Tata's new head

Tata's new head

The announcement that Cyrus Mistry will succeed Ratan Tata as the chairman of the Tata group of companies came at the end of a keenly watched selection process. The exercise drew much attention not only because of the iconic status and the size of the Tata group but also because of the professional manner in which it was conceived and conducted.

A search committee was constituted two years before Ratan Tata is to retire and it went about its business carefully scrutinising the record and potential of all contenders before arriving at a decision. Cyrus Mistry was not among the serious contenders in the beginning and it was expected that the mantle would fall on Noel Tata, Ratan Tata’s half-brother. Outsiders like Pepsico’s Indra Nooyi  and Merrill Lynch’s John Thain were also considered but in the end Mistry was the unanimous choice.

Mistry is both an insider and an outsider. He is the youngest son of Tata Sons’ largest shareholder,  Pallonji Mistry, of the construction group Shapoorji  Pallonji,  and is a Parsi but is a non-Tata. But that does not mean that he was a compromise choice because he has strong professional credentials.

He has a good management record at Shapoorji Pallonji. At 43, he is young and dynamic. He is close to the outgoing chairman and will be mentored by him in the next one year. That will give him time to familiarise himself fully with the business of the group,  find acceptance and exercise control.

This is important because even Ratan Tata had faced problems from within the group after he took over from JRD Tata. The succession planning and its timely implementation have therefore helped and strengthened the group in many ways. There is a lesson here for many other Indian companies where promoters have a stranglehold and management and succession are personalised.

Mistry has tough challenges ahead of him. He will be judged initially against the record of Ratan Tata who turned the group companies into a cohesive unit and an international brand. Managing a $83 billion diversified multinational operating in 80 countries and with 58 per cent of the revenues coming from overseas is a different ball game from running a $ 2 billion company.

The present poor business climate may not fully recover even by the time Mistry takes over. But he has the opportunity to write another fine chapter in the long history of the Tatas.