Inspiring Stewardship

Didier Cossin, Ong Boon Hwee

• Publisher: Wiley
• Year: 2016
• Print ISBN: 9781119270805
• eBook ISBN: 9781119292906
• Edition: 1
• Topic: Business
• Subtopic: Finance
• Index: Business

Transform from leader to steward to drive growth and make an impact

Inspiring Stewardship helps leaders drive sustainable development and growth by balancing short- and long-term objectives amidst competing interests. By examining a range of exceptional individual and organisational stewards alongside insights from quantitative studies, this book unlocks the contributions you can make to enhance your influence and secure your legacy. Profiles of leaders from Ratan Tata to Bill Gates illustrate what stewardship really means, and the attributes and characteristics of steward leaders. Are they fundamentally different? Where do they get their exceptional drive and resilience? Why do they shoulder such huge responsibility? Risks, rewards, motivations and actions are explored in depth to give you a real-world view of stewardship, and to show you how to embody these principles in your own everyday life.

The notion of stewardship has never been more relevant to business than it is today, as managers struggle to balance present and future interests. This book provides clarity, direction and guidance for more purpose-driven action.

• Understand the concepts and principles of stewardship
• Discover characteristics of steward leaders across cultures
• Learn how stewards have shifted the course of their organisations
• Examine the capabilities that deepen organisational resilience

Today, ownership of firms is increasingly fragmented, investment structures are more and more complex and the time horizons of investors, executives and owners do not always coincide. Inspiring Stewardship helps you break through the tension and drive sustainable growth through adaptability and good leadership.

PART I
WHY STEWARDSHIP?

CHAPTER 1
Stewardship at Work

The mind-set and attributes of stewardship have been around for a long time, even if they were not always labeled as such. There are many stories of business and national leaders whose personalities and legacies have come to typify this approach. We will explore some of the situations they faced in their careers and which proved to be the catalysts of their stewardship. The color and detail of the stories give us a flavor of the type and scope of these individuals' achievements. In subsequent chapters we will examine what motivated their actions, as well as what shaped their character traits and underlying values.

It is often said that authors stand on the shoulders of giants. Our understanding of the concepts and practice of stewardship is no exception. The individuals we describe are and have been inspirations. We refer to them throughout the book to illustrate the various dimensions of stewardship, as well as to show how context shapes stewardship. The diversity of these individuals and their styles reveals the multi-dimensional nature of stewardship. We would like to stress, right at the outset, that there is no ideal individual steward, but that each of these leaders is inspirational in a particular facet of stewardship.

As we will see, these leaders emerge from very different organizational contexts including financial investors, family foundations, trans-generational family businesses, public agencies, institutional investors, and state-owned enterprises. While it may appear in different forms, depending on the nature of the organization and its environment, stewardship shares distinctive characteristics across contexts. The different contexts may influence the way in which stewardship emerges and which actors are its drivers. Generally, these actors share three key characteristics: When influence and leadership lead to clear economic benefits; when actions are driven by a long-term focus; when there is a commitment to enhance the well-being of the communities in which organizations operate impacting the societies around them – is when stewardship is at work.

The Tata Story: Blazing a Trail

The 1960s and 1970s were a time of discontent for Indian businesses. Post-independence, India was an inward-looking, command economy that, in an almost Soviet fashion, upheld the public sector at the expense of private enterprise. Those who ventured into private business had to contend with a populist government, labor problems, and a slow growth rate. Territorial conflict with neighboring countries, as well as political instability on the domestic front, meant that the Indian government declared a state of national emergency on three occasions – in 1962, 1971, and 1975, each stretching over several years.

It was in this bleak period that a young overseas graduate became involved in his family's hodgepodge of businesses, some of them dating back to the 1880s. When he joined the family company in 1962, Ratan Tata was a 25-year-old civil engineer, armed with an architecture degree from Cornell University.

Despite the restrictive business environment in India at the time, Ratan Tata instinctively focused on nurturing innovation and business excellence by setting up internal structures for collecting and evaluating new ideas. Amid a culture of lifetime employment and seniority based on age or length of service, he offered the prospect of rapid career advancement to young able managers. This gave them a sense of ownership in the company's success, and signaled a commitment to talent rather than hierarchy. Thanks to the ample space provided for professionals and intrapreneurs, the Tata business units reported consistent profitability.

As a director, Ratan Tata was tasked with growing a number of Tata enterprises in the electronics and textiles sector. His 1981 appointment as chairman of Tata Industries signaled the group's move into the advanced technology space – one of several new initiatives aimed at modernizing and transforming the company. Having set up seven subsidiaries in various high-tech segments, between 1982 and 1989 Tata Industries grew its capital and profitability tenfold.¹ Throughout this period, Ratan Tata applied himself to creating a cohesive brand for the many companies under the Tata umbrella.

Ratan Tata's clarity of purpose in pursuing not only business success but enhancing social and national economic impact was key to raising his profile, expanding his influence, and establishing him as one of India's foremost thought leaders. The discipline he had honed over many years of running a group of businesses in a challenging environment, coupled with his overseas education and exposure, also stood him in good stead. His appointment in 1991 as chairman of Tata Sons, Tata group's holding company, coincided with the tentative start of India's economic liberalization and opening the Indian markets to the rest of the world.

