Tata bags Corus. Think Tesco, think Unilever

January 31, 2007
Jamsetji Tata

Jamsetji Tata

Update

Eighteen months after the original post of January 2007, Tata has acquired more global visibility through its acquisitions policy [Jaguar and Land Rover from Ford] and the launch of ‘the world’s cheapest car’.

The original post follows:

Indian company Tata Steel has won the battle to buy its Anglo-Dutch rival Corus. But what’s Tata like? In scale, Tata’s impact on the Indian economy at present can be likened to Tesco’s in the UK. But in other ways the company’s historic leadership and culture are better compared with those associated with the global conglomerate Unilever.

After a long running battle between rival suitors, The Ango-Dutch steel-maker Corus has been bought by the Indian company, Tata [January 2007]. Corus is itself a relatively unfamiliar name in the UK, in comparison with the historic British Steel organisation. This to some degree reflects Tata’s unobtrusive move to the centre of attention as a global player.

So what’s Tata really like?

Business travellers in India are quickly made aware of the country’s industrial success stories. Close to the top of everyone’s list is the Tata group. Visitors to Mumbai learn of the origins of Tata, perhaps first through ‘the other Taj Mahal’, the luxury hotel built by Jamsetji Tata, the founder of today’s corporate giant. They will perhaps be driven (definitely not drive!) in a company car, perhaps one such as the Indica better known in the UK as the City Rover. The will be unlikely to leave without being tempted into acquiring a Titan watch, another success story for Tata. They will learn how a familiar ‘British’ product, Tetley tea has been acquired by Tata Tea. They may also visit Jamshedpur, the model town founded by Jamsteji Tata, and the centre of Tata’s world-class steel operations. The town itself is an obvious parallel with the social vision of William Hesketh Lever, founder of Unilever, at Port Sunlight, on Merseyside.

The Tata dynasty

Jamsteji was to found not just a company, but a dynasty. Both sons (Sir Dorab and Sir Dorab) were to progress the company, and establish huge trusts). Later, JRD Tata (a son to a relation to the pioneering line of the family, and his French wife) founded Air India. He had progressed from his start as an apprentice, to lead the company over five decades.

The era had also seen the impact of another industry giant, in the romantic figure of Nathan Tata who had been adapted by Lady Tata after spending his early years in an orphanage. Through a combination of ability and more than a modicum of charm and charisma he was to become a major national figure and diplomat, sporting administrator as well as a business leader.

Today there is still a Tata at the head of the group. Ratan N Tata is a Cornell and Harvard graduate and continues the family’s involvement in the social as well as the economic well-being of the country. Unsurprisingly, he is a Tata ‘lifer’, having joined in 1962 and seen through his time the transformation of the company into a global player.

Tata and Unilever compared

An immediate comparison, based on scale can be made with Tesco, for its national impact, with its £1 of £8 in consumer spend passing through its UK tills. Tata contributes nearly 3% of India’s GNP. However, I am more taken by its similarities with Unilever. For example, Unilever employs more than 206,000 people and had a worldwide revenue of US$50 billion; Tata claims 2,46,000 people and revenues of $22 billion

The obvious product link is between Tata tea, now owners of Tetley’s. Unilever’s Lipton is still the leading brand internationally. However, for me, the link is not so much in products as in culture.

Unilever was also founded by a pioneer who started a dynasty. William Hesketh Lever (Lord Lever) created a model village, Port Sunlight, which still can be found a walking distance from the soap ‘manufactury’, and Unilever’s modern research laboratories. The Leverhulme research trust is one of the nation’s greatest philanthropic institutions; Tata’s trusts are as significant for India.
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Assessment of corporate culture is a tricky business, and coming under increasingly scrutiny from campaigns promoted through the internet. However, Unilever and Tata have both largely escaped the vituperation heaped on other global giants.

Through my observations and contacts with both companies, employees and managers reflect a healthy culture.

Their leaders have at critical times followed a sense of ‘duty to history’
akin to fifth-level leadership principles and also to servant leadership.

By and large, this has protected the company from the damage that can be caused by Mandrill management

Students of leadership may find it constructive to reflect on the patterns of leadership found in Tata and Unilever in achieving ‘built to last’ companies.


