Usually, in the western view, corporate success is attributed to efficiency, organisational structure, and scale.
R Gopalakrishnan and Harish Bhat argue that philosophy, culture, and the transmission of values are more important for sustaining growth and profitability of an enterprise over a period of time.
5 key points
Based on anecdotes related to the Tata group spanning over 100 years, Jamshedji Tata: Powerful Learnings for Corporate Success (Penguin) attempts to create a 10P framework for building Sustainable, Honest (SHE) Enterprises.
The authors, R Gopalakrishnan and Harish Bhat, are well-known professional managers who have served the Tatas for several years.
They introduce a '10P' framework to understand and anticipate excellence in corporate performance.
Essentially, there are only eight Ps, as the last two -- Postscript and Perspectives -- are more creative reflections.
According to the authors, multiple triggers lead to this work.
They include 1. An article on Gandhiji; 2. A speech by Ramachandra Guha delivered to Tata senior executives; 3. One of the authors (Gopal) had earlier documented reflections on iconic Indian companies and the challenges related to balancing enlightenment and capitalism, often seen as contradictory goals.
Managing this tension was a key motivation to write this book.
The book is structured around the 10Ps which together help to understand and create SHE enterprises.
Each P is explained with a brief concept followed by three anecdotes drawn from different generations of Tata group companies.
The book challenges the belief that enlightenment and capitalism cannot co exist.
Even if they do co-exist in one generation, how to sustain this balance across multiple generations needs deeper reflection and understanding.
Many organisations may implement some of the 10Ps proposed in this book individually.
The authors argue that it is critical to apply/adopt and use all the 10Ps for creating a Sustainable, Honest Enterprise (SHE) over generations.
The authors mention that the conceptual framework is inspired by Indian wisdom, consisting of self-awareness, protection (or conservative use) of natural resources, service to others rather than self, and conducting business with compassion.
There is no detailed discussion on the relevance and use of Indian wisdom and the 10Ps model proposed in this book.
The authors further propose a four-stage model: Philosophy, Icons, Rituals, and Narratives (PIRN). The interlinkages among these multiple frames of references are not discussed in the book.
Usually, in the western view, corporate success is attributed to efficiency, organisational structure, and scale.
However, the authors argue that philosophy, culture, and the transmission of values are more important for sustaining growth and profitability of an enterprise over a period of time.
Enlightenment is often equated with renouncing and or distribution of wealth. The first step towards enlightenment is renouncing material wealth.
If organisations begin renouncing wealth (Profit) through donations to society -- such as in health, education, the public good, skill development and job creation -- they can enable creation of multiple social enterprises.
We briefly describe the 10Ps proposed in the book and offer our critical observations.
The first P Philosophy
The core idea is that wealth generated from society should be returned back to society in multiple times.
This is an ideal objective but faces several practical challenges, especially in balancing shareholder and stakeholder interests.
The illustrative examples quoted in this section include managing a silk production unit by the Tatas in Bangalore, creation of a cancer hospital in Bombay and environment friendly measures at Tata Motors.
The silk production unit in Bangalore was created to generate local employment and preserve an art form. Over time, this enterprise sustained itself while serving societal goals.
The Tata Memorial Hospital is a societal response to a personal tragedy, demonstrating how wealth creators can contribute significantly to society welfare.
Many industrialists are driven by compassion rooted in personal experience.
Similar examples include hospitals founded by L&T chairman A M Naik and Reliance Industries. These examples show a socially relevant and generous initiative by owners. But the question remains: How much is enough?
Can enterprises substitute for the State in providing such facilities?
Tata Motors is a socially sensitive enterprise.
It not only produces automobiles and hence generates employment but also meets the broader community objectives by creating lakes, planting trees, and supporting flora and fauna.
These activities are seen as complementary to their main business.
The Tata group is focussed on this approach but they are neither the first nor the last business unit to do this.
Several businesses came in to existence to preserve art and support artisans (Jaipur Rugs is a classic example). Many organisations have developed an eco-friendly factory environment (Brakes India of the TVS Group).
The key question is: How much of the revenue should a business entity allocate for environmentally friendly activities to ensure its social relevance?
Is there an optimal way to manage the tension between shareholders and stakeholders?
It's important to recognise that examples/anecdotes illustrate specific concepts but do not necessarily establish them.
In our discussion, it is the connection between Purpose and the creation of a SHE enterprise in the larger context of the 10P framework.
If the purpose of a business unit is to return wealth to society at large in multiple times, a cooperative business model might be the best organisational structure to consider.
A cooperative model aligns shareholders and beneficiaries, by balancing wealth creation with social responsibility.
Another unresolved question is whether maximising shareholder wealth conflicts with customer satisfaction.
Second P: Pioneering
According to the authors, pioneering is essential for an organisation to sustain itself, grow and transform itself as a SHE enterprise.
Another way to interpret this concept is equivalent to identifying market gaps and business opportunities, investing adequate capital to explore new businesses with great potential.
Examples cited under pioneering include hydroelectric power, Tata Airlines, and the Indica car, spanning different periods.
