Efficiency At The Cost Of Moral Values? Power Lessons In Corporate Leadership
R. Gopalakrishnan and Harish Bhat discuss their book 'Jamsetji Tata: Powerful Learnings for Corporate Success'
What if you could unlock the secrets to enduring success through the world of industrial pioneers? In this special episode of The Core Report, Govind Ethiraj discusses the legacy of the Tata group with R. Gopalakrishnan and Harish Bhat, co-authors of the book Jamsetji Tata: Powerful Learnings for Corporate Success.
Their book dives deep into the life and legacy of Jamsetji Tata, the visionary founder of the Tata Group. His entrepreneurial spirit and values have shaped modern Indian industry. Discover how his groundbreaking ideas—from establishing the Indian Institute of Science to launching iconic brands like Tata Steel and Tata Motors—continue to inspire generations of leaders.
R. Gopalakrishnan, a veteran of Tata and Unilever, shares the story behind their collaboration and the motivation to create a book that transcends biography. Instead, it serves as a guide for young Indians seeking to understand the principles that have driven Tata’s success for over 150 years. Harish Bhat, an advisor and director at Tata Group, discusses the essence of value-based leadership, emphasising fairness, integrity, and a commitment to stakeholders.
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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TRANSCRIPT
Govindraj Ethiraj: Mr. Gopalakrishnan and Harish, thank you so much for joining me. So I'm picking up actually on a book that both of you wrote, Jamshedji Tata, Powerful Learnings for Corporate Success, and this is about the valuable lessons and the ideas of the philosophy of Tata, which both of you wrote, and we even talked about it already. I'm trying to now build on this book and try and maybe extrapolate Mr. Ratan Tata, who we lost recently, in some ways, but in a very forward way, and let me explain how. I think the question that many businesses, corporate leaders, entrepreneurs, managers ask is, what is really values-based leadership? And one of the things I guess that is consistent through the history of the Tatas, from the founder Jamshedji Tata, to JRD Tata, to Ratan Tata, and everyone in between, is the concept of values-based leadership, but that is something that is only best understood when practiced or seen being practiced. So that's really what I thought we could focus on and dwell on values-based leadership in a more forward-looking way, in a way that it's a takeaway not just for someone who is in the Tatas, maybe for them it's much clearer, but someone who is not in the Tatas or wants to become like the Tatas.
And that may be a good point to start, since Mr. Gopalakrishnan, you've had a very, very recent experience and encounter in that regard. So it's over to you.
R. Gopalakrishnan: Well, I'm glad you're focusing on this, Govind, because every generation forgets that there is something to learn from some earlier generation, in the political space, whether Gandhiji or anything to teach Indians is a subject, and we wrote the book about Jamshedji Tata and his successors from that perspective. I'm really glad you're exploring this subject with a futuristic view, because having been around for 50 years, when I began my career, the physical assets that you had formed news. You know, early in your career, you remember, the headline would say, so-and-so to invest 5,000 crores, 10,000 crores, and that made news.
In the middle of the last 50 years, it became intellectual assets. It moved from physical assets to intellectual assets, so somebody setting up a software company, that made news. But going forward, I think it will be what I call spiritual assets.
And the word spiritual, I'm not using in a religious sense, doesn't matter to who, but values-based leadership. I'm using spiritual as a short form of values-based leadership. I believe the morally rich companies are going to win in the future.
And so from that perspective, I'm very happy that you're focusing on that. I've just come back from Surat, if I may take a minute to just explain, and I was zapped. There were about 100 people, all probably second-generation local businessmen in all sorts of industries, perhaps in the age group 40 minus, 30 to 40.
They were obviously financially reasonably well-endowed, but they were hungry. And I thought they were hungry for business ideas, entrepreneurship, but they kept me up for later in the night, discussing how Tata managed to successfully develop a set of principles and run it for 150 years. But they said, we would like to be like Mr. Tata, and we can't be Mr. Tata, but maybe my great grandson can be. I mean, I never heard anybody this side of 40 tell me, talk to me like that. And so while it was a stressful night in terms of keeping me later than my normal bedtime, I have come back so charged and energized. And here I walk right into your interview, where you're saying you would like to discuss the same subject.