Even then Ratan Tata's eyes were firmly fixed on a distant horizon. He knew that with the world coming to India, the country's companies would urgently have to improve their standards. The speedy demise of the once-iconic Indian brand, the Ambassador car, once the Indian markets opened further confirmed these apprehensions.² Indian businesses had to learn to benchmark themselves not only against domestic players but against industry leaders from around the world; and one day, if necessary, go as far as to acquire their international competitors.³ For the Tata group this meant reassembling an unwieldy collection of companies, some of which had competed against one another in specific segments, into a cohesive business entity with enough muscle to make its way into international markets.

The goal Ratan Tata was pursuing was far greater than creating shareholder value: it was to give India a solid base of homegrown industries. In turn, these industries would provide strong, locally branded products to the entire spectrum of India's population, across geographic, social, and economic brackets. During the 21 years of his chairmanship at Tata Sons (1991–2012), the group expanded from a medium-sized domestic focused company to a $100 billion global business, dozens of times larger in size than in 1991. Tata group became India's biggest diversified industrial group by revenue and global in terms of scale. Today, 65 percent of the company's sales come from 90 percent of its overseas markets.

“I think our contribution to the nation was in building a foundation for basic industry, creating a foundation for technology, and setting some benchmarks in corporate governance and ethical business conduct,” observed Ratan Tata.⁴ This illustrates his commitment to driving social good, specifically accountability, adhering to moral and ethical principles, as well as encouraging openness and transparency. His willingness to pioneer and drive these standards in Indian business is a testament to his tenacity in safeguarding the future by encouraging strong, forward-looking policies and standards.

“What I have done is establish growth mechanisms, play down individuals and play up the team that has made the companies what they are,” summarized Tata.⁵ He ensured rewards were distributed in a way that corresponded to contribution, rather than hierarchical power, promoting equity as a key principle. This in turn promoted the intrinsic motivation of individual employees to take ownership of Tata company objectives. Today, up-and-coming managers at Tata companies continue to be described as “true-blue Tata representatives – focused, down-to-earth and unassuming, with a deep sense of social responsibility.”⁶

Ratan Tata applied high standards inside and outside the company. He was insistent that, just as companies needed to reach the highest global standards so did the Indian government. This led him to consistently reject collusion and corruption – activities often regarded as necessary in emerging markets.

He also attributed much of Tata Sons' successes to the spirit of the company's workforce, pointing out that the organization as a whole would always rise to the challenge rather than resist it.⁷ To promote responsible values and provide mentoring to managers, he set up structures such as the Group Corporate Office, the members of which are recruited from senior executives from the boards of Tata companies. Their role is to act as “stewards,” sharing guidance and a sense of perspective.⁸

Similarly, more than two years before Mr. Tata stepped down as chairman (on his 75th birthday in December 2012), a five-member selection committee was set up to nominate his successor. When the committee eventually put forward the name of Mr Cyrus Mistry, the departing chairman praised the move as a “good and far-sighted choice.”⁹ Given that more than 100 Tata companies in which the group holds mainly minority stakes are run by professional managers and independent boards, it is this understated moral guidance and a resolutely long-term view that define the group chairman's power.¹⁰ By taking such a forward-looking and rational approach to his succession planning, Ratan Tata demonstrated prudence – effectively planning for the long term – as well as care, protecting the interests of the company in the future through continuity of leadership.

This is a notoriously difficult topic for most business leaders to discuss, and it showed Mr. Tata's commitment to the good of the collective, rather than his individual needs.

Ratan Tata is emblematic of how impactful stewardship can be in an emerging market context. His actions helped to provide a powerful footing for India – navigating the many institutional gaps that existed. His pragmatic and meritocratic business practices allowed talent to flourish, promoting significant business results for the group of companies. His concern for securing the continued success of the companies over time never wavered, as demonstrated by his role in structuring company ownership in the Tata Trusts.

Mærsk: Ownership Continuity in a Family Foundation

In 1904, A.P. Møller founded a shipping company with his father – which subsequently became Mærsk. Over the course of the next half-century, Møller grew the business, adding containers and oils to the portfolio to accelerate the company's growth. Mærsk Group is now a global conglomerate in trade, shipping, and energy. How Mærsk has flourished and ensured succession across three generations is an enlightening story.

Møller had a strong long-term focus, which he reinforced through the ownership structure of Mærsk. Three charitable foundations control the majority of shares in the Mærsk Group. This shareholding structure has been key in enabling the group to make long-term investments. While the parent company, A.P. Møller-Mærsk, is listed on the Danish Stock Exchange, the company's main shareholder is the A.P. Møller and Chastine Mc-Kinney Møller Foundation, which A.P. Møller set up in 1953 to ensure that “his life's work would always be owned by parties that held a long-term view of the company's development in the spirit of the founder and according to his principles.”¹¹ A number of industry observers have commented on how Mærsk has never been enslaved by the obligation to deliver results for quarterly reports but rather guided by a long-time perspectiv...

Table of contents

• Cover
• Title page
• Copyright
• Acknowledgments
• About the Authors
• Introduction
• PART I WHY STEWARDSHIP?
• PART II WHAT DRIVES STEWARDSHIP?
• PART III STEWARDSHIP IN ACTION
• PART IV LOOKING FORWARD
• Appendix A: The Research
• References
• Index
• EULA