ORGANIZATIONAL DYNAMICS: Cyrus Mistry & The Tata Group 1

ORGANIZATIONAL DYNAMICS:

Feud between Cyrus Mistry & the Tata Group

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ORGANIZATIONAL DYNAMICS: Cyrus Mistry & The Tata Group 2
Abstract
ORGANIZATIONAL DYNAMICS: Cyrus Mistry & The Tata Group 3
Group Dynamics - Tata Sons

Performance:

Tata is currently Indias biggest conglomerate with total annual revenue of us$100.39 billion

for financial year 2017 and market cap of about 3.6 lac crore INR. Even though Tata have seen

various ups and down in recent years but historically right from salt to software Tata has

significantly created bend in Indian economy per say. But after the Mistry episode, Tata sons

blamed Cyrus Mistry for the poor performance of the Tata group entities, declining dividends

and misusing public relations to manipulate the media. Tatas also blamed Mistry for diluting

the organisational structure that was built over 100 years.

Role:

Context: first time in history of Tata, chairman for Tata trust (which have maximum share-

holding in Tata sons) and chairman for Tata sons (which drives all Tatas business entities) were

different, which was the main root chase of disagreement, which ultimately added fuel the

flames, and resulted into top management conflict.

Ratan Tata: Tata trust chairman (group care taker), whose job was to make sure all checks and

balances of the different Tatas business units are in place.

Cyrus Mistry: Tata sons chairman (group decision maker), who was top most decision making

authority in Tata group.

Norms:

Professional: Tatas are old hand and very professionals with their unique conventional style

of business management.

Ethics first: they deeply follow triple bottom theory of profit, people and planet, and even

spend billions of dollars in CSR activities

ORGANIZATIONAL DYNAMICS: Cyrus Mistry & The Tata Group 4
Once, when a reporter asked Ratan Tata, Why is Mukesh Ambani the richest person in India

and not Ratan Tata?

He replied, They (Ambanis) are businessmen, and we (Tatas) are industrialists.

Which shows, Tatas have high inherent values of doing the business, which was not only

limited to profits.

Cohesiveness:

One of the main reason, why Tata have so less iteration in their top management and most of

the decision makers continue to stay for donkey years in the same organisation is because the

way they empower their management by extending trust and allowing them to take full

ownership of the function, which indirectly reflect strong cohesiveness among themselves.

Size:

About 28 entities (individuals or trust) owns Tata sons 100% shares.

Major shareholding is retained for about 68% and 18% by Tata trust and Shapoorji Pallonji

group respectively. Since Shapoorji Pallonji was owned by Cyrus Mistry, it a created

conflict of interest situation for Mr. Mistry, which was also one of the reasons for is

disbandment.

Classification:

Tata group can be classified as command group because of its structure organisation

hierarchy with long chain of control (although small span of control).

Organizational Culture

Tata drives its culture through its core values.

ORGANIZATIONAL DYNAMICS: Cyrus Mistry & The Tata Group 5
Integrity: We will be fair, honest, transparent and ethical in our conduct; everything we

do must stand the test of public scrutiny.

Excellence: We will be passionate about achieving the highest standards of quality,

always promoting meritocracy.

Unity: We will invest in our people and partners, enable continuous learning, and build

caring and collaborative relationships based on trust and mutual respect.

Responsibility: We will integrate environmental and social principles in our businesses,

ensuring that what comes from the people goes back to the people many times over.

Pioneering: We will be bold and agile, courageously taking on challenges, using deep

customer insight to develop innovative solutions.

How core values are in line with cultural characteristics:

Core Values Cultural Characteristics

Integrity Stability

Excellence Attention to detail, Outcome orientation

Unity People orientation, Team orientation

Responsibility People orientation

Pioneering Innovation and risk taking, Aggressiveness

Cultural Stems from the actions of the founders

Below are some Quotes from Tata founder and Chairman over the years.

In free enterprise, the community is not just another stakeholder in business, but is in fact the

very purpose of its existence.

- Jamsetji Tata, founder of the Tata group

ORGANIZATIONAL DYNAMICS: Cyrus Mistry & The Tata Group 6
No success or achievement in material terms is worthwhile unless it serves the needs or

interests of the country and its people and is achieved by fair and honest means.

- JRD Tata, Chairman of Tata sons (1938 1991)

... What came from the people has gone back many times over.

- JRD Tata, Chairman of Tata sons (1938 1991)

Culture Clash

Considering Tatas Values we often come across various discussions on the Cyrus Mistry &

The Tata Group event. Groups culture talks about Leadership with trust being fair, honest,

transparent and ethical in our conduct. One may argue this didnt reflect in case of Cyrus

Mistry. But executives also questioned Mistry's efforts to restructure the group.

"It is like a bunch of finance or hedge fund guys that have walked in and decided to cut

everything. This is not the Tata way of doing business," said one source close to the Tata group.

"If you're picking things that are not working and then trying to get rid of them, where is growth

going to come from?"

Ratan Tata was an acquirer in his time at the top, overseeing deals like the $12 billion

acquisition of Corus, formerly British Steel, in 2007, and the purchase of Jaguar Land Rover a

year later.

Mistry accused the board of failing to give him "room to move", and argued that Ratan Tata

had acted as an alternative power centre.