Superb. Well done.
Govindraj Ethiraj: So why would you think that they wanted to focus on the intangible rather than the tangible? In this case, being values.
R. Gopalakrishnan: I can only tell you what they told me, and I don't want to mess around with it. They told us that we are sitting on the banks of the Tapti River. And the Tapti River is religion for people in Surat, like rivers are everywhere in this country.
And the particular religion that the Tapti River has is that it is a virgin. So I said, uska kya matlab hota hai? And they said, virgin means no other river joins it.
It stands all by itself from the Madhya Pradesh Western Ghats. So I said, what is the significance of that with your business interest? And look at the answer they gave.
They said, we in the business here have a tradition that we must be worth our word. Because that is honoring the river that is going past the city. Now, you know, I wasn't attending Sri Sri Ravi Shankar or one of those events.
I said, here are 35 year old guys telling me what I never expected to hear. So I think they were interested, saying that culturally we are very moored because of our river. And obviously, the river has a lot of significance for the locals.
And we want to know from people who actually run businesses, because the general feeling is you can't run a business with ethics and honesty. But living in Surat, we want to be. And I did realize that Surat is the second largest city in Gujarat, is ahead of Madhya Pradesh.
And it's forecasted to exceed Ahmedabad in the next 10 years. So obviously, if the brightest student in the class, who's today coming 10th in class, is going for the gold medal, it is something that must gladden our heart.
Govindraj Ethiraj: Right. Harish, picking up on values-based leadership again, what does it mean to you in a way, if you take a step back and say that, what did this term mean to me, as you look back and where we stand today or sit, and as you look ahead?
Harish Bhat: So, Govind, for me, values-based leadership means doing what is right. Doing what is right, not just as per law, doing what is right, not just morally alone and legally alone, but doing what your conscience tells you is right. That, to me, is the essence of values-based leadership.
So, you know, let me for a moment, one of the books that I got when I joined the Tata Group, which inspired me greatly, was a book called The Creation of Wealth, written by R. M. Lala.
And R. M. Lala was a historian of the Tata Group.
He wrote beautifully. But the epilogue to this book, in 2003, an epilogue was added to this book, and that epilogue was written by Mr. Atantata. And I'm going to read out for you, Govind, a paragraph of this epilogue, which has stayed in my mind for a long time as defining what values-based leadership means.
Here is what Mr. Atantata says here. He says, the people within the Tata Group have displayed enormous spirit over the many decades that we have been in existence. I hope they will remain totally committed to making the Tata Group what I think all of us would like it to be.
The predominant business house in India, which emits fast eroding values, will continue to stand out as being a well-integrated, growth-oriented group with market leadership, operating with a high level of integrity, a great value system and uncompromising in its goal to achieve results without partaking in corruption, bribery and or political influence. And, you know, to me, this is a very, very, very, very fundamental statement which has stayed in its mind. He says, operating with a high level of integrity, a great value system and uncompromising in its goal to achieve results without partaking in corruption, bribery and or political influence.
I think that is as clear a message as possible on what kind of values the house of Tata should have. And that stayed in my mind ever since. Going back a century, I read a report which came after 25 years of the Empress Mills.
There was a report at the Silver Jubilee of the Empress Mills. And similarly, there I found a paragraph about how Jamshedji Tata would emphasize the highest levels of integrity and values in Empress Mills. So I think across my career of 37 years in the Tata Group, Govind, not once has the group asked me to do something which is against my conscience.
And I believe that is the general philosophy of the group across our companies. So to me, value based leadership means doing what is right, going by what my conscience tells me is right and perhaps exceeding the legal boundary to make sure that that happens.
Govindraj Ethiraj: OK, so I'll question for both of you. Let me start with you, Mr. Gopalakrishnan. So when we talk about values based leadership and its sustenance, because that is a little more important.
