mistry. At this juncture, it is going to be a major challenge for him to handle this great empire. Till now Cyrus Mistry has appeared to be a lot like Ratan Tata. His low profile and humble nature is going to make him a level 5 leader.

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references

http://daily.bhaskar.com/article/MAH-MUM-ratan-tata----when-he-gave-a-humble-smile-to-the-receptionist----4132309-NOR.html

http://www.dnaindia.com/money/report_cyrus-mistry-humble-head-of-corporate-leviathan-tata-group_1782212

http://parsikhabar.net/individuals/ratan-tata-indias-humble-business-king/1633/

Articles from Business line

Articles from the Hindu

Articles from the Economic Times

http://www.tata.in/htm/heritage/HeritageOption1.html

http://economictimes.indiatimes.com/topic/Cyrus-Mistry

http://www.thehindu.com/business/companies/jaguar-turns-the-corner-with-tata/article3851201.ece

http://www.indianexpress.com/news/tatas-take-over-jaguar-land-rover-for--2.3-bn/288941

http://www.thehindubusinessline.com/companies/singur-issue-tata-motors-seeks-rs-1400cr-damages-from-bengal/article3751002.ece

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