Tea with Tata, India's multi-billion dollar social business
Colossal turnovers, philanthropic shareholders, and custodians of social value are all part of business as usual for the Tata group. Isabelle de Grave met Subramanian Ramadorai, vice-chair of one of the world's largest IT providers, Tata Consultancy Services, for tea, cake and talk of billion dollar social ventures at the Skoll World Forum for social entrepreneurship.
The Tata group, India's largest company, is an intriguing business operation. 143 years old and mammoth, it was founded in 1868 by Jamsetji Tata as a trading company, and now has over 100 companies in more than 80 countries. It's both an advocate for social responsibility and a streamlined money-maker in the corporate world. In 2012-2013 the total revenue of Tata companies, taken together, was $96.79 billion. It's social impact, less easier to quantify, ranges from disaster relief and health to education and housing.
Subramanian Ramadorai, vice-chairman of Tata Consultancy Services (TCS), India's largest IT provider, has no qualms about the Tata group being described as a corporate giant. "True," he interjects squarely in a conversation about where social purpose fits into the wider business activities of the Tata group. There is no sudden attempt to qualify the description with shades of social purpose. Something you might expect in an age where media opportunities often mean corporate CEOs put on their shiniest social business shoes.
This is even more surprising given the social business setting – the central marquee at the Skoll World Forum for social entrepreneurship. The room is filled with the sound of chinking coffee cups, casual elevator pitches and informal propositions – a sort of unofficial incubator for future partnerships and new business directions. On the last day of the forum, the hubbub of social entrepreneurs, corporate executives and NGO professionals exhanging ideas and business cards shows no signs of abating.
Amid the chinking and chuckling, Ramodorai is candid about the Tata approach to business, and told a story, over tea and cake, of a young post-grad who had nearly left India behind to get himself into a well paid job in the US.
"In 1972 I had no reason to leave the US, I had studied a Masters and I had a nice job after my post-graduate degree," he says. "But I still went back." If Tata was going to win over a generation of well-educated young professionals that were leaving the country in droves to find work in the West, it had to offer something different.
"They wanted you to come back, but not for the money – you're well off in the US why would you go back for money?" Instead an invitation to work at Tata was an offer to work for a sort of social conglomerate, focused on supporting India in the climb out of poverty.
The idea was, "What comes from the people goes back to the people multiple times; you don't just make money and forget about it – that was the fundmental reasons we joined the group," Ramadorai says. He points towards the founding philosophy of Jamsetji N. Tata who founded the Tata Group in 1868:
In a free enterprise, the community is not just another stakeholder in business, but is in fact the very purpose of its existence. –– Jamsetji N. Tata
And these words are not taken lightly within the group, Ramadorai explains."The original founder's value system is always reinforcing our actions, it's not just about standing up on a stage talking about it and going away to do our own thing."
S. Ramadorai, TCS vice chairman at World Economic Forum
A captivating story so far. But how does the founder's ethos filter down to company level? Ramadorai points to three aspects of Tata's overarching management strategy and ownership structure that drive its social mission:
Strong company values have bred a unique culture within the group. "The CEOs are all grown over the years within the company or they have been chosen for accepting and understanding its values beyond anything else. The last thing that comes to our mind is, 'Let's cut back on the social and think of this as unnecessary expense'," he says.
Custodians of social value sit on the board. "There is always a representative from the Tata sons on the board – they are the custodians of the core values," Ramadorai says.
The Tata Trusts. The Tata founders bequeathed most of their personal wealth to the Tata Trusts, which own 66% of the equity of Tata Sons, the holding Tata company. This ownership structure means that 66% of the profits of the Tata Group go towards social ventures, social investments and charitable goals.
Contributing to the unique company culture there is also a heathy spot of social impact competition and collaboration between companies within the group. Tata uses its Index for Sustainable Human Development to direct, measure and enhance the community work of all Tata companies. Annual reports show which companies are achieving the highest social impact. The Index was developed by the United Nations Development Programme and Tata Council for Community Initiatives (TCCI), a initiative that works across Tata companies to drive community engagement and improvement programmes.
Ramadorai grew Tata Consultancy Services from a company with a $400 million turnover and 6,000 employees to one of the world's largest software and services companies with more than 200,000 employees working in 42 countries and a turnover of over $6 billion. And he is currently advisor to the Indian prime minister on the national council of skills development.
But one of the acheivements he speaks most passionately about is a recent collaboration between Tata chemicals and TCS to build a low-cost water purifier, Tata Swach, that can be manufactured using locally available resources. TCS deployed thousands of these filters in the Indian Ocean Tsunami disaster of 2004 as part of its relief activities.
"We encourage using the core competency of a company for a social cause," says Ramadorai. “Technology is not only used to solve customer problems, it’s used to tackle issues like adult literacy; for example, we developed a platform that can teach an illiterate adult to read and write in 40 hours.”
Tata is an exemplary practitioner of the concept of 'shared value' – "A management strategy focused on companies creating measurable business value by identifying and addressing social problems that intersect with their business," as defined by the Shared Value Initiative.
It has been practising shared value for centuries, proud and comfortable with its mix of enormous profit and social gain, quietly arguing that you can be a corporate giant with a social mission.
But which comes first – the social goal or the profit motive? Are social goals and community stakeholders part of a strategic objective in a broader attempt to grow and reward shareholders.
"The way we look at problems is very different from simply saying, 'Let's first generate wealth and then we'll see.' Wealth is needed: if I don't make profits I'd have to come and beg you for money." So business as usual, until you have the money to invest considerably in a social cause. With this as the end goal, all business activities are "rooted in a passion for accelerating the community," he says.
The key difference in Tata's approach to social responsibility is that it's "an institutionalised mechanism," says Ramadorai. "It's not something that's been planted from outside."
Photo credit: Scott Feldstein