Tata Motors: A critical evaluation and audit

This report aims to critically analyse the organizational structure, structure, corporate strategy, styles of management and leadership in the Tata Motors Ltd. India. The research has adopted qualitative analysis of various organizational reports and documents available online. The outlining of organizational behaviour is followed by associating concepts and theories with the existing practices in Tata Motors Ltd. which finally concludes with drawing a picture of OB which help us to understand those concepts in organizational settings.

We aim to critically analyse the association of elements of modern organizational behaviour firstly by providing brief overviews to important aspects and secondly by relating the theoretical concepts with the practical aspects of TATA Motors Ltd, an automotive company established in India. We have chosen Tata Motors Ltd because it has an excellent blending of innovation and values as it says in its brand caption- “Leadership with Trust”. It is an organization worth analyzing and studying the organizational behaviour as it is performing beyond expectations and is also doing well in its international expansion initiatives.

Introduction

Overview of Organizational Behaviour

Organizational behaviour investigates the impact of individuals, groups and organizational structure on the behaviour and culture within an organization. OB aims to improve the effectiveness with which an organization works (Ashraf, T). People in an organization are complex and multidimensional. They possess the desire to satisfy their needs and they need to associate themselves with other people for learning and growing (Lawrence, 1998).

Organizational structure is a strong determinant in shaping an organization’s behaviour and decision regarding structure has major influence on an organization’s strategy (Galbraith, 1973). To be effective, any organization structure must create a balance between differentiation and integration and to respond quickly to the economic conditions, it should integrate across differentiated departments (Lawrence and Lorsch, 1967). According to Schein, 1990 organizational culture is the assumptions and beliefs of organization and the behaviour that the leaders acquire for the purpose of decision making and problem solving. Schneider, 1994 argues that organizational culture is strengthened with the manager acquiring the people with similar culture to those who are already a part of it.

It is essential that the organization chooses their leaders and leadership style with great care as it has direct impact on the workforce attitude and motivation levels. According to Yukel, 1998 a leader must be able to involve people in the organization, motivate them towards achieving organizational goals and objectives. The choice of leadership is influenced by the organizational culture. For example, in an organization where the tasks are not very well defined and people are not enough dedicated, the leadership style will naturally be one which reflects a controlling power. Similarly leadership style is also affected by the organizational structure. It can be top-down in case of functional structure or collaborative in case of matrix structure (Beer, M).

Organizational Behaviour

Beer, M (Harvard University)

In the current era of globalization, OB needs to deal with various issues and challenges that may arise. For example, transfer of production manager of a manufacturing firm which is setting up a new subsidiary in a foreign country. The manager is now in a new organizational and cultural setting where workforce may exhibit very different needs, attitudes and behaviours from the home country workforce. This issue is especially relevant to MNCs such as TATA Motors.

Company Background

TATA Motors Limited was established in 1945. It is India’s largest automobile company. Its portfolio consists of two main business units- Passenger Car Business Unit (PCBU) and Commercial Vehicles Business Unit (CVBU). TATA Motors Ltd is gradually improving its global presence by acquiring businesses abroad. It is the second largest bus manufacturer and fourth largest truck manufacturer in the world. Tata Motors entered in the Indian passenger vehicle business as late as 1991 and within two decades, it is the India’s third largest passenger vehicle player. The 2009-2010 consolidated revenues stood at US$ 20 billion (TATA Motors Annual Report 2009-2010). (Appendix 1). It has 14,000 engineers and scientists at 6 research and development centres in India, Spain, South Korea and United Kingdom (Tata Motors, 2010).

Tata Motors in 1998 launched India’s first indigenously designed car named “Tata Indica”. In September 2004, Tata Motors Ltd became the first Indian Engineering Sector Company to be listed on the New York Stock Exchange (NYSE). Since 2005, it is in a strategic alliance with Fiat. In 2008, Tata Motors revealed the intent behind world’s cheapest car “Nano” and launched it in 2009. Prior in 2008 it acquired two prestigious British car brands – “Jaguar” and “Land Rover (TATA Group Brochure, March 2010).