Promoting or foraying into hydroelectric power is seen as a smart way of generating wealth by harnessing natural resources with minimal investment in the context of assured demand.
It reflects a strategic approach to wealth creation by the Tata group founders. The initiative is supported by a strong business acumen.
Is the clean energy produced by hydroelectric plants, a deliberate environmental initiative, or a byproduct of pursuing a business opportunity?
This question remains unanswered.
Tata Airlines represents another opportunity identified by the group to generate wealth.
There have been internal differences on this business option, but the group yielded to the passion of a family member to pursue this opportunity.
Leadership involves spotting opportunities for wealth creation while contributing to society. Exploring uncharted territories is seen as pioneering.
The Tata car, project was driven by compassion to make automobiles affordable to a common person.
There were initial hiccups in the product design, but the company managed to improve the original design to successfully launch an acceptable product in the marketplace.
These are three glittering examples of new product market exploration opportunities. These initiatives manifested in to new industries.
The BCG matrix-based thinking would identify them as transforming babies into stars.
Third P: People and Talent
Every organisation needs competent, committed professionals who are aligned with the Purpose of the organisation.
The authors provide numerous examples of how the Tatas have attracted top talent, (at Tata Steel, Tata Motors, Tata Salt) given them significant responsibilities and empowered them to manage their respective organisations.
The Tatas have attracted an exceptional set of professionals including luminaries like Nani Palkhiivala, Sumant Moolgaokar, Darbari Seth and others to accelerate and sustain wealth creation.
The focus is on talent; nurturing them is not unique to the Tata group; every organisation attempts to develop a talent pipeline to drive growth and expansion of activities.
The 7s framework proposed by McKinsey lays emphasis on people.
For example, Dr Vikram Sarabhai identified and nurtured talent (potential leadership when required,) a practice followed by many organisations over time, a practice ephemerally called as a succession plan or leadership pipeline. Some succeed, and many did not.
Attracting, nurturing, and empowering talent is a critical task for building a SHE organisation.
Fourth P: Progress
Progress essentially means growth.
There are well-known mechanisms by which growth in an enterprise can be planned -- for example, the BCG matrix, which provides a frame of reference for an organisation to develop a portfolio of businesses (guides allocation of resources in developing a growth plan).
But here, the authors demonstrate that the Tata Group has been constantly expanding, entering businesses that were sensible and appropriate at different points in time.
The group started with textiles, moved on to steel, power, chemicals, consumer goods, jewellery, fashion products, airlines, transport, information technology, and the hospitality business.
The illustrations mentioned include the shipping line, TCS, Taj Hotels and Westside.
The Tatas were unable to manage effectively the shipping business due to external factors, competition intensity and prevailing rules of the game at that time. The Tatas exited this business after a brief period of operations.
TCS (Tata Consulting Services) is considered as a great example of consistent and disciplined growth.
The Taj Hotels and Westside are discussed as examples of growth at various points in time.
Progress can be seen as growth, either inorganic or organic. It requires an ability to manage required skills and the associated risk of failure.
Business houses prosper and grow based on opportunities available to the group and the attitude and priorities of leadership.
Fifth P: Perseverance
Examples quoted here include the Indian Institute of Science, a soda ash manufacturing plant (Tata Chemicals), Titan and Tanishq.
All these businesses required a certain amount of tenacity and patience to realise their potential.
In the context of the Indian Institute of Science, managing/obtaining government approvals was a challenge.
Similarly, the Tata Salt turnaround was a prolonged affair.
Titan and Tanishq required time to establish themselves in the relevant consumer market segments.
To ensure that the Indian Institute of Science became a reality, Professor William Ramsay was engaged by the Tatas to provide an advisory report to the government to argue the need for such an institution. The Tatas funded Professor Ramsay's travel and paid a fee for his services.
One way of looking at this is that it is a subtle form of lobbying.
Another way of viewing this is when expert services are used, they must be paid for, and it is up to the government to make a decision either way based on expert opinion.
The critical question is: How long should a business leadership stick to its original plan?
When is it the optimal time to quit?
When should a company decide to move on?
As it so happened, all three initiatives mentioned above turned out to be worthwhile in terms of their financial/societal impact.
Sixth P: Principle
The principle of the Tatas is clearly illustrated through specific examples.
Saving the steel business by mortgaging family assets.
Respect for contractual obligations is another example, in the context of Tata Airlines, even though the payout has been very high.
The principle here is that a deal is a deal -- contractual obligations will be respected.
The third example is the well-known story of Tata Finance's recovery from an unexpected corporate fraud.
These are all remarkable decisions that reflect the principles followed by the Tata group. These actions are in tune with good corporate practices.
But again, corporate history is full of such examples. Johnson & Johnson had to recall Tylenol at a huge cost and gained significant consumer confidence and loyalty.
Seventh P: Profits
Profits are important, but how do you make sure you make profits without exploiting natural resources?
An example quoted here is Empress Mills, which focused on employment welfare -- more specifically, women employee welfare.
One can argue that if employees are taken care of, they will possibly contribute to the organisation in a better way, hence overall productivity would improve.
