Tata succession: Will the year long planning pay?

Fri, 25 Nov Pre-Open

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If there is any class on succession planning scheduled, Ratan Tata will surely be the one who rightfully deserves to give tutorials. For the man who took the Tata group worth US$5 bn to US$ 70 bn, the decision to relinquish the control must not have come easy, followed by a tough job to search the right candidate who could step in his large shoes. With the recent announcement of Mr. Cyrus Mistry taking over from Mr. Ratan Tata, the speculations regarding who will be the next one have come to a rest. Mr. Mistry, with a BE in civil engineering and masters degree in management from the London Business School, has been chosen amongst the variety of options - Tata or non Tata, Indian or expat etc.

Tata Sons, a holding company, needs not just a professional executive but a smart fund manager as well at the helm of affairs. Will Mistry manage to do both? While a year of working and learning closely with Mr. Tata before taking the full responsibility of the group in December 2012 will help, the responsibility is enormous. But to begin with, he has shown good intentions by announcing a legal dissociation from the management of his family businesses (Mistry is MD of SP Group which is into construction, textile and water treatment etc) to avoid any conflict of interest.

His selection is important in the sense it sends some important signals - Tata Group will choose the one it considers responsible and worthy enough to run the group, even if it is a non Tata (Mistry has been chosen over Noel Tata, Ratan Tata's half brother who has served as the managing director of the retailing company- Trent and is now serving as non-executive chairman -to merge some Tata Group retailing operations). Especially now when Tata Group holdings are high enough to be insulated from takeover threats. While Cyrus doesn't bear the name Tata, he is no outsider to the group. He has served as a Director of Tata sons and is expected to have a strong hold over the group values.

Besides, roping in someone who belongs to a family that has significant holdings in Tata sons (Cyrus is son of Mr. Pallonjee Mistry, who has largest 18% stake in Tatasons) makes good strategic sense as shareholding is the key to control for the group like Tata which is more global than ever.

While it will be too soon to give a final verdict, with so much of effort and planning in finalizing a successor and coming up with a unanimous choice, chances are Tata group will get its succession right.