Tata Motors’ manufacturing plants in India are established at the following locations:

East- Jamshedpur

West- Pune and Sanand

North- Lucknow and Pantnagar

South- Dharwad

Tata Motors and Fiat have their common manufacturing plant at Ranjangaon, Pune. Besides, Tata Motors’ also has international manufacturing plants in UK, South Korea, Thailand and Spain (TATA Group Brochure, March 2010).

TATA Motors follows the reporting procedure and flow as shown in Appendix 2. The company has constituted a set of specific committees to manage the operations at a diverse level. The Board of Directors empowers these committees which helps them to set targets for the management.

Subsidiaries Companies

Tata Motor (www.tatamotors.com)

Jaguar Land Rover (JLR) (www.jaguar.com) (www.landrover.com)

Telco Construction Equipment Company Ltd (Telcon) (www.telcon.co.in)

Tata Motors (Thailand) (www.tatamotors.co.th)

TAL Manufacturing Solutions Ltd (www.tal.co.in)

Tata Technologies Ltd (TTL) (www.tatatechnologies.com)

Tata Cummins Ltd (TCL) (www.tatacummins.com)

TML Distribution Co

Tata Marcopolo Motors

Tata Daewoo Commercial Vehicle Co Ltd (www.daewootruck.co.kr)

Tata Motors European Technical Centre (TMEC)

Tata Autocomp Systems Ltd (www.tacogroup.com)

HV Transmissions Ltd (HVTL and HV Axles (HVAL) (www.tatamotors.com)

Tata Motors Finance Ltd (www.tatamotorfinance.com)

Hispano Carrocera S.A. (www.hispano-net.com)

Concorde Motors (India) Ltd (www.concordemotors.com)

Source: (TATA Group Brochure, March 2010).

TATA Motors Ltd manufactures a variety of vehicles under the categories of commercial, utility and passenger vehicles. The complete product profile is attached in Appendix 3.

Research Methodology

Data Collection

The data for this study will be gathered from the organization’s annual reports, official public documents, company website and subsidiary companies’ websites. This research is mainly based on collecting and analysing the secondary data from published online sources. The data collected is mainly of qualitative nature and reflects the organization’s various attributes related to the organization behaviour. Basically it is a form of desk research.

Issues and Challenges

The research is conducted keeping in mind the considerations wherein only publicly available information has been included in the writing of report. Due to absence of any personal contacts, we have majorly focused on the information available to us through online sources such as annual reports, market reports, previous researches, company brochures, websites, etc. It was particularly challenging to determine the exact type of culture and management style the organization follows. This may be due to the changing business environment and the extreme level of innovations in the practices.

Analysis

The analysis of the above mentioned information contained in documents and models has been analysed using the concepts in module. We have made sure we bridge the theoretical concepts learned in the module and the research purpose of analysing the various components of organizational behaviour. We did not require performing any quantitative methods of analysis for this report while focusing on implementing classroom learning in analyzing Tata Motors organizational behaviour.

Organization strategy

Strategic intent

According to Sutherland & Canwell (2004), “strategic intent” is the intention of an organization to synchronize and propel the management and workforce towards achieving the required goals and objectives. If we closely look at the way Tata Motors has been expanding in international market, it is clear that the intent is acquisition and mergers of similar businesses globally. Latest examples are the acquisition of two British car brands Jaguar and Land Rover and strategic collaboration with Cummins to form Tata Communications Ltd (TCL) (Cool Avenues, 2010). According to Stacy (1993), strategic intent is to intentionally share an intension with the members of management and workforce to achieve a desired position by adopting a particular strategy. In addition to this, Tata’s strategic intent is to acquire new sources of resources and capabilities to achieve its goals and objectives (Robson, 1997 and Thompson, 2001).

