Remembering J.R.D. Tata...

Today, we celebrate the 115th birth anniversary of J.R.D. Tata, former Chairman of the Tata Group of companies, a statesman-industrialist, a philanthropist and the only business leader to be conferred the Bharat Ratna - India's highest civilian award by the Government of India. It is an opportune occasion to recapitulate his 53 years at the helm of India's largest industrial group. There is so much to learn for every budding manager, entrepreneur and leader from the life and decisions of J.R.D. Tata. I present key highlights of his leadership from my book 'The Tata Group'.

Appointed Chairman of Tata Sons at the age of 33 years

Image: JRD Tata as Chairman of Tata Sons

In a special board meeting of Tata Sons on 26 July 1938 at the Bombay House, the board of directors unanimously elected J.R.D. as the chairman of Tata Sons. Though just 33, he had proved his credentials in the previous decade in the formation of the Associated Cement Company (ACC) and the formation of the Tata Airlines, and emerged a hero in his own right. He also had the blessings and approval of Lady Navajbai, the largest stockholder in Tata Sons at that time. To make light of his achievements at a young age, J.R.D. joked years later about his appointment as chairman as ‘a moment of mental aberration’! 

The J.R.D. era begins

When J.R.D. took over, Tatas were the largest industrial house in India. The 14 major companies under their control had combined annual sales of ?280 crores. The young chairman was to preside over the ‘first family’ of India Inc. for the next half a century. He modeled his style of leadership to that of Jamsetji, and always placed the nation before the company.

He once said, ‘To me, Tatas and India are in many ways one and the same, and one of their purposes and the objective is to build India.’ 

Like the founder, his priority was not money-making. ‘None of my decisions were influenced by whether it would bring me money or wealth,’ he once said. 

With age on his side, and his characteristic enthusiasm, J.R.D. embarked on a mission to spread the Tatas’ wings to newer industries and fly ‘beyond the last blue mountain’. J.R.D. broke with the long-held tradition that the Tata Sons chairman would be the chairman of the operating Tata companies. He devolved powers to heavyweights within the group who had far greater experience than him. He took an active interest in the affairs of Tata Sons and of two key companies where he had substantial experience—Tata Steel and Tata Airlines. 

Exploring the establishment of new companies and grooming talent to lead them was another priority. As a result, the next decade saw the establishment of several new companies under the House of Tata. Tata Chemicals began in 1939; TELCO, now Tata Motors, in 1945; and Air India International, India’s first global airline, in 1948. The Tatas’ investment in basic industries through Tata Chemicals and TELCO was in continuation of Jamsetji’s vision of contributing to India’s industrialization through core-sector contributions. These initiatives were costly, capital-intensive and meant the holding of large funds from the public. In later years, they were even vulnerable to government interventions and nationalization. Some succeeded and some surrendered. Yet the commitment stayed.

Under JRD, Tatas were probably the first corporate organization in the world to have a department of economics and statistics, and a department of public relations in early 1940s. In 1945, when management as a discipline was not fully developed even in the Western countries, the Tatas setup Tata Industries—the first technocratic structure in Indian business. Eminent economists, lawyers and financial wizards were appointed to its board. None of them were shareholders, their expertise was used to benefit group companies. Tata Industries was owned entirely by Tata Sons and became the managing agents of all Tata companies in place of Tata Sons. Besides the technocrats, directors of major Tata companies also sat on its board. This brought together the best blend of experience and expertise to benefit and catalyse the growth of the Tata Group in independent India. Between 1945 and 1970, Tata Industries became the group’s ‘think tank’ and spearheaded several new companies. 

Tatas in independent India

The first decade of independent India has been described by historians as the ‘golden age of Indian industry’. Despite the government’s licencing policy, Tata companies, including TISCO and TELCO, received generous permissions of capacity expansion. The Tatas optimized the opportunities. There were setbacks too. As part of the nationalization programme of the Nehru government, Air India and New India Assurance Company were nationalized. It was a bittersweet experience and the Tatas were witnessing the unfolding of a new era of centralized planning that was dominated by intrusions in the functioning and decision-making of private companies, including the likes of the Tatas. J.R.D. was exasperated and used every opportunity to communicate to the government about the need to balance private enterprise with public welfare. 