Conflict Management Styles

While there was a lot of noise over the losses which the Tatas wanted to cut and the

performance of the organisation which had taken a nose dive, the core of the conflict seemed
ORGANIZATIONAL DYNAMICS: Cyrus Mistry & The Tata Group 7
to be a conflict in interest and intent. It was built over a period of time through various small

and big slipups which happened on part of Cyrus Mistry, but mainly took shape in the form

Mistrys unceremonious exit as a result of three incidents between the year 2015 and 2016.

The first trigger of displeasure, was related to Mistrys Irish citizenship which he was asked to

renounce on repeated requests from Tata, but he didnt. Nevertheless, the Tatas held onto the

strong belief that the Tata Sons flag bearer must have an identity which is completely Indian.

The second blow was the revelation of an estimated Rs. 2,926.35 crores which were paid to the

Shapoorji Pallonji group, owned by Mistrys family, towards multiple civil work assignments

which included Tata Motors, Indian Hotels, Indian Rotorcraft Limited, Tata Housing, Tata

Advance Systems and the construction of TCS buildings. The third and final dust-up happened

when Mistry pushed five members of the Group Executive Council (GEC), earlier set up by

him, to supervise the CEOs of the individual group companies.

Cyrus Mistry
Competing Collaborating

Ratan Tata

Compromising

Avoiding Accommodating

Ratan Tata

When we put things from this incident in perspective with the Thomas-Kilmann Model of

Conflict, it is observed that, through most events which turned, Cyrus Mistry adopted his

signature style of dealing with conflict - Competing.

ORGANIZATIONAL DYNAMICS: Cyrus Mistry & The Tata Group 8
Being on the forefoot, tackling issues head-on and displaying a certain degree of aggression in

either turning around the business or attempting to cut the losses by shutting down the ventures

which were making losses.

Mr. Ratan Tata on the other hand choose to adopt an avoiding style of managing conflict

through a good part of the entire duration of this feud. His discontent however, was quite

evidently seen through his passive-aggressive remarks aimed mainly at Mistrys non-

compliance of the 140 year old organisations culture.

What pretty much sets the tone for what conflict management styles could have been adopted

and how the matter should have been dealt with in a far more amicable manner is a blog post

by John A Davis, founder and chairman of the Boston-based research organisation Cambridge

Institute for Family Enterprise. He very aptly wrote in this post: Ownership of a family

business is a job that requires certain sensible qualifications. It shouldnt be treated as a birth

right. So select owners with the same care you select key leaders of your family business. And

then create the right governance (agreements, policies, plans and discussion forums) for the

owners so they can discuss, decide, and manage conflicts in an effective way.

Learnings

In the instance illustrated above, there are a number of learnings that can be picked up from

both parties involved in the situation.

Lesson from Tata camp

1. Power & dependency

Power and dependency allowed Mr. Ratan Tata to influence a majority of board of

directors to follow his directive i.e. voting to remove Mr Cyrus Mistry from his position

2. Resistance to change
ORGANIZATIONAL DYNAMICS: Cyrus Mistry & The Tata Group 9
Mr Ratan Tatas strong will and resistance to change led to the chaos that could have

been easily avoided through peaceful negotiations. In competitive & complex business

environments sometimes business owners, do need to take hard decisions.

As our honourable prime minister said while rolling out, demonetization yes there

will be struggles in the early stages...but everything will work out in due course of

time. Thus -change needs to be given time to realize the benefits.

3. Self managed team

In the above instance, the coup team demonstrated how successful a self-managed

team can be. However, its the intention with which team is formed defines the

difference between it is for a good or bad purpose. A strategy does not have a moral

conscience but humans do.

Lesson from Mistry camp

1. Nobody is a friend in the corporate world

In a current corporate environment, self interest is our basic resting pulse and threats

are not external but internal also. A wise person will always remember these. Thus one

should always be on top of his/her game.

2. Finding a middle ground

Every business decision, has an impact on people working in the company. Shutting

down of every sick unit is not always the solution. Turn around strategies can also be

considered.

3. Managing change
ORGANIZATIONAL DYNAMICS: Cyrus Mistry & The Tata Group 10
While change is good, necessary & essential; however the rate at which change is made

is needs to be considered keeping all factors- such as a past instances; emotional

connections of founders, people, existing people dynamic etc. A sudden change has its

own cons...People need time to accept & adapt to change.

4. Work for someone & work for yourself

When shifting from running your own business to working for someone it is

important, to understand & appreciate the difference between the two approaches. Both

approaches come with their own pros & cons. In such situations; dependency is more

than power you hold.

ORGANIZATIONAL DYNAMICS: Cyrus Mistry & The Tata Group 11
References

Ray, Shantanu Guha. (Dec 01, 2016). Tata-Mistry feud: Three incidents that lead to Cyrus'

ouster from Tata Sons, First Post. Retrieved from:

http://www.firstpost.com/business/tata-mistry-feud-three-incidents-that-lead-

to-cyruss-ouster-from-tata-sons-3133854.html

Samanta, Pranab Dhal (Dec 08, 2016). The real inside story of the Ratan Tata - Cyrus Mistry

breakup. The Economic Times. Retrieved from:

http://economictimes.indiatimes.com/news/company/corporate-trends/the-real-

inside-story-of-the-ratan-tata-cyrus-mistry-breakup/articleshow/55862287.cms

Davis, John A. (undated) The Five Derailers of Effective Succession. Cambridge Institute for

Family Enterprise. Retrieved from: https://cfeg.com/Library/The-Five-

Derailers-of-Effective-Succession.asp?n=189