With Chandrasekaran as chairman of Tata Sons, the job has just been downgraded

Given the battering Tata Sons and its interim chairman Ratan Tata have received following Cyrus Mistry’s ouster in October, the appointment of N Chandrasekaran as chairman of the Tata holding company on January 12 is both a sensible and strategically pre-emptive move. It may even help the Tata brand get back some of its lost ground.

Following the boardroom coup on October 24, the Tata Sons board had announced the formation of a five-member committee, which included Rata Tata, to select a new chairman. The committee considered several other names, including Ralf Speth, chief executive officer of Jaguar Land Rover, Harish Manwani, non-executive chairman of Hindustan Unilever, and Noel Tata, Ratan Tata’s half-brother and currently in charge of a few retail verticals. It returned the verdict of Natarajan Chandrasekaran, catapulting the Tata Consultancy Services managing director and chief executive officer into the chair of the most powerful corporate professional in India, and key to the $103-billion Tata empire.

Chandrasekaran had several things going for him. He has been a Tata insider for the last 30 years. As head of TCS since 2009, he has delivered results that have made the information technology company the brightest jewel in the Tatas’ crown. It is believed the government supported Chandrasekaran, as it did not want a foreign national heading an Indian conglomerate. And Tata insiders vouched for him as one who knew the Tata ethos well – a deficiency that was Cyrus Mistry’s undoing.

More than other things, the timing of the appointment has been a clever counter-attack against a belligerent Cyrus Mistry. The five-member appointments committee charged with searching for a replacement for Mistry was given four months to come up with a name. Corporate circles believed this could stretch indefinitely, and the public perception was that interim chairman Ratan Tata wanted to keep holding the baton on one pretext or another. Now, by quickly clearing the decks for Chandrasekaran six weeks before the end of the four-month deadline on February 24, Ratan Tata has come clean and the various group companies can now return to business as usual.

That Ratan Tata is not all about hunger for power was important to demonstrate at this juncture, especially since Mistry is actively pursuing his case against Tata Sons before the National Company Law Tribunal. He is pressing for a ruling of breach of corporate governance, and for an injunction against his ouster from the Tata Sons board, where he represents over 18% of the stockholding.

Ratan Tata could not have brought in a cleaner and more efficient face. Under Chandrasekaran’s leadership, TCS’ revenue and profits grew three-fold to Rs 1 lakh crores and Rs 24,375 crores, respectively, in the financial year 2016. It accounts for as much as 74% of Tata Sons’ revenue. As a performer, the IT chief has excelled in delving into the smallest snag personally. A Tata old-timer recounted how a recent IT delivery problem at HDFC Securities had not been attended to, and Chandrasekaran had stepped in to ensure things were sorted out.

Chandrasekaran’s opening statement after his appointment conceded that he would be all about earning back brand value. “It will be my endeavour to help progress the group with the ethos, ethics and values that the Tata Group has been built upon,” he said.

Owner to professional

But after the standing ovation Chandrasekaran has got, one significant aspect of the appointment has been missed by most. With Chandrasekaran as chairman of Tata Sons, the job has just been downgraded. Earlier, it was always an owner Tata. The only other non-Tata chairman, Sir Nowroji Saklatwala, the third chairman of the Tata group from 1932 till 1938, was really a Tata by lineage. He was the son of Bapuji Saklatwala and his mother was Virbaiji, the sister of Jamshetji Nusserwani Tata. Cyrus Mistry, though not from the family, is also a heavyweight owner-entrepreneur. For the first time, it will be a pure professional who will lead the Goliath-like Tata holding company.

Tata insiders, too, have welcomed Chandrasekaran’s appointment as a step towards bringing in more professionalism. Given his 30-year history with TCS and the Tata culture, he would be able to provide the right coordination between the various moving parts: the powerful Tata Trusts, the chairmen and leadership of key Tata companies like Tata Steel and Tata Motors, as well as with the heavyweight Tata Sons board. This is another area where Cyrus Mistry slipped up, and instead developed outside power centres that the powerful trusts looked upon with suspicion.

However, for the same reason – that Chandrasekaran is ultimately a professional and a long-time Tata man – few deny the actual pecking order will be chairman emeritus Ratan Tata, followed by Chandrasekaran. And the events of recent months have demonstrated that Ratan Tata has anything but retired.

Challenges ahead

There are other challenges too. Chandrasekaran, from when he was appointed an intern at TCS in 1987 till he became the managing director and chief executive officer of the IT giant in 2009, was an information technology man, doing little else. Yes, he is also an organisational leader, but he never stepped outside TCS, and never sought a job in another field. So the flip side is that he has no experience in the wide array of products and services, from steel to airlines and chemical manufacture, that the salt-to-software group (as the Tatas are routinely called) is involved in.

Again, on the downside, by picking up the best performing chief executive in the Tata Group, is Tata Sons exposing TCS’ robust growth to speed bumps that may harm the company? Chandrasekaran is credited with maintaining close and personal relations with most of TCS’ big clients, travelling 15 days in a month. Can Rajesh Gopinathan, the new chief and currently chief financial officer of TCS, keep up the scorching pace?

The grapevine in TCS in recent weeks saw Chandrasekaran as a reluctant contender for the top job at Tata Sons. Given the company’s robust performance, he enjoyed a degree of autonomy no other Tata company chief had. That is history now. As Tata Sons chairman, Chandrasekaran will be buffeted by a hundred different demands and pressures. He has no choice. It’s the price he has to pay to occupy the country’s top corporate post.