Resource and strategic capabilities

Recently in the context of acquisition of Daimler Chrysler by Tata Motors, Mr Ratan Tata believes that he can improve the business and increase the revenues faster than General Motors. According to Richter (2007), there is possibility of only two out of the three to survive in the playground. If we look at the core values of Tata Motors, we find that they are committed to deliver quality in life of customers and they have demonstrated through the successful launch of Tata Nano that their core strategic capability rests in scale of operations resulting in cost efficiency. Also according to Brockbank (2002), Tata’s leadership development will reflect its attention towards enriching value addition in its human resource strategies.

Tata’s current strategies

Tata’s current focus is on leveraging its capabilities in the automobile sector and expanding its market and distribution network with a focus on understanding the preferences of local consumers and developing in-house engineering capabilities.

Since the automobile industry is significantly affected by cyclicality. To reduce its impact, Tata Motors is continuously expanding its operations in different varied segments by manufacturing wide range of products across distant geographies.

Tata Motors is expanding internationally on the concept of two-fold strategy. Firstly it is expanding across geographies through strategic acquisitions. Latest examples are acquisition of Jaguar Land Rover (JLR) and Daewoo Motors Ltd. Secondly it is expanding its current product range into chosen countries, such as expansion of its Indica brand of cars in UK.

Tata Motor’s scale of operations is extremely huge and varied. This provides it with an opportunity to cut costs and sustain its cost based competitive advantage. In case of Jaguar Land Rover (JLR), Tata has followed special breakeven strategy where it has concentrated on the factors such as material cost and manufacturing, warranties, selling and administrative expenses, product development expenditure and human resource management. The strategies are detailed in Appendix 4.

The focus on quality management and customer satisfaction remains high on the priority list of Tata Motors. We have established a procedure for ensuring quality control of outsourced components. They have a program for vendor assistance through which the quality of raw materials and components is maintained. The preference is given to the suppliers and vendors with TS 16949 certification. For Jaguar Land Rover (JLR) business, vendors are required to be certified with TS 16949 and ISO14001 standards.

According to the JD Power Consumer Satisfaction Index 2009, Tata Motors showed the best performance by moving up from 11th rank in 2008 to 5th rank in 2009. The new Jaguar XF1 launched in 2008 has won several awards such as the ‘Best Executive Car’ award by JD power UK survey, ‘Best Executive Car’ award for the third consecutive year by the Diesel Car and the What Car? Magazines, Editor’s Choice Award as Best Luxury Vehicle for 2010 by World of Wheels Magazine in Canada. A complete list of awards won by Tata Motors has been attached in the Appendix 5.

Source: Tata Motors Annual Report 2009-2010

Organizational Structure

“Organizational structure is perhaps the least understood and most under-appreciated topic in business.” James Schermerhorn, Jr., Professor, Ohio University

For an organization to successfully allocate and direct its resources (physical and human) towards achieving the organizational objectives, it is essential that it designs the structure which fits with its organizational strategy. Designing the right organizational design involves division of tasks and responsibilities into specific jobs, assigning jobs and employees to various departments and delegating the authority and responsibility (Dewar & Simet, 1981).

Important elements of an organizational structure are job designing, job redesigning and job specialization. It is critical factor that determines the success of both organization and its employees (Fontaine, 2007). The fundamental reason behind designing an appropriate organizational structure is effective and efficient utilization of resources. It may encompass organization of various jobs into different departments, creating the reporting procedure and flow of information chain, division of business units under functional and divisional heads. As argued by Mische (2001), in the context of a business environment that is extremely dynamic and is impacted significantly by technological changes, the need to adapt becomes inevitable; organizations such as TATA Motors need to be flexible in their business operations and the processes followed.