Image: JRD Tata with Prime Minister Nehru at Tata Steel Jubilee Park, Jamshedpur

The decade saw the establishment and acquisition of several companies and managing agency houses. Voltas (1954), which specialized in large-scale air-conditioning, and Tata Finlay (1963) for tea plantations were notable additions. A decade later, when James Finlay wanted to divest their interests, Tatas acquired their stake. Tata Finlay became Tata Tea, the number one tea-growing company in the world (by size). In 1960, Tata International and Tata Exports were formed to export Tata products and services to international markets. It was a revival of the old Tata expertise in trade that existed during the years of Jamsetji when Tata had offices in Osaka, Kobe, Shanghai, New York and Paris. Under its renewed international outreach, the Tatas ventured into precision equipment manufacturing in Singapore, palm oil refining in Malaysia and hotels and electricals in the Gulf countries.

The Tata Consultancy Services, the group’s flagship company today, saw the light of day as an operating division in 1968. Its growth from a dozen software consultants to 400,000 software experts in 50 years has been mind-boggling, to say the least. By mid-1960s, the number of companies under Tata Sons had increased to 150 and the total assets to over ?500 crores. The most challenging decade for the group and India Inc. was about to begin.

Tata Empire becomes a commonwealth of Tata companies

In 1966, after the Prime Minister Indira Gandhi-led government came to power, there were increasing efforts to limit the scope and scale of private sector companies. To this end, a series of legislations was introduced. One of these, which had an unprecedented effect on the House of Tata, was the abolition of the managing agency system on 2 April 1970. Under the new system, each Tata company became an independent entity with its own board of directors. The writ of Tata Sons was no longer implementable on them; its role was limited to advise and persuasion. With 74% of the group run by managing agencies, the Tatas had to identify and on-board hundreds of independent directors for its fifty manufacturing companies and 100 associate companies, almost instantaneously. The massive exercise was led by India’s pre-eminent jurist - Nani Palkhivala, who joined Tata Sons as a director in 1961 and remained J.R.D.’s adviser on most legal matters for the next three decades. During this complex exercise, J.R.D. nominated the managing director in each company and another director from the Tata ecosystem. All other directors were from outside the group, thereby giving the companies substantial autonomy. He did not yield to the temptation of appointing family members on the boards of companies, a practice adopted by most other family owned managing houses. He was commended for his statesman-like approach by industry peers.

The abolition of the managing agency system severely impacted India Inc. The Tata Group was particularly impacted because the stake of Tata Sons in most Tata companies was negligible. Interestingly, the stake of the Birla Group in Tata Steel was double (6%) that of Tata Sons (3%). Every year, before the AGM, G.D. Birla, head of the Birla empire, would sign and send his proxy-form to J.R.D. for his decision and discretion. The cohesion of the group was maintained purely by the power of J.R.D.’s charismatic personality. He had nurtured and empowered every single leader within the Tata companies during their formative years. They admired him and were grateful for the trust he reposed in them. This was the soft power through which Tata Sons led the group companies for the next two decades. It also worked to the group’s advantage as it was spared the sway of the draconian MRTP (Monopolies and Restrictive Trade Practices Act, 1970) Commission as the Tata Group emerged as a professionally run group of independent companies under the leadership of a nominal chairman.  

During the 1970s, most Tata companies were chaired by the ‘awesome foursome’. J.R.D. was the chairman of Tata Sons, Tata Industries and Tata Steel. Sumant Moolgaokar was the chairman of Tata Motors and ACC. Darbari Seth was the chairman of Tata Chemicals, Rallis India and Tata Tea. Naval Tata was the chairman of the textile and power companies.  

The penultimate decade before liberalization

The 1980s began with a bang. There was a change in government at Delhi. Prime Minister Indira Gandhi wrested power from the Janata Party. The Tatas had also regained their numero uno position in India Inc. despite a difficult decade. Their combined assets had tripled over the previous decade and crossed ?1,540 crores. The octogenarian J.R.D. realized that it was time to bring a young leader at the helm of affairs. In October 1981, he appointed Ratan Tata, son of Naval Tata, as the chairman of Tata Industries.

Of Ratan Tata, J.R.D. had once said, ‘Ratan is a much better manager than I am. He understands all the modern techniques of management. If I succeeded, it was only because of ideals. Ratan has both ideals and also the training of a manager.’

