ivan f rodriguez organizational evaluation
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Running head: ORGANIZATIONAL EVALUATION 1
Organizational Evaluation
Ivan F Rodriguez
University of Phoenix
ORGANIZATIONAL EVALUATION 2
Organizational Evaluation
There is only one global institution, business, motivated by capitalism and fueled by
profit that can mount a frontal attack to the challenges modern world is facing. Business
alone has the know-how, the skills, and the drive to rise to the defy. Business must enlarge
its horizons, moving beyond its tunnel vision of shareholder value to the target tableau of
stakeholder value, embracing customers, employees, suppliers, and investors, ant on to the
panorama of the ultimate purpose of business, societal value, the “bettermen of mankind,
with profit at the end of the rainbow” (Bhote, 2003, p. 4). The movement to involve business
in tackling socials ills while earning the right to a profit, improving education, food, health,
social infrastructure, and helping the dispossessed to start their own business has started.
Tata represents an extraordinary example of how vision combined with leadership
can create an organization to deliver outstanding results consistently. Tata introduced a new
set of standards to create value, and define an unprecedented framework to support one of
the largest and more diversified industrial conglomerates in the world (course of action to
become a business that improves the world. Tata’s leadership development across levels is
the focus of its employee policies, along with people development and growth. Business
environment is changing swiftly, bringing in its own set of opportunities and challenges; at
the same time, the group is rapidly evolving and expanding its reach strategically,
geographically, and culturally. The new geographies and the shifting environments of the
businesses demand Tata to prepare its leaders (current and future) to resolve successfully
such adversities.
The effectiveness of Tata’s organization design (including its modifications in
structure) is performed in a sequence of three assessments. The company is measured in six
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areas (dynamic innovation, fiscal volatility, disruptive workforces, employment, and
economizing of talent, supply disruptions, and rapid growth, and unethical leadership
performance) in three times (1925, 1975, and 2012). Figures 1, 2, and 3 show the results of
this assessment, the area of the polygon is directly proportional to the company readiness,
and maturity, the bigger it is, the more mature. Although this is a subjective evaluation, the
intention is to visualize how Tata’s organizational design evolved to respond to the needs of
its markets.
Tata Evolution
Tata comprises operating companies in seven business sectors: Materials,
Engineering, Information Technology and Communications, Energy, Services, Consumer
Products, and Chemicals. Tata was founded in the last quarter of the 19th century in
India when the country had set out on the road to gaining independence from British
rule. The founders aligned business opportunities with nation building. This approach
remains ingrained into Tata’s ethos today as it spreads its operations to other geographies.
Tata is today India’s largest conglomerate with revenues of $14,714 billion dollars per year –
representing 2.8% of India’s GDP (Kumar, 2013), employing more than 172,000 people in
80 countries, and exporting products, and services to more than 85 countries (Bhat, 2013).
Tata shares a set of five core values derived from Tata’s early beliefs that continue driving
Tata’s business decisions. These values are (1) Integrity, (2) Understanding, (3) Excellence,
(4) Unity, and (5) Responsibility. Tata has been distinctive in their adherence to business
ethics and their commitment to corporate social responsibility. This legacy has earned the
trust of Tata’s stakeholders in a measure few business houses can match.
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Tata’s organizational structure is decentralized. Their seven business units are led by
a Chief Executive Officer (CEO) who has typically less than five layers organizational
structure. Decisions are made by employees closest to the situation (gemba). The level of
initiative (and proactiveness) expected from each employee is high, and this is a key
performance indicator (KPI) and employees are consciously motivated to exercise initiative.
Tata’s decentralized structure enables more flexible response to rapid environmental
changes. This has been probably one of the most relevant success factors that has allowed
Tata advancing successfully in a hypercompetitive global market, capitalizing in each
business sector, high dividends, and brand positioning. Tata’s organizational structure
permits to fix better accountability, moving fixed cost to variable. Despite the higher risk
(vs. centralized organizations), Tata’s bad decision-making has not deteriorate or reduce the
speed of Tata’s growth value. The cross unit coordination is mandatory across the company
and at stake for favoritism.