Is this something that we realize and respond to in exception? And if it's a rule, how is it that companies or good leaders practice it in a way that there is constant either learning or alignment with that sense, which is arguably nebulous about a values based leadership environment?
R. Gopalakrishnan: Actually, Govind, I don't think it's a nebulous view. My response when people ask me, because you're all coming from that position, I myself would have said what you just said maybe five, ten years ago. How do you raise your kid at home?
You just raise your kid to be academically very good or very good in football and say values can come later. No, you don't. Every parent strives to varying degrees of efficiency to give their kid a balance between good education, good sports, good values.
The values part is a soft part, the nebulous part. How is it done? There's no classroom for it.
Grandmother sits you on her lap or grandpa sits you on his lap. They tell you stories. I call it the software of good enterprise.
And the education and the sport, I call the hardware of good enterprise, good raising children, sorry, not enterprise. In the same way for enterprise, there's a hardware. The hardware is getting your MBA, practicing DCF, cash flows, return on capital employed and efficiency that it produces.
And that is important. But what's happened to Western capitalism? By the way, I think Western capitalistic enterprise is on a death knell.
It's on the death row. Because they have focused so much on efficiency, they've forgotten completely, you know, all the Milton Friedman and stuff of the past. Today, the financial world stinks of money.
Stinks. And I think it's carrying to an excess which will find its own balance. The focus on the software, you can't run a company through only effectiveness.
You can't run it only through efficiency. You can choose 60, 40, 50, 50, 40, 60, but you have to choose it. So it's not an exception.
And the upcoming future manager will learn this formally and informally.
Govindraj Ethiraj: Harish, how is this translated for you in your own leadership roles at the Tata's? And when I say translated, I don't mean on the exception, but on the rule. I mean, literally, what would it mean on a daily or a weekly basis?
Harish Bhat: So I think, Govind, I've been a marketer most of my life with the Tata Group. I've spent many years with Tata Tea and thereafter with the Tanishq and the watches business of Titan. It means five or six things in day to day work.
First, it means that you provide your customer with products and services of very good quality and no compromise on that. Not just products and services, but after sales service, all touch points with the customer have to meet the promise that you've made to the customer. That to me is values based leadership.
The second Govind is to be fair to all your stakeholders, whether it's the community around you, whether it's the team members who work with you, whether it's your vendor partners, your franchisee partners, your distributor partners. How fair are you being to all of them? And how is that fairness coming from within you?
Not imposed by a contract or not imposed by the law necessarily, but how is that fairness coming from within you? And, you know, as the leader of these businesses, you have to address each of these stakeholders on a daily basis. The third thing, Govind, is when you run into a dilemma of two or three potential actions that you could take and you are deciding which of those actions to take, how do you decide which course of action to take, keeping the interests of all these stakeholders in mind and doing what you believe is then optimally right for all those stakeholders rather than going by just one stakeholder, by just the shareholder or, you know, just the customer. How do you balance out all these requirements?
The fourth thing, which is very, very important to me, Govind, is the say-do ratio. You know, if I make a commitment to you, then delivering on that commitment to you, I would rather under-promise and over-deliver. To me, that is also values based leadership, because then I am respecting you as an individual.
Once I make a commitment that I am delivering to you what I am committing to you. And fifth, Govind, I think ensuring that everyone within the business, everyone within the business, however senior or however junior they are, are aligned to the core values of integrity, aligned to the core values of respect for the individual. How do I, as a leader, make that happen in my day-to-day work?
That is as important as pursuing those values myself, because that is what will institutionalize those values. If you can get those values clearly communicated across the organization. With varying degrees of success, I would think I've tried to do that in all the leadership roles that I've held in the Tata Group.
Govindraj Ethiraj: And what's the, if I can use this term, delivery and feedback mechanism? For instance, many of the principles you talk about, and you use the good example that's Tanishq, because that's a retail operation as opposed to, let's say, tea, which is produced centrally and then distributed or marketed. But in a retail operation, there are more moving parts.
