Leadership move in Tata Trusts

It should remove apprehensions about an individual's or family's control over the Tata group

Tata Trusts has just taken a giant leap forward. The appointment of two vice-chairmen on Wednesday means the next chairman of Tata Trusts will be a non-Tata for the first time in its 126-year history, and perhaps successively so. By taking the decision to appoint former defence secretary Vijay Singh and TVS Group chairman Venu Srinivasan as vice chairmen of different trusts under its fold, the Trustees have made an important departure, just as it happened at Tata Sons with the appointment of non-Tata individuals after Ratan Tata. 

Many may now say that the succession planning was long overdue, but it’s perhaps better late than never. In any case, no one can deny that Ratan Tata’s deeper involvement in the running of the Trusts after his retirement from the Tata group did have a profound effect on an institution that, while still loyal to the legacy of its creators, had become too set in its ways. Tata believed change had to take place for the Trusts to give punch to its weight in terms of impact, and brought in Bridgespan Group, an international nonprofit that measures and advises philanthropic organisations to assess the way it should function. That led to many changes in the Tata Trusts over the past few years.

Appointing outsiders is an emerging trend in world-scale philanthropy space, and the Rockefeller Foundation and Ford Foundation have followed that principle.

 An organisation’s genesis may have taken roots in the imagination or the wealth of an individual or a family, but the continuing impact of that organisation on a society or an economy may be best achieved in the hands of leaders who bring the best combination of experience and expertise. And they need not be from the family. Founders of organisations or trusts have to keep in mind that just because someone is related to you does not mean he or she has the right combination of skills and experiences to do a certain job effectively. Outside leaders may be better equipped to supplement your strengths, and they are also more likely to be objective because they are not as emotionally invested in the situation.

In doing so, the ideals and purpose of the founders, who started it all, can be expected to be best perpetuated. There are several large foundations in India, established by high net worth families or individuals. More can be expected, given both the emergence of tech entrepreneurs and the growing influence of emulating philanthropy, out of the West. The example set by the Tata Trusts can be considered by them.

Most of the foundations are run by the original family members who are still unable to imagine anyone as an adequate replacement. Even if they have to choose somebody, most are inclined to replace themselves with a clone. This is the same in most business houses. Research by US-based management consultancy Bain & Company found that only one in five board members in Indian companies was ever involved in talks about a CEO’s succession and little effort was made at the board level to groom top leadership. Some family businesses delay the process of succession planning because their decisions could create conflicts and criticism within the family. Also, issues like death could be uncomfortable to discuss.

To be sure, this is not an India-specific problem. According to studies conducted by Heidrick & Struggles and Stanford University’s Rock Center for Corporate Governance, on average, boards spend only two hours a year on CEO succession planning and almost 40 per cent of companies have zero viable internal candidates, pointing to a lack of talent management. This is surprising considering that the lack of a truly operational succession plan can have devastating consequences.

Sometimes it is necessary for organisations to bring in people who can view their role through the lens of someone who just bought the company and is unencumbered by the emotional baggage that comes from a long tenure in the organisation. 

In the Tata Trusts’ case, the move is even more welcome because of the nature of its relationship with Tata Sons, the holding company of India’s largest conglomerate, the Tata group. Tata Trusts, the philanthropic trusts endowed by members of the Tata family, hold 66 per cent of the equity capital of Tata Sons. The leadership move at the Tata Trusts should once and for all remove apprehensions about an individual’s or family’s control over the interests of the Tata businesses.