Nohria et al (2003) in the July 2003 Harvard Business Review found the following organization structure to be most productive and effective:

Which does away with bureaucratic elements

Which makes it easier to work in the business environment

Which enhances the level of collaboration between teams and departments

Which allocates the right type of resources in the right places

The Organizational Structure of Tata Motors

Overview

The organizational structure of Tata Motors follows the matrix form which incorporates the elements of functional and divisional organizational structures. It is a global automotive giant operating in various automobile sectors across distant geographies; hence there is a need to integrate its divisions along the various functional units of its business. If we look at the organizational structure of Tata Motors, we will find that the functional units are divided into the categories of Finance, Strategy, Engineering, Communications, Human Resources and Legal. These functional departments construct the strategic framework on which Tata Motor’s different business sectors are based; such as India Operations, Commercial Vehicle Business Unit and Passenger Car Business Unit (Appendix 6). Tata Motors consists of flexible, adaptive and multi-tasking individuals who can work in different situations in different roles.

According to Chen & Huang (2007), the organizational design impacts and is impacted by the type of interactions, information exchange and knowledge management. Tata Motors encourages relationships at both formal and informal levels through designing flat organizational structures at different divisional units.

Considering the span of control a flat organizational structure benefits Tata Motors because it has some very experienced team of leaders who can provide a strategic direction to the management working under their supervision (See Appendix 7 for key players in Tata Motors Ltd). The organization is focused towards achieving the goals and visions set by Mr. Ratan Tata, thus there is a visible need for autonomy which is well supported by a flatter structure. Lesser levels in the organization structure provide a better platform for innovation and customization of products.

Linking Organizational Culture with Organizational Strategy

An indistinguishable feature of organizational structure is the flow of information; the employees follow a formalized pattern of reporting. Tata Motors follows a code of conduct that helps in deciding on and assigning responsibilities to promote group working. One of the biggest benefit of such a structure is the accessibility of top management to the middle and lower management level employees. This is extremely critical in building a culture that is positive and productive. Tata Motors Ltd links all its functional departments through Enterprise Resource Planning (ERP). It promotes easy sharing of important information between its different departments. The various divisions and departments are interconnected through intranet; thus promoting instant information sharing among the employees and management. This is especially helpful in keeping the organization’s human resources connected at every level.

The current focus of Tata Motors is on revolutionizing the car business. This means the strategic focus in on innovating and developing the domestic and international market. The two recent examples supporting the rationale are the launch of Tata’s world’s cheapest car- NANO and acquisition of Jaguar and Land Rover brands (JLR). During the phase of Nano development and launch the whole organization took it as their personal achievement. All these factors are strengthening the organization’s culture along with its organizational design by implementing the right business strategy.

Organizational Culture

The employees at different levels of the organization (lower, middle and top) are aware of organization’s every setting and action embedded in the elements of culture; thus the way an organization manages is inadvertently judged by its human resources which influences their behaviour towards their own and organization’s objectives Nadi (2008). Whether an organization will successfully implement its strategy and achieve the set goals is highly dependent on the culture within it.

It is extremely critical for an organization to develop the right kind of cultural settings within which its workforce operates, learns, develops and demonstrates. Culture can be understood as the integration of organization’s beliefs, norms practices and organizational behaviours. It also links the organization’s strategies, technologies and products (Kefela, 2010). The organizations which focus extensively on improving quality through Total Quality Management, such as Tata Motors Ltd find that the premise of managing quality (TATA Motors Ltd managed its quality through TQMS) can be defining force behind culture change and improvement (Chaudron, 1992).

The culture in one organization can be very different from another depending on the corporate strategy and what is to be achieved. Cultural development is also an essential facilitator of leadership development (Bal and Quinn, 2001). Tata Motors works towards developing leaders keeping in view the context and culture in which they are developed.

Organizational culture is the backgrounds in which leaders are developed the leaders are developed and is therefore imperative towards developing a competitive and sustainable leadership across organization. Studies by Collins and Poras (1994) found out the strong linkage existing between organizational culture and the performance of its employees which is indirectly linked with customer satisfaction.

Elements of Organizational Culture at Tata Motors Ltd

The organizational culture of Tata Motors is understandable as the “task culture”. Tata Motors believes in providing complete customer satisfaction and follows strict safety related measures and guidelines. To provide a rich customer service experience it undertakes effective and efficient networking of sales and service networking. It performs in concord with its customer requirements and expected levels of performance and service. It also adapts itself to the various competitor strategies and upcoming rules and regulations. Thus the culture within the organization is focused on dealing dynamic and challenging forces of business environment and is very well complemented by its matrix and flat organization structure.