So how do you ensure, or to the extent that you can ensure, that these values are being adhered to all the way down and at that customer touch point where it can backfire the most as well?
Harish Bhat: So I think the most important thing, Govind, you know, all organizations have their system of audit, their system of checks and balances. That, whether it's an FMCG organization or retail or financial services, they would have that. So I'm not necessarily going to cover that because I think that is important.
And that discipline of process control is important in any organization, including in a retail organization. And that's important because there may always be some bad egg sitting somewhere. But the most important thing to me, Govind, is to actually get ownership of values by every person within the system.
People should believe in those values. They should not follow those values only because there is a central diktat. And if you have to get people to believe in values, then I think you need to communicate those values clearly.
You need to communicate why those values are important. And then you need to, you know, you need to demonstrate those values in action. People are looking at you constantly as a leader of a business.
Unless you demonstrate those values and walk the talk, other people in the system are unlikely to do that consistently. So my belief is that very good communication and leaders actually living those values in their day to day life are two very important things. Those values have to be upheld by all stakeholders.
Of course, like I told you, process checks, controls, all that needs to be in place. And I would also think that, you know, if those values are getting violated, then the right actions at those points send out very, very strong messages.
Govindraj Ethiraj: And there is an example from Ratan Tata, which you talk about even in your book.
Harish Bhat: Yes, that's correct. Tata Finance, but I'm going to request Mr. Gopalakrishnan to talk about it because he was a member of Mr. Ratan Tata's core team when the Tata Finance episode occurred.
R. Gopalakrishnan: Go ahead. No, it's in the book, so I'll be brief. Hopefully people will read the book.
But it was a shock to all of us to receive some anonymous message that there's been a fraud. If you would expect it, we were scurrying around trying to find out what the facts are. But very soon we found that there indeed had something has gone wrong, though we were not very clear what was wrong and what the cost of that wrongness was.
What Ratan Tata did was without knowing what the total debit note size would be, when he heard the plaintiff wails of shareholders who had put their individual retail money, retirement money, he made a statement that I don't know what the amount is, but you're guaranteed you'll get your money back. Now, that immediately sent a great signal that a problem has come up and every business is, every human being is flawed. So, you know, something will go wrong, but he didn't push it under the carpet.
Then many things happened, quasi-legal, legal, went after the perpetrators. That's all in the public domain by now. But the fact of the matter is, I sat around the board table and the final bill was presented as I remember it, 800 crores.
Now, technically speaking, our liability was limited as per the Companies Act. But we said no. And what Harish mentioned a little while ago, you go not by the law, but beyond the law and everybody was paid.
So that's it. I'll give you a second example, which is not in the book. But these kinds of examples you don't have to talk about.
They get around with a positive effect. I became chairman of a company, of a Tata Suns subsidiary, which is a joint venture between a well-known American company and Tata Suns. And I succeeded Nathan Tata, who was the first chairman.
And they told me the story that the factory was set up, which is the automation and high-tech business. But the then CEO came and said to me, I have a problem. I've set up the whole unit, but I can't get a single order because people want a backhander.
He said, well, there's no way you're going to play a backhander. He said that I can't run the factory. He said, shut it down.
Brand new factory. Shut it down. That CEO, as he told me, was shocked.
And he said, listen, we can't shut down a brand new factory we put up. They went to apply their mind de novo. Not only did they get their first few orders without backhanders, it's a flourishing company.
Of course, it's taken 15, 20 years. But for me as a new person to Tata and as a newly appointed chairman of this joint venture, you can't blame me if I think this is dramatic.
Govindraj Ethiraj: So, you know, you talked about efficiency and effectiveness, and these are really what is expected from business leaders today, more so maybe in listed companies or many of which are also in the Tata group and prominent parts of benchmark indices and so on. How does a business leader today in this time balance or find balance between values-based leadership and the efficiency and outcomes and effectiveness that is really demanded by not just shareholders, stakeholders, but the ecosystem as a whole?