Tata’s business growth has posed a challenge, of a kind never experienced by this
company in the past, resulting in a 45% increase in demand for leadership positions
compared to Fiscal Year 2010. Further, 17% of Tata’s senior leaders are retiring in the next
three years, allowing the next level of the organization to occupy strategic positions. Tata
growth from inside, less than 10% of their executives are from the outside (Kuman, 2013).
This has compounded the challenge of meeting the increased demand in an already
constrained supply situation. The executive committee, headed by the managing director,
owns the development and succession plans for the top positions and reviews availability of
talent across functions during talent reviews and succession planning meetings. Tata’s
organizational design specify the set of organizational tasks, divide these tasks into jobs,
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departments, subsidiaries, and divisions to get the work done, and assign authority
relationships to get the work complete in the required time and with required specifications.
Evaluation of Tata’s organizational behavior
Operating across borders and time zones, and integrating diverse management teams
and corporate governance practices do not seem to have modified the Tata imprinting. Of
particular interest is that Tata has not embraced blindly ready-made recipes to resolve the
challenges of multinational management, preferring instead organizational solutions aimed at
fostering mutual recognition and knowledge exchange within the multinational
conglomerate. Another Tata advantage is being run by a very successful minority, the Parsis,
without stirring anger amid the majority of the population, as is tragically common in other
countries (Chua, 2002). This gentle approach may distinguish Tata from counterparts that
produce much noise in their expansion.
Tata’s organization theory follows a global organization theory type, knowledge-
based theory. Tata’s knowledge management research is consistent and cohesive with its
performance and vision. Tata’s knowledge transfer and sharing are becoming increasingly
important to explain dynamic flows of knowledge that enable workflow processes (and
hence organizational performance). According to Nonaka (2004), the knowledge-based
organizational performance model takes into consideration the practical aspects of
knowledge transfer among temporal members, and it has implications on future methods of
transferring knowledge. A good example of the effectiveness of this approach is represented
by the extension of transactive memory theory Tata has included to access members who are
not present in the current team and that can help improve how they manage and train their
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knowledge resources. Tata’s knowledge generation and transfer is critical for its continued
success.
Effectiveness of Tata’s organizational structure and design
Tata’s strategy is created to deliver outstanding results. Critical to Tata’s success
include 10 areas: (1) Customer loyalty and long-term retention, (2) Leadership (i.e.,
providing vision, and inspiration, which facilitates employees reaching their full potential,
(3) Organization (i.e. revolutionizing the ways people are hired, trained, evaluated,
compensated, and promoted), (4) Employees (i.e., empowering them on the road to industrial
democracy), (5) Supplier partnership (i.e., improving customer quality, cost and cycle time,
while enhancing supplier’s profits), (6) Powerful new tools (i.e., for achieving quality, cost,
and cycle time breakthroughs), (7) Design (e.g., maximizing customer value and their
“wow” reactions), (8) Manufacturing (i.e., transforming a sunset of obsolescence into a sun-
rise enlightenment), (9) Support services (i.e., converting a black hole of little accountability
in the business white-collar world to service with maximum productivity), (10) Quality of
results (i.e., achieving order of magnitude improvements).
Tata’s organizational design effectiveness can be measured by its ability to adapt and
proactively respond to the ever-changing market. Tata’ has advanced successfully to the
different phases of globalization. Their values remain intact regardless the countries where
Tata does business. Advancing one step farther, Tata’s hard metrics (e.g., On time delivery
(OTD), Defective parts per million (DPPM), Gross Profit Margin (GPM), OSHA Index
(OSH), Operational Profit Before Interest and Taxes (OPBIT), Inventory Turns (IT),
Financial Ratios (FR)), average approximately 2.5 times better than Tata’s competitors’
performance (Bothe, 2003). Despite the level of subjectivism on measuring some of the key
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soft metrics, Tata’ is also delivering above-average results. Metrics such as Employees Turn
Over (ETO), Employees Seniority (ES), Number of Training Hours per Year (THY),
Employee Multi-skill Ratio (EMR), etc. represent some of the metrics used by Tata to
monitor the effectiveness of its strategies and culture’ deployment (see Appendix A).
