Business Case Studies, Leadership Case Study, Tata Group,Ratan Tata

Code :LDS0008

Year : 2005

Industry :Business Law, Governance and Ethics

Region : Global

Teaching Note:Available

Structured Assignment :Not Available

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Introduction: The role of aCEOis complex in nature. CEOs are supposed to be future-oriented strategistswith business acumen and are expected to build up the company by bringing newinsight, discipline and strategic decision-making to the organization. JimCollins, co-author of a study about the common factors in companies that had exceptional long-termgrowth, found that their leaders shared “tremendous ambition for the cause, the company, thework—but not themselves—and the unbelievably terrifyingwill tomake good onthat.”3 SumantraGhoshal of the London Business School cites the “intellectual ability to create clarity in big, complex companies, to dealwith inherently conflicting demands and tomakewise decisions in the face not just of the unknown, but of the unknowable” 4 as the key qualities for a CEO. The role demands exceptional thought and judgment to successfully steer a company across the span of years by integrating its strengths towards the goal of creating wealth.

For years, companies likeGE,Unilever,McDonald’s andmanymore had been grooming internal candidates to take on the responsibility of CEOs. At the same time,many companies were finding that the experience of their topmanagement candidates was not preparing them for the jobs they were expected to fill.With the increasing rate of failure among top executives,more andmore companieswere looking for outside candidates tomanage the business enterprise successfully. The turnaround of IBM, under the leadership of Louis Gerstner, an outsider, was one of the best examples. By 2004, the trend had been to prefer an outsider than an internal candidate for the top positions. But research studies showed that the internal candidate at the top position was likely to perform better than an outsider. With the rising accountability to the shareholders and falling supply of ablemanagers, the pressure was tremendous on the directors of the company to select the right candidate. Negligence in the selection process had leftmany companies permanently impaired and undecided about their successor.