R. Gopalakrishnan: That's a fantastic question because CEOs are under tremendous pressure. And you see company after company being put through the wringers, the CEO gets fired. I think you must know where to draw the line.
You must keep a lot of flexibility and porosity, but the determination of how porous and how flexible will determine on your value system. That's far and no more.
Govindraj Ethiraj: Harish, how has this balance evolved for you between efficiency and values?
Harish Bhat: Yeah, so on the one hand, Govind, I am very clear that when I've been in a leadership role in a company, I have to meet the financial and operational metrics and all the efficiency metrics which are defined. And that's part of my role to deliver to those metrics. But I need to do those while remaining within the boundaries of the value systems which have very clearly been defined, not just defined by the Tata group, but value systems that I truly believe in.
So perhaps it puts even more pressure on me to think of new and innovative methods of creating demand, of managing the business to be able to deliver results. But I think it creates for a far more fulfilling experience. Everyone within the business and everyone within the ecosystem is happy that we have achieved those results without breaching any ethical or value boundaries.
It means that I have to be constantly scanning the horizon, constantly scanning all elements of the business to ensure that those boundaries or boundaries of values are adhered to and we remain within those boundaries. I think it places additional demands on the leadership of a company. But I think those additional demands in the long term are worthwhile, because if you take the Tata group and the Tata brand, which is today, you know, 700 million plus Indians use products and services of the Tata group, and they use those products and services because they trust the Tata brand.
And I think they trust the Tata brand because they also know and love the value systems and the integrity which lies behind the Tata brand. So in the long term, Govind, I think in the short term, it places demands on leaders. In the long term, I think the payoff is very, very significant.
Plus, it's the right thing to do, fundamentally.
R. Gopalakrishnan: Can I add a point, Govind, to what Harish just said? Just so that it becomes a sort of a conversation. You know, don't think I'm being, I'm perhaps making an aggressive point, but it's not pointed in your industry.
The fourth estate also has a role to play. Because if the fourth estate celebrates results at any cost, and every morning you see this played out. If somebody is perpetually in controversy, without judging whether he's right or wrong, you can say, he's not the kind of guy who should get a Padma Bhushan or awards night hero, but we make them heroes.
If a particular, the VCs in the PE industry also celebrate efficiency at the expense of, and so you find big names, they're all known to everybody because they're in the public space, reaching ridiculous valuations of $30 billion and collapsing down to half a million dollars. This role of the fourth estate in advancing the case for values-based leadership is very important. In that sense, I'm very happy that you have taken this initiative.
I think it's a first step. But I hope you will encourage your cohorts to take this forward, because otherwise we are heading into an abyss. And if I'm exaggerating, it's allowed at my age.
But for God's sake, it's a signal to people, watch it.
Govindraj Ethiraj: Right. Last couple of questions. Harish, let me begin with you.
And I again want to put this to both of you. There are some values which are, let's say, they sustain over time, over centuries, maybe in this case. And there are some values which get added on.
And Mr. Gopalakrishnan talked about ESG. And potentially, as I see too, it is a value that has got added on into a CEO's lexicon and not just the written lexicon, but the way they approach business and so on. How do you see, do you see that too?
I mean, that there are some values which are always perennial, perpetual, and there are others which get added on. And how do you manage this new mix?
Harish Bhat: So I would broadly agree with you, Govind. I think there are values which have been fundamental since the beginning of humanity and will continue to be so. The values of honesty, the values of integrity, the values of hard work, the values of ensuring that you take care of the community around you.
These are values which have remained with us for a very long period of time. I do agree that the sensitivity and the focus on ESG, on the environment, on sustainability has grown significantly because we are also seeing the impact of global warming, of we are seeing the impact of pollution in so many parts of the world. So the sensitivity to and the importance of such a value has grown dramatically.
So I think it has to settle into a leader's mind. It takes time. It evolves and eventually leaders have to make it part of their balance scorecard or the various things that they are achieving within a business.