The Leaders we Deserve: Is John Reid really so incompetent?

January 28, 2007

The Home Secretary Dr John Reid has replaced Tony Blair as the prime target for negative political stories of someone who is egregiously bungling his duties. Is John Reid really so incompetent? Are we fortunate to be part of a democracy in which there can be such robust criticism of our leaders? Or are we seeing the emergence of a culture in which apparent increased freedom of expression blanks out access to more thoughtful analysis in a torrent of simplistic rhetoric?

In an earlier post it was suggested that John Reid’s political honeymoon had come to an end. Reflecting further has helped me become more aware of the mostly simplistic treatment within the flood of stories about John Reid and his personal competence.

This weekend, The Sun offered a cartoon-like representation of John Reid as the head of a Frankensteinian monster, which has a space where a brain should be. This follows an earlier representation in the same newspaper of an unpopular England football manager with a turnip for a head. No prizes for guessing what image was provided in more recent times, when the team had a Swedish manager.

The Sun’s campaigns can, arguably, be seen as in the spirit of the grotesque and hugely popular cartoons in the tradition of Gilray , or the social commentary of Hogarth

It’s the Sun wot does it, innit?

The Sun has its own justification for the content and style of the paper. Unlike politicians, it can claim to win the popular vote every morning of the week. Sir Terry Leahy of Tesco made much the same point recently when asked whether there would be a Tesco party for voters at the next election.

A case can be made that The Sun may influence the voting intentions of a considerable number of people at the general election, and that Rupert Murdock may have a further influence on the words and deeds of politicians. But should we buy their claim made after one election that it was ‘The Sun wot did it’ ?

The contrary view is that the overall effect of The Sun’s political messages on voters is rather weak. Possibly, although political leaders such as Tony Blair at very least will put some effort into wooing the Sun lest its opposition will cost them valuable votes at election time. I am inclined to believe that the popular press, including its largest circulation daily paper, has some political impact (perhaps not as much as they might wish or claim).

It’s the heavies wot don’t do it: tabloidification

Less obviously, the impact of the so-called free press (The popular press in Liberal Democracies) is in sustaining a cultural norm accepting the rhetoric of the banner headline and the cartoon images. We may reach differing conclusions over whether the popular press influences political opinions. It seems clear to me that there is little doubt over the way in which the daily diet reinforces cultural behaviours. There are reasoned arguments to be found – publications such as The Economist maintain an admirable level of analysis on a range of business and political issues. In general, however, what used to be called the heavies, or the broadsheets, (or even The Quality papers) have become closer in format (and arguably even in style and content) to what used to be called the tabloids. Tabloidification has won the day.

The Case against Charles Clarke

The Home Secretary took on the job after his predecessor, Charles Clarke, was encouraged to resign by Tony Blair. A succession of damaging stories had emerged about failures in the Home Office. The leader took the rap.

The strongest ‘quality’ case against Charles Clark might be expected to be found in a paper such as the staunchly conservative Daily Telegraph. Shortly before his resignation the paper identified ‘three strong reasons why he should go’. These were mismanagement of his department; failure to address the problem when it came to light; and refusal to accept responsibility for the problem.

The problem turns out to be that the Home Secretary has failed in his primary function of ‘maintaining public order by effective management of the systems under his control. Mr Clarke has allowed some hundreds of foreign nationals, sentenced to prison in this country, to go free without even a formal consideration of whether they should be deported’.

This all sounds reasonable at first reading, and suggests that there was a case to answer. Further reading leaves me unconvinced. I am reaching a conclusion that we have here an illustration of The Nimzowitch effect.

This, simply put, is a state of general anxiety about what might happen, so that the threat appears more important than its execution. (See the earlier post on chess cheating for more on the Nimzowitch effect).

The Case Against John Reid

John Reid bought himself a honeymoon period by announcing energetic measures to put things right, and was equally energetic in indicating what a shambles he had inherited which would require quite a lot of fixing.

The combination worked for a while, but another series of stories (‘scandals’) emerged from the Home Office. The specific details now blur in the memory, but were often concerned with poor record-keeping, and the potential implications of such bureaucratic failings – ‘disappearances’ of various kinds.

