Infering TATA’s culture – A press report write- up
FINANCIAL year 2004 must have brought the smiles back at Bombay House, the headquarters of Tata Group. Key Tata companies have fared well, quarterly profits have been good and year-end figures are expected to follow the trend. Restructuring has helped major Tata companies weather downturns. But as it satisfies markets and investors, can the group resist pressures for a character change? Or, should it yield?
Last October when two temporary workers engaged previously in a Tata Power project attempted self-immolation in front of Bombay House, it brought out the darker side of economic growth. The soot stains on the road where the workers fell, betrayed pain within a booming economy and a plea to those best placed to address it. Bombay House, after all, is headquarters to the Tata Group. For most, Tata is synonymous with humaneness.
Mr Ratan Tata
Thus, despite bigger companies coming up, Mr Ratan Tata remains one of the most respected industrialists. He was less than a year into his role as Non-Executive Chairman of the Group when the incident happened. In December 2002, on turning 65 he relinquished executive powers in line with the group's policy.
Deemed a technical change — the late J. R. D. Tata was non-executive chairman for many years — the slight shift to his designation was nevertheless a time to retrospect for those tracking Mr Ratan Tata's tenure at Bombay House. Coincidentally, just a few days before the change occurred, Tata Motors unveiled the Indigo sedan, further vindicating its foray into car manufacturing.
In 1988, soon after assuming chairmanship, Mr Tata tackled a labour crisis at the company. Tata Motors' subsequent journey through a risky car project to its becoming one of the world's top truck makers and among India's top three car manufacturers encapsulates the nature of change Mr Tata wants at the group.
Taking over a conglomerate, in which some companies were ruled by longstanding helmsmen who had fashioned them into personal fiefdoms, Mr Tata's central achievement was putting the glue back into the group.
This seemed to be done in tune with modern reality, reposing reduced emphasis on the promoter's identity, bonding instead through ownership and shared values.
The promoter's stake in key Tata companies was increased and membership to the group rooted in codes of functioning and adherence to brand values. The group made solid progress with its old economy companies — Tata Steel has a new cold rolling mill, Tata Motors has entered the cars sector and Tata Tea has acquired Tetley.
There were exits too, as from Tata Oil Mills Company, Lakme, ACC and Tata Infomedia. There were also slip-ups, prominent being the troubles at Tata Finance and Rallis.
But on the upside, the Tatas became a leading player in telecom through VSNL and Tata Teleservices, while IT-major Tata Consultancy Services continues to fare well. At several AGMs, Mr Tata highlighted the need to make the companies competitive. Luckily for him, in certain cases the revitalising of the company coincided with India's economic growth.
Why, then, the suicide attempts before Bombay House? The answer probably lies in the tradition of charity which the Tatas cannot stop overnight. Homi Modi Street, where the Bombay House stands, should have been the last place for such a protest, yet by the same yardstick it is the most effective to drive home a message. Jamshedpur is the biggest social cause the Tatas have supported.
But even in Mumbai where money was never in short supply, Bombay House was a regular port of call for those with a dream but no resources.
From charity organisations to mountaineering expeditions, from hospitals to cultural programmes and sporting events — all list Tata among the resource providers.
These values contributed to the Tata brand image, and in a group where the promoter and brand share the same name it influenced how senior company officials were seen in public.
In fact, it will not be wrong to suggest that even as the group chases profit, the respect attached to the Tata name stems from a perceived reluctance to pursue profit for profit sake.
It is not easy for the group to dilute the image, though today's economic scenario demands nothing but professional focus. Mr Tata has put the structural glue back in the group, given it the ability to reward investors.
But public perception depends on how much the Tata character may change amidst the ascent of the economy.