You know, within the Tata Group, however, I am for a moment reflecting on the history of the group. We must remember that Jamshedji Tata, way back in the 1890s, wanted to bring clean hydroelectric power to the city of Mumbai to replace the coal and soot that was across all the mills of Mumbai at that time. And he thought that he could produce clean power from the, you know, from the waters of the Western Ghats, which is how Tata Electric came into place.
Or in the 1960s and 1970s, Suman Mulgaonkar thought he should build a lake alongside the Tata Motors plant in Pune so that he could give back to the environment what the plant may potentially be taking away from the environment. So I would say the consciousness of the environment has been there all along within the Tata Group. But I do agree with you that ESG is becoming far more important now than it has been in the past.
And leaders have to adapt to that and make sure that their companies are true to meeting the environmental benchmarks over the next several years.
Govindraj Ethiraj: Mr. Gopalakrishnan, what could be a present and future value in, as you think, I mean, it's like a blue sky question. I mean, what could, you know, maybe some people saw environment and climate coming into the mix. Maybe some people didn't.
But now it's with us. And there are maybe some new values which are maybe subset of old values, as Harish was saying, environment is a subset of a larger value of keeping your community safe or your environment protected. But what could be new?
R. Gopalakrishnan: You know, I have a fundamental disconnect with what Harish said and what you're saying. I don't think by my instant reaction that there are any new values that are coming. These values have been there forever.
It is just that there are so many fundamental values that you are not able to cope with it. So in the Vedanta, it is said we must protect the resources and enable to do business. And it even specifies the resources of water, air, soil and people.
It's been around for 5000 years. Now, we are now discussing as though ESG is something new. I don't think that's true.
It is just that we can't remember so many things. We are all frail human beings. And it's like a Kala Chakra, certain buckets pop up in red color periodically.
If you go back 30-40 years, safety, industrial safety was not top of the pops. Getting an industrial license from some babu in Delhi was the top of the pops. And as you know, industrial safety got a focus.
And the same for innovation, same for quality and so on and so forth. So the first thing that I want to say is that I don't believe in there are any new values. You call them Hindu values, call them Zoroastrian values, call them Jain values.
They all of them say about the same thing. It is just that we are not able to cope with also. If I look at the future in the same spirit of saying, not calling it a new value, but becoming a reminder to CEOs, the red light goes on, it is spiritual values.
And I emphasize spiritual value is not about saying your prayers in the morning, but it's about understanding that your responsibility is not only to the shareholder. And next time you go to Harvard or IIM Ahmedabad or wherever you go for your advanced management courses, like I have during my career, and somebody tells you about Milton Friedman, you say, that's the biggest load of poppycock I've ever heard in my life. That kind of a debate has to come to our mind, but it wouldn't have come to my mind if you asked me 30 years ago.
I was very happy I went to Harvard and came back. And it's a CV I took. So I think I'm really very happy that you've taken the initiative you've taken to discuss this subject.
I wish you'll do hell of a lot more, talk to many more people. And all of us have these frailties which we can be course corrected. And it's that course correction that I'm calling spiritual values.
Govindraj Ethiraj: OK, and thank you for that. Harish, last word. You know, the book on Jamshedji Tata was called Powerful Learnings for Corporate Success.
Not to pin you down, but if you were to write something similar, because I did say that I want to try and extrapolate Ratan Tata into this. What would it be called? Would it be the same thing?
Powerful Learnings for Corporate Success or something similar?
Harish Bhat: I think it would be Powerful Learnings for Corporate Success. And I think maybe I would subtitle it with doing the right thing. I strongly believe that Mr. Ratan Tata stood for doing the right thing and that would have to get somewhere into the title of the subtitle.
Govindraj Ethiraj: And I think that's a very useful note to end on. Harish Bhatt and R. Gopalakrishnan, thank you so much for joining me.
R. Gopalakrishnan: Thank you for your initiative and I hope you carry on. Thanks a lot. Great pleasure.
Govindraj Ethiraj: Thank you so much. Thank you very much, Rohit. Bye.
