Ratan Vs Cyrus: Purpose Vs Profit

Posted on Posted in Leadership

It’s fascinating to follow the recent Tata story, especially as  a student of  leadership and organization culture –  to decipher what would be going on in the  minds of the Board of Directors when they decided to remove Cyrus Mistry was an interesting assessment. I was trying to draw my conclusions based on the various reports which emerged and had a feeling that this could be a typical case of – PROFIT OVER PURPOSE.

My initial speculation got confirmed when I read today’s newspaper – about how the Nano project was leaking revenue and could not be turned round.

This is what differentiates Tata compared to any other organisation – profit is considered as a result, the group stands for much, much more than that.

Let me share my perspective – if I give you the choice of opting to work for TATA or Reliance as your next assignment, other factors remaining same – which one will you choose? Chances are that you will choose Tata – there is something about them.

What is that “something”? History has that answer.

Jamshedji after joining his father’s business made the first big move in starting Empress Mills in 1877.  He was a visionary, big on the swadeshi movement and wanted to establish India as a manufacturing hub and started working towards that goal. It is important to mention the very famous story of  1897 wherein he was stopped by an Englishman who was the manager in the hotel and told him that Indians were not allowed in that particular dining area of the hotel. He chose to respond and not react. J Respond he did – he invested 3,00,000 pounds to build one of the greatest hotels of that time – The Taj Gateway where Indians were welcomed with open arms. This is that “something”.

Jamshedji also made the first moves to start the Iron and Steel factories in India. Unfortunately, he could not see that dream come alive in his lifetime as he passed away before that – but the culture of the group was beginning to take shape  – make profits but not at the expense of people, ensure lives of people around you get better.

He architected what Tata stood for that time – Good Thoughts, Good Words, Good Deeds – this is that “something”.

The mantle was then handed over to his son Dorabjee  and then later to JRD, who joined the group in 1926 and was later appointed the chairman and head of the group in 1938. He was only 34 then. A humble man – he jokingly called this move by the group – Mental Aberration.

He was instrumental in carrying the legacy from Jamshedji and to build on the philosophy of “Men and Women should be respected more than the machines “

8 hour working day, leave with pay, accident compensation schemes etc., which we all consider a part of any corporate job today were first brought in by this group. This was not a statutory requirement then, but the group was keen to protect their employees.  It was much later that the government made all this compulsory for other companies to follow. That “something” got even more clarity:  Purpose Over Profit.

JRD was instrumental in getting India on the civial Aviation map, first with Tata Airlines which then became Air India. A passionate flyer himself , he also had the distinction of being the first person in India to get a pilot’s license. He was keen that Indians fly and was ready to pump in money in this sector – “Purpose over Profit “

Tata Institute of Fundamental Research, TELCO, Tata Memorial Hospital, one of the first cancer hospitals in India, Indian Institute of Science Bangalore  – “Purpose Over Profit “

He was one of the first leaders to talk about family planning and forecasted that population could be a huge problem for India in the future. His statements at that time were not accepted well but now we realize – he was correct. Though a lot of people did not agree with him , he still went ahead and set up a family planning foundation to work in this area in 1970 – “Purpose over Profit “

Tata Steel Mobile Health Clinic, Tata council of community initiatives, Water management initiatives, National Centre for Performing Arts, JRD Sports Complex, Tata Football Academy, Tata Adventure Foundation –  Was it required for the Tata group to get into all these initiatives and projects? Absolutely Not. Why did they do that? – Purpose over Profit.

You will be surprised to know that when Bachindra Pal climbed Mount Everest, she had the Indian Flag with her and also the Tata flag because she got trained in the adventure foundation of Tata – Purpose achieved.

You see what I mean – and I can go on but I believe I made my point – it was always – Purpose Over Profit.

Ratan Tata took over from JRD and he built on this culture. Jaguar Land Rover turned around, the birth of Nano – all these initiatives were more about the purpose than the profit. We all know how Ratan Tata reacted to the unfortunate incident of 26/11 – not only did he compensate the employees but also gave  money to a very large section of the society who got effected, did they have to do that ? No.  Why? – Purpose Over Profit.

So when Cyrus Mistry says – Nano is not doing well, Corus was not a great move , getting into Aviation again was a bulldozed move (can’t blame Ratan Tata – who is equally fond of flying like JRD), he is right, absolutely right.

I am not saying that you should ignore profit and keep making bad deals, but TATA has moved beyond profits. They have a larger PURPOSE of why they exist, the only reason why the company continues to grow after more than 100 years and will continue to grow in the future as well.

Long term initiatives are the DNA of the organization and more importantly  – that “something” is PURPOSE Over PROFIT – I don’t think Cyrus Mistry , in its true sense, really understood that or even if he did ,did not believe in it.

Shaju Nair

2 thoughts on “Ratan Vs Cyrus: Purpose Vs Profit

  1. Very apt comparison of purpose versus profit. However, branding Cyrus Mistry as “Only for profit” man and not knowing what has gone into the boardroom will be a bit unfair. After all he was chosen by the board and they would have definitely selected someone who believed in their organization’s core values. There could have been multiple other reasons that you and me (as a shareholder) are possibly not aware of. I only hope that purpose wins over short term profit which eventually creates a value for the shareholder in the long run 🙂

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