The Task Environment

Source: Own Creation

The culture of Tata Motors has one essential element of innovation and at the same time it is also one of its foremost strategies. For this purpose they set up cross-functional teams for progressive research projects. Innovation makes the culture of Tata Motors unique and aggressive (Stanleigh, M).

TATA Motors culture follows the following pattern. It begins with the Employee’s thinking (views, beliefs, attitudes and behaviours) which leads to Employee’s actions. Then is the role of management which is important factor in shaping the employee’s thinking and actions. Tata Motor’s management thinking affects their actions which influence employee thinking and actions consequently. They ensure learning and development at each stage of various processes people practice within the organization. Thus organizational culture is a fusion of management and employee culture at Tata Motors.

TATA Motors Ltd Organizational Culture

Source: Own creation

Tata Motors strongly believes in the fact that “all the difference is made by the people”. For implementing the concept in reality it makes a lot of investment in developing its people potential by the methods of participation, empowerment, training and development, learning opportunities. Thus the organizational culture of Tata Motors can be best understood as one which provides space for continuous improvement for its human resources.

The managers need not worry about the routine chores as much as they need to focus on really improving the quality of work and technological and social advances. The culture at Tata Motors can be best described as delegation-oriented and empowerment-focused. It is a culture which recognizes people, groups and teams for their personal and organizational achievements.

Tata Motors Ltd has always given significant importance to developing an organizational culture wherein innovation is encouraged. The employees are continuously encouraged to adopt innovative practices. With this effect, TATA Motors Ltd has various technological and quality improvement related programs.

Although its main focus rests on the Indian automotive market, it has been forging in the international markets in recent times. It is expanding its business profile in emerging markets like Hong Kong, Mexico, Russia, South Africa, United Kingdom, etc. This poses challenges for Tata Motors to fit its culture in these countries with its corporate culture. It is critical to choose the right business model with cultural values and beliefs that are consistent with its overall corporate strategy. It is also expanding its operations in countries in Britain, Italy and Spain.

Tata Motors has always been striving to attain technological excellence it its business processes and operations. Therefore the Research and Development department is constantly working towards achieving excellence. It is investing on big scale in research and green technology reflecting commitment towards ecological impacts of automotive industry.

Tata Motors possesses strong belief in assisting the cause of nature and climate control; its efforts for innovation in the field of engineering and technology are aimed at developing alternative fuels. It has also made CO2 emission norms- EURO compulsory in many of its vehicles.

The organizational culture of Tata Motors makes it essential to develop its leadership potential and impact while maintaining its original values which aim to improve the people’s quality of life. It is equally committed to the cause of societal development which is visible in its Corporate Social Responsibility through which it helps the under privileged sections of rural and urban society.

Overall, if we assess the true nature of organizational culture in Tata Motors Ltd., it is where people are encouraged by their supervisors and managers/leaders through rewards programs, risk-taking avenues and change through innovation.

The employees are given a degree of freedom and scope to produce new ideas, implement them, success is rewarded and failures are considered to be learning experiences which would lead to improvement in future. The team members are encouraged to get involved in communication with leaders at every level of organization. This increases the productivity of teams at Tata Motors. It can be best seen in the conception, production and launching of Tata Nano where the efforts were completely team based (Agrawal, 2008).

Management and Leadership

The mission of Tata Motors very clearly and strongly infers the thinking behind the organization. It says “Leadership with Trust”. It signifies the strength of organization is in building trust and developing leaders with tremendous potential. It is “complex” to place and analyse the management style of Tata Motors into any one particular category. However one pattern that is clearly visible through the facets of its organizational structure and organizational culture and strategy is the “consensual management” thinking. Tata Motors believes in its employees being the most important and productive attribute. This type of management style helps the organization to create a favourable environment for its employees, customers and the community. Lok and Crawford (2001) discussed the high degree of correlation between leadership and job satisfaction and employee commitment.