Sir Ratan Tata's Vision His thoughts, in 1913, on the manner in which the Trust's funds could be used "... for the advancement of Education, Learning and Industry in all its branches, including education in economy, sanitary services and art, or for the relief of human suffering or for other works of public utility.... "To engage qualified and competent persons to investigate into matters that pertain to the social, economic or political welfare of the Indian community, the object being to design schemes of a practical nature calculated to promote the welfare of the said community, care being taken that such work is not undertaken from the stereotyped point of view but from the point of view of fresh light that is thrown from day to day by the advance of science and philosophy on problems of human well-being... Purpose Espoused valuesAt the Tata Group our purpose is to improve the quality of life of the communities we serve. We do this through leadership in sectors of national economic significance, to which the Group brings a unique set of capabilities. This requires us to grow aggressively in focused areas of business. Our heritage of returning to society what we earn evokes trust among consumers, employees, shareholders and the community. This heritage is being continuously enriched by the formalisation of the high standards of behaviour expected from employees and companies. The Tata name is a unique asset representing leadership with trust. Leveraging this asset to enhance Group synergy and becoming globally competitive is the route to sustained growth and long-term success. Five core valuesThe Tata Group has always sought to be a value-driven organisation. These values continue to direct the Group's growth and businesses. The five core Tata values underpinning the way we do business are: 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 the communities we serve. 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.
GE Appliances – Case on Organisational Decision making issues
In the 1990s GE faced a major decision. GE’s appliance division, maker of well known products such as dishwashers, ranges, refrigerators and washing machines, was fighting declining profitability, and Appliance Park, GE’s complex of factories near Louisville, Kentucky, which employed 10,000 of the company’s 22,000 workers, was losing a substantial amount of money. The washing machine operations, technologically outdated, were contributing significantly to this loss, and GE had to evaluate two alternative courses of action : Should GE spend $70 million and make a major investment in new technology to bring the washing machine operations up to date so that GE could compete into the next century, or should GE close down its washing machine operations and buy from another manufacturer washing machines that it would sell under its own brand name?
To evaluate each alternative, GE’s managers tried to decide which one would lead to the best long-term outcome for the organization. They used criteria such as manufacturing costs, quality, profitability, and product development costs to evaluate each alternative. One of the factors that GE was most concerned about was whether the unions in its appliances Park operations would agree to flexible work arrangements that would reduce labor costs. There had already been significant job losses, and GE managers had been sitting down with the unions to hammer out a new work agreement that would allow the corporation to evaluate its future labor costs. Using information on future labor costs and internal forecasts of future product development and manufacturing costs, managers tried to assess whether the investment would lead to a profit. At the same time, managers talked to companies like Maytag and Whirlpool to determine what it would cost GE to have them make a washing machine according to GE specifications.
If GE could buy another manufacturer’s washing machine for less than it would pay to make its own, then it seemed to make sense to choose the less costly alternative. However, GE’s managers had to evaluate the effects of other factors. For example, if GE stopped making washing machines, it would lose a core competence in washing machine production that it would be unable to recover. Suppose the company that GE chose as its supplier failed to live up to its agreement and put only its old technology into the machines it supplied GE, or lower in quality that the machines it produced for itself. GE would be at the mercy of its suppliers. On the other hand, suppose the unions reneged on the contract and refused to cooperate after GE had made the investment in modernizing the washing machine plant.
The situation was further complicated by appliance division managers who were lobbying for the investment because it would protect their jobs and the jobs of 1,500 workers. The division managers championed the advantages of the investment for improving the competitive advantage of the division. Corporate managers, however, had to evaluate the potential return of the investment to the entire organization.
GE’s managers had a very difficult time evaluating the pros and cons of each alternative. Because of uncertainty, they could not accurately predict the consequences of any decision they made and had to rely on their knowledge or and experience in the appliance market. However, they decided that GE would make the investment and continue to produce its own washing machines. New lines of modern washing machines were introduced throughout the 1990s. In 1999, GE opened a $5 million Reliability Growth Test Centre and it tripled the amount it spends on R&D in 1999 to produce appliances that never break down and which ‘delight’ its customers. Nevertheless in 2003, GE like Maytag, was still losing money from its appliance division, while main rival whirlpool was experiencing record sales and profits and GE’s managers were still trying to figure out what to do.