A monumental task awaits new Tata chief

Will Chandrasekaran be able to arrest the slide?

Business & Politics

News - Biz@India

January 17, 2017

/ By / New Delhi



Will the change of guard turn around Tata's fortune?

Will the change of guard turn around Tata’s fortune?

Natarajan Chandrasekaran has been appointed the new chairman of Tata Sons amidst speculations that have constantly hounded the Tata group since Cyrus Mistry unceremonious dismissal. All eyes are now on the new chairman and his farsightedness.

Since 1868, when Jamsetji Nusserwanji Tata established a private trading firm in Mumbai, it has not only grown and transformed into India’s premier industrial house, but has also touched everyone’s life as a USD 103.51 billion conglomerate – offering everything from salt to satellite television, steel to supercomputers, automobiles to a lot more across the globe. Not a day goes by when we are not touched by some or the other Tata product, service or news.

The latest news was of the ascendency of Natarajan Chandrasekaran, CEO and managing director of USD 16.5 billion Tata Consultancy Services (TCS) as the executive chairman of Tata Sons.

Fondly called Chandra by his family and Chandru by his friends, Chandrasekaran’s elevation is significant for half a dozen reasons.

 

Talent Hunt

His elevation came in less than three months after Cyrus Mistry’s infamous ouster on October 24, 2016. However, his selection was not easy as he was not the only one in the race – Ralf Speth, CEO of Jaguar Land Rover, Unilever’s Harsh Manwani, Sir George Buckley of Smiths Group and Indra Nooyi, CEO Pepsi were in the run.

A selection committee of five people was formed, comprising Ratan Tata, Amit Chandra, managing director of Bain Capital, Venu Srinivasan, chairman of the TVS group, Ronen Sen, ex-diplomat, and Sushanta Kumar Bhattacharyya, founder of the Warwick Manufacturing Group.

Significantly, he is the first non-Parsi to head the Tata Sons. All before him belonged to the Parsi clan. Jamsetji Nusserwanji Tata was succeeded by son Sir Dorab Tata (1904-1932), Sir Nowroji Saklatvala (1932-1938), JRD Tata (1938-1991), Ratan N Tata (1991-2012) and Cyrus Mistry (2012-2016).

Chandrasekaran will succeed interim chairman, Ratan Tata, on February 21.

The unceremonious ouster of Mistry not only pushed the Tata Group into turmoil, but it also dented the image of one of the most revered groups across the globe.

 

Home Grown

A Tata lifer, Chandrasekaran honed his skills over three decades since joining the Tata Consultancy Services in 1987, after he completed a master’s degree in computer applications from the Regional Engineering College, Trichy (now National Institute of Technology, Tiruchirappalli) in Tamil Nadu, India.

He was spotted by none other than TCS Chief, S Ramadorai when Chandrasekaran was working on a project in Washington DC, in the early 1990s. In his autobiography, TCS Story and Beyond, Ramadorai writes, “The client said good things about him, so I asked him to come and meet me. We took it off from there.” Since then, there has been no looking back for Chandra till he was selected to head the Tata Sons on January 12, 2017.

He is often credited with the success of TCS, India’s largest IT company.

 

Challenges Galore

No sooner was the appointment announced, than the who’s who of India congratulated him on the elevation. Anil Ambani, a fellow marathoner and chairman of Reliance Group described Chandra’s elevation as Tata Sons’ chairman as ‘outstanding’.

While the story of his success and how a non-Parsi has made it to the Tata Sons will keep hitting headlines for the next few days, there are challenges that Chandrasekaran needs to grapple with.

To begin with, Chandra’s appointment comes at a time when the company is fighting a legal battle at the National Company Law Tribunal with Mistry, who has challenged his ouster. The spat between Ratan Tata and Cyrus Mistry has led to a lot of turmoil. Hope the new chairman can bring stability.

That is easier said than done.

Also, Mistry and his family, the powerful Shapoorji Pallonji Group, own 18 pc stake in Tata Sons. This is one of the many points of contention between Mistry and the Tata Trusts. It is perceived as a conflict of interest between the Tatas and the Mistrys.

Besides dealing with Mistry, the new Tata chairman has to deal with other stakeholders – the board of Tata Sons, Tata Trusts and CEOs of operating companies. Many of the board members and CEOs, like Chandrasekaran, had appeared for the interview before the selection committee. As a Tata lifer, he understands the ethos and legacy of the group but he will have to carry everybody along to get the group out of the current impasse.

Chandrasekaran, who steered TCS as India’s IT bellwether, has no expertise or experience in manufacturing, steel, automobile or telecom sectors. According to media reports, he had told the selection committee that he will need experts to guide him. The Executive Group Committee set up in April 2013 with the objective of providing strategic and operational support to Mistry has been dissolved. It included NS Rajan from Ernst & Young, Tata brand custodian, Mukund Rajan, ex-BSE chief Madhu Kannan, strategist Nirmalya Kumar and Tata veteran Harish Bhat. The members of the new EGC are yet to be revealed. This means, he has to get the core team of advisors right, who will enable him to help understand and take corrective corporate measures.

TCS and Jaguar Land Rover are money spinners for the group. Tangled in various problems, the Tata companies are struggling with more than USD 25 billion debt. Chandrasekaran has to take unpleasant and hard decisions in the operating companies.

 

Trial or Trump?

One may be tempted to ask whether he will succeed in bringing the much-needed turnaround. A far more important question to ask is whether the stakeholders in the Tata Group want to succeed at all? We will know in the coming months.

It is to be seen how long and how far Chandrasekaran – who is a marathoner despite being a diabetic – can take more than 660,800 employees and CEOs in this important race of his life. Remember, the world and Ratan Tata, former chairman, are watching!

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