Tata Removes Cyrus Mistry
Last Monday the Board of Tata Sons, an iconic Indian company, made an abrupt decision to oust its Chairman Cyrus Mistry. Two thirds of the Board are appointed by Ratan Tata himself. In his letter to the Board Cyrus says he is shocked as this came completely unexpected and no explanations were given to him. The crisis has extensive coverage in the India business media including the rather decent analysis of the current situation at Tata.
I met Cyrus Mistry several times during his almost four years tenure as the Chairman of Tata Sons. I particularly remember one visit when he invited our team to his house at the time when the Chairman of our company had troubles in Moscow and we were in the middle of a crisis — Cyrus and his team rounded us with warmth and sympathy, exactly what we needed the most at that time.
Both teams discussed the dilemma Big vs. Beautiful in the management of big corporations. Both agree that Big is VERY important in both of our countries, but Beauty should also get its place in the big corporate world. When Cyrus said that Tata’s companies should earn the right to grow in order to get investments from the mother company, he spoke about Beauty.
All big companies were created by charismatic Leaders, born entrepreneurs. As business grows (getting Big) and diversifies, Leaders have to delegate more and more functions to the hired managers. Managers are not entrepreneurs, they have a different mentality and risk appetite. Stock option helps but definitely does not bridge the gap. Leaders become Leaders because they have special vision, which managers lack, otherwise they become Leaders themselves and will not agree to be employed. Managers bring to the business their knowledge and common sense, polished by MBA courses and McKinsey manuals. They are deliberately trying to make business Beautiful, sometimes taking (or not) the gene code of the company into account. But only Leader remains the key holder of this gene code, as the company is his child.
Sometimes these two distinctive approaches collapse, sometimes not — it depends on chemistry and pure luck. It’s a mutual education process which may bring situation to the new balance — a right mixture between the vision and a McKinsey manual. And the Company jumps to the new height, having accumulated new energy. Sometimes personal feelings prevail and the road to the new balance is blocked. I think this is the case with Tata’s current situation. I agree with analysts who can not find a clear objective reason for ousting Cyrus in such a dramatic manner — he managed to improve some things and failed to improve others — a big Company is like a mature human body, it can not function ideally all the time.
I do not know what Ratan Tata is currently looking for in a new Chairman, and in what way he/she should be different from Cyrus. I personally think that Cyrus was a good choice. But I am not a gene code holder and do not understand Tata’s internal chemistry. I feel a lot of sympathy for Cyrus and Tata (now separated) and hope that this chemistry crisis is overcome as quickly as possible. Because it seems very painful.