Anticipated effect of changes on organizational leadership and strategies
Because the opening of the Indian economy in 1991, Tata has been subject to global
competition, making it imperative for the group to become competitive in India against the
new entrants. To gain scale, reduce their exposure to the cyclicality of India’s economy,
survive, and achieve a sustainable competitive position in industries globalizing, most Tata
companies looked overseas. Tata’s recent experience is an excellent case for analyzing
‘accelerated internationalization’ (Locke, 2003). As it pertains to a challenger conglomerate
from formerly peripheral areas that goes international to access resources, Tata has been
driven by multiple factors, including the need to access new markets (e.g., in BPO services),
the opportunity to integrate the value chain (e.g., in steel), and the quest for brand control
(e.g., in tea). This strategy proved feasible because Tata possesses strong leadership
combined with vision; can exploit the possibility of leveraging increasingly developed
financial markets in India, a large domestic market, and global liquidity, and reacted fast to
the opening of specific opportunities at given times.
Conclusion
The core values of an organization begin with its leadership, which will evolve to a
leadership style. Subordinates will be led by these values and the behavior of leaders, such
that the behavior of both parties should become increasingly in line. When strong unified
behavior, values, and beliefs have been developed, a strong organizational culture emerges.
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Leaders have to appreciate their function in maintaining an organization’s culture. This
would in return ensure consistent behavior between members of the organization, reducing
conflicts, and creating a healthy working environment for employees (Kane-Urrabazo,
2006). Tata’s organization design has allowed this company adapting, and responding
efficiently to its market’ demands. Tata is a global brand, with a decentralized management
who soon realized that growing from inside, developing their own talent, financing with their
own capital sources, and deploying one of the most admirable innovative capacity, has
created a successful and inspiring industrial conglomerate. They have overcome the
challenge of creating expensive distribution networks, management preferred to leverage
distribution centers by a partner, a joint venture, or an alliance. It became clear that the most
effective option was growth through the inorganic route.
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References
Bhat, H. (2013). Tata Annual Report. Tata Annual Report, 1, 1-109
Bhote, K. R., (2003). The power of ultimate six sigma. New York: Amacom.
Chua, A. (2002). World on fire: How exporting free market democracy breeds ethnic hatred
and global instability. New York: Doubleday.
Nonaka, I. (1994). A dynamic theory of organizational knowledge creation. Organization
Science, 5 (1): 14-37.
Kumar, N. (2013). Emerging TNCs: trends, patterns and determinants of outward FDI by
Indian enterprises. Transnational Corporations, 16(1), 1-26.
Tripathi, D., & Jumani, J. (2007). The concise Oxford history of Indian business. Oxford: UP
Press .
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Figure 1 Tata Organizational Evaluation 1925
Note: Self-assessment performed by I. Rodriguez using Tata’s public reports. Maturity Ratio
38.9%.
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Figure 2 Tata Organizational Evaluation 1975
Note: Self-assessment performed by I. Rodriguez using Tata’s public reports. Maturity Ratio
58.3%.
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Figure 3 Tata Organizational Evaluation 2012
Note: Self-assessment performed by I. Rodriguez using Tata’s public reports. Maturity Ratio
80.6%.
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Appendix A Tata Group Parametric Overview
Business
Sector
Year of
establishmen
t
Core Activities Annual
Revenuesa
Number of
Employeesb
Steel 1907 Among the top ten global steel
enterprises (Bath, 2013), with a
crude steel capacity of more than
28 million tons per annum. It is
one of the world’s most
geographically diversified steel
producers, with operations in 26
countries and a commercial
presence in 50 countries.
1,329 81,000
Motors 1921 Tata is the world’s fourth-largest
bus and truck manufacturer and
India’s largest automobile
company (Bhat, 2013). It has
manufacturing sites in Europe,
Africa and Asia.