In the 1980s, the Tatas launched fourteen new companies. The most noteworthy was Titan Industries, which went on to become India’s number one watch company.  

By 1988, Ratan Tata was nominated chairman of Tata Motors at the insistence of the ailing Sumant Moolgaokar. His first major challenge was the Rajan Nair-led labour strike at Tata Motors’ Pune plant. He successfully thwarted it through multi-stakeholder negotiations, including with then chief minister of Maharashtra, Sharad Pawar. This became the talking point across political and corporate circles leading to an increasing conviction about his ability to lead the Tata Group. However, J.R.D. had not made up his mind about his successor at Tata Sons. As India was at the threshold of economic liberalization, the foremost question in everyone’s mind was—who would lead India’s largest conglomerate into the new millennium? Or would India’s most iconic group of companies disintegrate?

Image: JRD Tata passes the baton of Chairmanship to Ratan Tata

On 1 March 1991, J.R.D. Tata was to fly to Jamshedpur to participate in the Annual Founder’s Day celebrations held in the memory of Jamsetji Tata on 3 March. That morning he suffered from anginal pains. Yet, with help of painkillers he traveled to Jamshedpur and joined the annual festivities that are conducted with great fanfare every year. On his return, doctors recommended a week-long stay at Breach Candy Hospital in Mumbai. Ratan Tata, who had just returned from Stuttgart after a meeting with Mercedes, called on him at the hospital. The subsequent Monday, 18 March, J.R.D. was back in office. When Ratan met him, in his characteristic style, J.R.D. asked, ‘Well, what’s new?’ ‘Jeh, I saw you at the hospital on Friday! There’s nothing new since I saw you last,’ replied Ratan. ‘Well, I have something new for you. I have decided to step down and name you my successor as chairman of Tata Sons,’ said J.R.D. Though appointed deputy chairman of Tata Sons in 1989, Ratan Tata was quite surprised at the sudden decision. What followed was amusing. ‘Don’t say about this to anyone now. I have to pick an auspicious day to do it,’ said J.R.D. who wasn’t known to be superstitious. 

At the Tata Sons board meeting on 25 March 1991, J.R.D. announced his decision to nominate Ratan Tata. Pallonji Shapoorji Mistry, the largest individual shareholder of Tata Sons, seconded the nomination and the new chairman was unanimously elected. J.R.D. was nominated chairman emeritus. As J.R.D. addressed the board one last time as the chairman of India’s largest business house, he remembered several milestones achieved in the past 50 years while he was at the helm of the Tatas. Ratan Tata recalled that speech as an archival account of his experiences, but having not a word of praise about himself.

Under J.R.D.’s leadership, Tata Group’s assets had increased from ?62 crores in 1939 to ?10,000 crores in 1990 and revenue from ?280 crores to ?24,000 crores. The group did it in an era that was marked by major government intrusions in private enterprises that scuttled substantial growth and delayed industrial expansion projects by decades. One could wonder how the Tatas and the Indian industry would have performed under J.R.D. if his ingenuous leadership would have been available when the Indian economy liberalized. 

As J.R.D. rose from his chair that morning, and offered it to Ratan Tata, history was created. Through personal example J.R.D. had established that companies could be both value-driven and market-driven; that profits did not preclude ethical behaviour; that growth was possible without using political patronage to bend rules and cut corners; and that pursuit of wealth could be graceful. Emotions were high in the board room that day as it was the end of an epoch-making era. However, posterity will never get an opportunity to relive those moments as the proceedings were not recorded.

When asked how he would like to be remembered, J.R.D. said, ‘As an honest man who tried to do what he thought was right.’

Image: JRD Tata conferred the Bharat Ratna, 1992

I am sure several among the readers, especially those that have been directly/indirectly associated with the Tata Group will have their own experiences/anecdotes with J.R.D. Tata. There would be others who would have read about his life and work. Do share those stories that have impacted you the most - in the comments section. They would provide valuable management insights.

Published by Penguin Random House India, 'THE TATA GROUP' is available at your nearest bookstore and on most major airports. It can also be ordered on Amazon and Flipkart in Print and Kindle versions. A lot more information is available on my website: shashankshah.com