The BBC has followed the stories diligently. Individually they are in varying degrees illustrative of our old friend The Nimzsowich effect. From just this week, for example, the time-line of crises includes

27 January…The News of the World claims 322 convicted sex offenders are missing across the UK
26 January….Home Secretary John Reid denies telling judges to give softer sentences to ease prison overcrowding
26 January….England and Wales Youth Justice Board head Rod Morgan quits over youth prisons’ overcrowding
25 January….Risk of being a victim of crime in England and Wales rises for the first time since 1995, figures suggest
14 January Senior civil servant suspended over failure to update police records of Britons convicted abroad

I leave others to decide the evidence of actual rather than threatened harm to the public.

So is John Reid really incompetent?

We are sometimes reminded that you may be paranoid, but you could still be persecuted. I believe that the various stories will have within them evidence that there continue to be problems that need fixing at The Home Office. But on balance, I see the evidence as demonstrating powerlessness of a political leader grappling with ‘events’. Powerless yes. Incompetent? I remain open to a reasoned argument. The view would be the stronger if it offered specific actions that could have improved things. Until then I will hold to the view arguments (stripped of political purposes) are based on a peculiar belief that a leader ‘ought to be able’ to fix everything going wrong in connection with his organization or department. It is the belief that grants the charismatic leader the high road to power, and the low road to eventual defeat.


Look out Marks, here comes Tesco

January 20, 2007

Earlier this week, Mark and Spencer announced its spectacular greening policy which propelled it into the lead position among top British retailers. Now Tesco announces its plans for becoming a greener and cleaner organisation. While the Marks’ Plan A may just shade it in coherence and specified targets, we are clearly witnessing a battle for corporate credibility on environmental policy. This may well produce a rising tide effect in such efforts in retailing which will impact throughout the distribution chain.

M&S chief Stuart Rose announced the company’s Plan A (‘there is no Plan B’) earlier this week. He would have been fully aware that he had done no more than steal a few days start over industry leader Tesco.

Today, Sir Terry Leahy CEO of Tesco responded. Leahy presents a more measured leadership style than the effervescent Rose, but he is developing into a formidable communicator for his organisation. He also has a tougher message to convey in shaping the public perception of Tesco’s stance as an environmental leader.

The communications battle: M&S 1 Tesco 0

In exploring behind the leaders’ pronouncements this week, I turned to the respective corporate web-sites. This is a simple if crude measure (but both companies are fully aware of the importance of first impressions). M&S had a clear lead in this particular battle. News of its new environmental policy had been clearly and highly visibly posted. In some contrast, the Tesco site has not been updated. The ‘latest press releases’ today had not been updated from the year end. The corporate responsibility pages were equally unforthcoming on Tesco’s new plans. If Marks appeared to have a launched a campaign after careful preparation, Tesco by contrast seems less ‘joined up’.

On this measure it’s M&S 1 Tesco 0

The likely environmental impact of the plans M&S 1 Tesco 1

Going beyond the economic: The impact of political leadership

What are the forces supporting these initiatives? The traditional economic rationale would look to explanations that gauge shifts in public opinion and attempt a cost-benefit analysis. Such analyses remain important as corporate leaders will continue to communicate with institutional stakeholders for whom the decision to support a company will depend on evaluation of its short-term profitability. Governments take a slightly longer time-scale around re-election consideration

But in an indirect way, the general public, influenced through pressure groups, can influence government, and government can influence corporate responsibility through various direct (legislative) and indirect (exhortative) measures.

For example, just over a month ago a Green Business Summit was hosted by the Government.

Executives from some of Britain’s biggest firms, with a combined total of 250 million customers, met at 10 Downing Street yesterday [11th Decemebr 2006] to work out a combined plan for a new range of “green” products, to be launched in the new year.

Companies such as Tesco, Marks & Spencer, HSBC, BSkyB, B&Q, O2 and The Carphone Warehouse have committed themselves to “accelerating the roll-out of practical, simple solutions” to help consumers reduce carbon emissions.

It would not be unreasonable to assume that such a meeting would accelerate the plans of participating organisations. In such ways, according to experts in transformational leadership, are self-seeking behaviours tempered with wider social considerations.


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