1,657 55,000
Jaguar
Land Rover
1922 Jaguar Land Rover is a business
built around two iconic British
car brands. Jaguar Cars, is one
of the world’s premier
2,170 16,000
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Business
Sector
Year of
establishmen
t
Core Activities Annual
Revenuesa
Number of
Employeesb
manufacturers of luxury saloons
and sports cars (Bhat, 2013).
Chemicals 1947 Tata Chemicals is the second-
largest producer of soda ash in
the world (Bhat, 2013). It is
India’s market leader in the
branded and iodized salt
segment as well as urea and
phosphate fertilizers. The
company’s plants are located in
India, the United
States, the United Kingdom and
Kenya.
2,352 5,000
Titan 1946 Titan is the fifth-largest watch
manufacturer in the world and
the largest jewellery retailer
in India, with a product portfolio
that includes watches and
accessories, eye wear, jewellery,
and precision engineering
1,528 6,800
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Business
Sector
Year of
establishmen
t
Core Activities Annual
Revenuesa
Number of
Employeesb
products.
Global
Beverages
1957 Tata Global Beverages is a
global beverages company
headquartered in Mumbai. It
owns popular brands such as
Tata Tea, Tetley, Good
Earth, Tata Coffee and
Himalayan mineral water. Tata
Has alliances with PepsiCo and
Starbucks.
1,109 3,000
Power 1912 Tata Power is an integrated,
independent power producer,
with a presence in power
generation, trading, mining,
transmission and distribution.
Headquartered in Mumbai, with
plants in India and a presence in
Indonesia, South Africa, Bhutan
and Singapore (Bhat, 2013).
4,368 4,300
Rallis 1951 Rallis India is the country’s 201 900
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Business
Sector
Year of
establishmen
t
Core Activities Annual
Revenuesa
Number of
Employeesb
leading agri-input company,
with pan-India operations, four
factories and a research centre.
Its portfolio has pesticides,
herbicides and insecticides,
along with seeds, plant-growth
nutrients and organic compost,
as well as a range of agri-
services (Bhat, 2013).
Total 14,714 172,000
Note: aRevenues during fiscal year 2011/2012 in billion United States Dollars. bEmployee’s
number is estimated at the end of fiscal year 2011/2012.
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Appendix B Tata Diversification Pattern
Industry Indian
Operations
Foreign
Operations
Tata Stake
1992 2007
Textiles 1874-2001
Hospitality 1902 1982 41 28.28
Steel 1907 2005 8 30.52a
Power 1910 16
Cement 1912-1990 n.a.
Soaps and toiletries 1917-1983b
Insurance 1919-1956c 1920
Printing and
publishing
1931-2003
Aviation 1932-1953 2005 30 31.6
Chemicals 1939
Consumer
electronics
1940 22 27.61d
Cosmetics 1952-1998
Air-conditioning 1954 2000 30 32.34e
Pharmaceuticals 1958-1998 2005 81.65
Tea and coffee 1962
Locomotives 1970 47.11
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Watches 1984
Financial services 1984
Management
consulting
1991 2005
Auto components 1993 2004 n.a.
Telecom services 1994 n.a. 50.11
Motor vehicles 1998 n.a. 33.43
Retail (general) 1999 n.a.
Car components 2005 n.a. 100 g
Retail (electronics) 2006 n.a. 100
Fresh produce 2007 n.a. 50 h
Real state 2007 n.a.
Note: a Including Tata Sons (24.08) and Tata Motors (4.45). b Tata Cement was sold
to Lafarge in 1999.c Sold to Hindustan Lever. d Nationalized. e Acquisition of Volkart
Brothers (a Swiss trading firm operating in Bombay since 1851). f Including Tata
Sons Ltd. (23.79) and Tata Investment Corporation (2.87). g Including Tata Sons
(19.10), Tata Chemicals (7.31), and Tata Investment Corporation (4.88). h Croma is
owned by Infiniti Retail, a 100% subsidiary of Tata Sons, while Woolworths of
Australia provides technical and sourcing support (Tata Annual Report, 2013).
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