Tata looks for successor

RATAN Tata, the 72-year-old chairman of the $71-billion Tata Group, is looking for someone like him as a successor. But his choice is plainly not as straight and simple as that of the grand old ruling Congress party, which is grooming Rahul Gandhi.

The second most keenly-awaited succession announcement in India became the topic of discussion in corporate boardrooms on Wednesday, after Mr Tata said in a conference that he has hired consultants to choose a successor.

As always, Mr Tata is not in a hurry. He has given himself two years to finalise as to who would step into his rather big shoes, people familiar with the matter said.

“The successor, I would hope, would have integrity and our value systems in the forefront and hopefully would carry on the path that we have tried to set for the company’s growth,’’ Mr Tata told a conference organised by the Wall Street Journal. Mr Tata will retire in 2012, whenheturns75.Heisthechairmanof Tata Sons, the group’s holding company, and non-executive chairman of group companies like Tata Steel, Tata Motors and Tata Consultancy Services.

The choice of successor may be at the top of his mind, as he may prefer to leave behind a conglomerate, where the next chairman does not face the challenges he did when he was called in to head the group after his uncle JRD Tata.

Ratan Tata, after taking over in 1991, spent the initial few years asserting his control over a group dominated by senior executives like Russi Mody and Darbari Seth, widely referred to as ‘satraps’.

As the world knows Mr Tata succeeded, transformed the group from a bunch of India-focused companies to one reaching out for business opportunities across the globe.

The process of succession planning is much more dignified than at the time of JRD Tata,’’ said Gita Piramal, management writer and author of ‘Business Maharajas’. “Nobody knew JRD’s mind. There seems to be an inclusive exercise going on, as Ratan Tata is consulting within and outside to find the successor.”

Neither Ratan Tata, nor anyone else in the group, is talking about who would succeed. But the choice seems to be as huge as the group’s business empire.

As has been for many years, the first name that crops up in any debate about it is Noel Tata, a natural heir with the surname. What strengthens the argument for him is that he is the son-in-law of the biggest shareholder of Tata Sons, Pallonji Mistry, popularly known as the Phantom of Bombay House.

Noel Tata is building the retail business under Trent, which runs the Westside stores. Some say he has not proved his mettle by running the biggest of the companies in the group. But this was also the case with Ratan Tata when he took over. An external spokesperson for the group said it had “nothing to add” beyond what had been stated by Mr Tata.

But Ratan Tata, in his own words, is open to anyone at this point of time. “We are looking both within the organisation and outside,’’ he told the conference. “It would certainly be easier if that candidate was an Indian national.” In the same breath, he said, “It could also be an expatriate sitting in that position,’’ with nearly 65% of the group’s revenue coming from overseas markets.

Many names, including Indra Nooyi of PepsiCo, Vikram Pandit of Citigroup and former Vodafone Group CEO Arun Sarin, have done the rounds. But none of them seem to be interested, say people in the know who did not want to be identified.

Some experts are notconvinced that an expat, particularly a person who is not of Indian origin, could lead the group. “There are complexities with a diversified conglomerate which not many expats are used to or exposed to. Where as Indian CEOs may be routed through several companies and may be more prepared to take over as the head of a conglomerate. But that’s not the only reason, there are cultural nuances they (expats) need to adapt to,” said Arvind Mahajan of KPMG.

There is also a galaxy of leaders in the group which makes Ratan Tata’s choice difficult. There is RK Krishnakumar who has been involved in the plantations and hotels businesses for many years, though at 71, age is against him.

R Gopalakrishnan, a former Hindustan Lever executive; B Muthuraman, former managing director at Tata Steel who lead the nation’s biggest overseas acquisition, that of steel company Corus, and Ravi Kant of Tata Motors who steered the takeover of Jaguar Land Rover, are the other top leaders.

But Mr Tata is not taking chances. He may be seeking advice from the best of the global expertise in head hunting.

John Ward, author of many books on family businesses and a visiting lecturer at the Indian School of Business in Hyderabad, is being speculated as one of the advisors, though there is absolutely no confirmation of this. Others rumoured to be involved are McKinsey and Boston Consulting Group.

According to Rajiv Memani, country head for Ernst & Young, which has worked with various Tata group companies, a typical external consultant for a group like the Tatas would have to be one with the least conflict of interest. “The firm should also be capable of matching intellectual wavelength with the group’s senior executives and be able to visualise the group’s objectives.”

Source: The Economic Times