The old saying 'Satisfied Employees Produce Satisfied Customers' is another relevant point.
Nevertheless, this was a pioneering initiative by the Tatas at that time.
Another example is the creation of an elephant corridor to ensure wildlife was not impacted by Tata Tea estates operations. This is an appreciable CSR initiative.
There was generous financial support by the Tatas during the COVID-19 pandemic, which is an exhibition of support to humanity.
This underscores the idea that wealth created in the context of society should go back to society.
The three examples discussed here differ in magnitude: Looking after employees seems a natural consequence, creating a corridor for elephants impacted by business operations is more of a corporate social responsibility, and generous grants to support COVID-19 relief is an act of compassion.
But in all these, the underlying thought process is support to the relevant community and realise optimal profit.
The Tata Group has been consistently following what is good for the group in the context of society.
All business growth decisionS and operational decisions are based on this guiding principle.
If this is not carefully done, it can turn in to rigidity and become a routine task rather than an advantage to the brand, its financial power, professional management, and reputation.
The Tatas are pragmatic in their approach to business. One key secret in business is knowing when to quit.
If you quit too early, you may not recover fixed expenses and leave lot of money on the table.
If you stay too long, the reputational and financial risk can be high.
Deciding the optimal time to say 'This is not going to work for us' is critical.
This is demonstrated in the context of the shipping business and the silk farm business in Bangalore.
Even though the objectives were laudable, the Tatas did not continue to pursue them indefinitely.
Nineth P: Perspectives
This is an imaginary conversation among the senior Tatas to articulate what they wanted to accomplish, by creating an institution named the Tata group of companies.
This philosophical section can be seen as perspectives as envisaged by the founders.
Tenth P: Postscript
This is a summary by the authors about what they wanted to write, and accomplish, and what they accomplished.
This section is a self-audit on the broad objectives of writing this book.
Some stories in this book are well known and are described in other books on the Tatas but that does not diminish the overall importance of these stories.
This book is well-written and has significant information on the Tata group of companies.
There is nothing novel (need not be) in the framework of the 10Ps.
The 10Ps framework is a convenient way of putting to gather all aspects of the Tata group of business leading to a SHE enterprise.
Each one of the Ps can be seen as a business element in strategy literature.
For example: Pioneering can be seen as new product expansion, Progress can be seen as identifying and responding to growth opportunities, Perseverance can be seen as (when) the trade-off to quit the business, Profitability, especially in the context of moderate, optimised profitability, is often discussed in business literature as conscious capitalism.
Principle, purpose of the organisation are all well-articulated business concepts.
The authors have taken anecdotes from the Tata group companies and provided them as an attractive framework (10Ps), the connection to Hindu philosophy and also the PIRAN are stretched in the context of unifying the anecdotes.
The anecdotes are powerful corporate tales.
A mere compilation of them would have been useful to new generation of entrepreneurs to create a SHE enterprise.
The authors have seen it from a theoretical perspective of ten Ps, and then the anecdotes flow from this.
This is a matter of taste, and both approaches are equally valid.
The 10Ps essentially represent/overlap topics often discussed in management literature.
To summarise, philosophy essentially means creating SHE enterprises.
Purpose would mean focusing on the community and being involved in community-centric activities while creating wealth.
Examples quoted here are the silk producing unit, the cancer hospital, and water bodies created in the Telco factory.
The pioneering initiatives include the hydroelectric project, making of the airline is another and the common men's car.
People is equivalent to professionally identifying talent, recruiting, nurturing and empowering them so that they can contribute to the wealth creation process.
Progress is seen as exploring growth options. Examples include the shipping line business, TCS, Titan, Taj Hotels.
Persistence is discussed in the context as when it is not too late to drop a business from the portfolio of businesses.
The Indian Institute of Science is an example, Tata Salt and Tanishq are seen as examples in the context of progress.
Principles are values that are unique to the organisation and would never be compromised.
Examples include saving Tata Steel by mortgaging the personal wealth of the founders, adherence of contractual obligations in the context of the airline business and recovering public faith in the context of Tata Finance.
Profit is related to conscious capitalism.
The examples include employee welfare measures at the Empress Mills in Nagpur, the elephant corridor in Tata Tea estates, and financial support during the COVID-19 pandemic.
The major takeaways from this work is:
1. Wealth earned in the context of the society must go back to society;
2. The name and brand is more important than anything else.
3. Try a business and let it go, or grow it.
4. Implement negative decisions with grace.
5. Assemble talented professionals.
6. Restructure the business portfolio based on technology developments and changes in the business environment.
7. No compromises on the articulated values of the organisation.
Business literature is full of descriptions related to purpose, values of an organisation, community bias, philosophy of conducting business, purpose of an organisation, people relevance, growth initiatives and choices and conscious capitalism.
What is articulated in this book with several anecdotes spanning roughly a century in the Tata Group of companies resonate well with what is available in management literature on the whole.
This book is a welcome addition to the existing literature on professional management.
Dr N Ravichandran is a retired professor at the Indian Institute of Management Ahmedabad and was the fourth director of IIM Indore.
Feature Presentation: Ashish Narsale/Rediff