The organization practices a “participative environment” which fosters the relationship between the employees and management and leaders. There are several programmes which have been implemented by the organization to train and develop its workforce in order to adapt to the latest advancements in technology and management practices. Since Tata Motors is continuously changing and evolving in order to compete on the global automotive landscape (Tata Management Training Centre).

To say the least, Ratan Tata is definitely one of the most powerful business and strategic leaders in the business world. The way he has revolutionized the automobile industry is truly remarkable of his business acumen. If we closely analyze the way Tata Motors has operated on the Tata Nano business, we will find that the leadership style followed is not just visionary but is built wholly on the tenets of entrepreneurship. The leadership of Mr Ratan Tata has proved to be truly remarkable in motivating and leading the workforce towards achieving common business objectives (TATA: Leadership and Learning).

Ratan Tata, the chairman of Tata Group is responsible for transforming Tata Motors Ltd. into business that flourishes on strategic business thinking. He works for the company with a dream to make Tata an international company that is known and respected by the global business world. To achieve this, he went forward to bring in a CEO from a foreign country, Mr. Carl-Peter Forster, who had previously lead global car manufacturing giant General Motors (GM).

Tata Motors measures its “leadership effectiveness” through surveys intended to measure the “engagement” of employees. It also publishes the Tata Code of Conduct; it is widely communicated through posters, booklets and pamphlets. The following model of leadership is currently being followed by Tata Motors (General Management Review, 2005).

Leadership System of Tata Motors

Source: Tata Motors

Tata Motors Business Model

Osterwalder et al. (2005) have defined a business model as a conceptual instrument or framework made up of a broad group of entities and relationships existing between them through which an organization expresses its rationale of carrying out business activities in certain ways. It describes the value system of an organization covering several segments of customers and of the organization architecture and its network system consisting of partners and customers to generate profitable revenues in the long run.

Tata’s business model is known as Tata Business Excellence Model (TBEM) determines the quality movement within the groups. It functions under the aegis of Tata Quality Management Services (TQMS), which is an internal organisation created by TATA to help different companies under the TATA umbrella to achieve their business objectives through quality management. TBEM is designed to deliver strategic focus to enable the organization to acquire and practice the most sophisticated and profitable global business processes. Thus TBEM is also a tool for the organization to keep on evolving in the tough business environment (TQMS) (In Media Room, Features, 2009).

Tata Business Excellence Model

Source: TQMS: TBEM

Elements of TBEM

Leadership

Tata Motors gives a lot of attention towards ensuring that the senior leaders of organization remain focused on achieving the organizational vision and exceed the expected levels of performance. It believes in measuring organizational performance, creating an atmosphere conducive for ethical behaviour and developing future leaders for attaining excellent performance.

Strategic Planning

It emphasizes on planning the actions, implementing those plans and ensuring the objectives are met and achievements are measured and sustained for improving the functioning of business. While it is important to resolve smaller key strategic issues faced by Tata it is control the competitive environment.

Customer & Market Focus

It places a great importance on developing and maintaining relationships at corporate and business levels through effective listening, participative learning, and performance excellence. Tata Motors understands its customers well. Nano is an excellent example where the main motive was satisfying the demand of middle class citizens of India.

Measurement, Analysis and Knowledge Management

It is all about measuring, analysing, and managing the knowledge within the organization in respect to bettering the performance levels.

Workforce Focus

It addresses fundamental human resource management practices focussed toward creating and maintaining an atmosphere of high-performance and directing the employees towards success. It covers issues such as employee engagement and development in integrated way (i.e., aligned with your organisation’s strategic objectives and action plans). It also includes and enhances human resource planning (HRP) as a component of overall strategic planning.

Process Management

Tata Motors through its process management identifies its core and distinctive competencies and managing them in a manner which helps it to achieve effective design for organisational learning and continuous improvement of business processes.

Business Results

It incorporates the organization’s objecti