The ordinary heroes of Taj Hotel

On 26/11, rampaging terrorists killed some 150 people at 10 locations in South Mumbai, including 11 employees of the Taj Mahal Palace hotel. The chief of the Tata group, Ratan Tata, which owns the Taj via group company Indian Hotels, during his visits to some bereaved families, met a woman who pointed to the garlanded figure of her late husband and said: "My children never realised their father was a hero." It took Tata by surprise, as he expected to encounter anger and sorrow. Designing an organization for extreme customer centricity requires several dimensions. The unusual hiring, training, and incentive systems of the Taj Group have combined to create an organizational culture in which employees are willing to do almost anything for guests. This extraordinary customer centricity helped, in a moment of crisis, to turn its employees into a band of ordinary heroes. There is no single factor that can explain the employees’ valor. 

• The tales of employee heroism included a banquet manager helping guests escape; telephone operators staying at their posts and alerting guests to stay indoors; and staff forming a human shield to protect guests at the time of evacuation.
• In a banquet hall, the 24-year-old banquet manager, Mallika Jagad, was managing an event quickly realized something was wrong and had the doors locked and the lights turned off. She asked everyone to lie down quietly under tables and refrain from using cell phones. She insisted that husbands and wives separate to reduce the risk to families. The Taj staff kept calm and constantly went around offering water and asking people if they needed anything else. Next morning, a fire started in the hallway outside, forcing the group to try to climb out the windows. A fire crew spotted them and, with its ladders, helped the trapped people escape quickly. The staff evacuated the guests first, and no casualties resulted. It was my responsibility and I was still doing my job - Jagad says.
• Forty-eight-year-old Thomas Varghese, the senior waiter at Wasabi, instructed his 50-odd guests to crouch under tables, and directed employees to form a human cordon around them. Four hours later, security men asked Varghese if he could get the guests out of the hotel. He decided to use a spiral staircase near the restaurant to evacuate the customers first and then the hotel staff. The Taj veteran insisted that he would be the last man to leave, but he never did get out. The terrorists gunned him down as he reached the bottom of the staircase. 
• When Karambir Singh Kang, the Taj Mumbai’s general manager, heard about the attacks, he immediately left the conference he was attending at another Taj property. He took charge at the Taj Mumbai the moment he arrived, supervising the evacuation of guests and coordinating the efforts of firefighters amid the chaos. His wife and two young children were in a sixth-floor suite, where the general manager traditionally lives. He tried to get to his family. It was impossible. By midnight the sixth floor was in flames, and there was no hope of anyone’s surviving. Kang led the rescue efforts until noon the next day. Only then did he call his parents to tell them that the terrorists had killed his wife and children. His father, a retired major general, told him, “Son, do your duty. Do not desert your post.” Kang replied, “If it [the hotel] goes down, I will be the last man out.”
• One executive chef at the hotel told the researchers that other groups have tried to hire him, but he refused to go for reason of - there is a connection with the guests. Generations have come to the Sea Lounge for matchmaking and weddings are celebrated in the Crystal Room; and waiters have been serving people for generations, the researchers were told.
• Harvard Business School (HBS), while making a case study on crisis management at the Taj during 26/11 were transfixed by the topic and were incredulous why employees were willing to give up their lives when they had the option to flee. 
• The uncommon valour of those who worked at the Taj convinced to research the human resource (HR) practices of the organisation. This was an extremely rare case of employees placing the safety of guests over their own well-being; and in the process some of them sacrificed their lives. 
• There was nothing in the manuals or any training given to these employees for an incident like this one. 
• A research into the HR practices of the company found three pillars of unique practices that explained the courage and actions of employees: A recruitment system that hires for character and not for grades; training programmes that not just mentor employees but also empower them to take decisions; and a reward programme that recognises employees on a real-time basis.
• The aspect that recruiting from small towns and recruiting for attitude rather than grades was unheard of.
• At a time when we are hearing so many stories of human frailty, mismanagement, moral turpitude, the Taj research is about ordinary people who became heroes. It's about leadership from everywhere, especially leadership from below. 
• The culture of employee-empowerment has been ingrained in the Taj workforce for some time now. The researchers found similar displays of gallantry at the at the Taj properties in Maldives at the time of tsunami in December 2004.
• Just like the character of a human being is the sum of choices made over the years, the culture of an organisation is the sum of values, policies and practices consciously fostered over the years.

Every crisis or war makes many ordinary men heroes

Ratan Tata Generosity

Harvard Business School and its immoral profit strategies

• In the aftermath of the 2008 financial crisis USA was enraged because not a single Wall Street guy who got them into the mess was prosecuted. 
• There are many financiers who could have been made to take the perp walk, there’s also a case to be made that the fault lies with those who laid the intellectual foundation upon which a market-driven financial crisis could happen in the first place.
• Corporations are not institutions set up to be moral entities. They are institutions which really only have one mission, and that is to increase shareholder value.
• By the late 1970s, HBS had proved itself a dependable supplier of prescreened and highly motivated graduates to big business. 
• In the 1980s, HBS graduates weren’t going to big business anymore but were headed to Wall Street and consulting.
• In the 1980s, HBS had abandoned its mission and threw its lot in with Wall Street. HBS had nurtured the professional manager from his birth and then helped to kill him.
• “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure” laid the groundwork for the most radical change in the hierarchy of power in corporate America since the robber barons gave way to professional managers.
• Managers had become too entrenched and lacked discipline and accountability. Managers weren’t going to voluntarily reform so the system had to be adjusted so that they would be forced to do so. No longer they would be judged by their board. The market was henceforth to be judge, jury and executioner.
• Executive pay was largely tied to company size. The highest-paid CEOs ran the largest companies. But the unproductive diversification had resulted in excess capacity, flat or declining profits, and stagnant share prices. Companies sitting on large piles of cash suddenly became the target of hostile acquirers. The age of investor capitalism began, and its heroes were not CEOs but corporate raiders.
• A wave of deregulation then created the active market for corporate control, with the new belief that the shareholder was supreme, absolving managers of responsibility to any one except shareholders. The bottom line was all that mattered.
• A story was cited - George Bernard Shaw asking an actress if she would sleep with him for a million dollars. When she agreed, he changed his offer to $10, to which she responded with outrage, asking him what kind of woman he thought she was. His reply: “We’ve already established that. Now we’re just haggling about the price.”  
• It was concluded that we’re all whores. “Like it or not, individuals are willing to sacrifice a little of almost anything we care to name, reputation or morality, for a sufficiently large quantity of other desired things.” Having started from the assumption that we are all whores, they naturally ended up with prescriptions for making us well-behaved whores.
• Bad management theories are destroying good management practice. This is precisely what has happened over the last several decades, converting our collective pessimism about managers into realized pathologies in management behaviors.
• If everybody assumes you’re a whore, you might as well grab as much money as possible while you’re still in demand. By propagating ideologically inspired amoral theories, business schools have actively freed their students from any sense of moral responsibility. And HBS threw its lot in with the cynics.
• Graduates of HBS had always been drawn to finance, but in the 1980s they began heading to Wall Street and private equity firms in droves. 
• In 1965 only 11% of HBS MBAs entered the fields of consulting or investment banking and by 1985 these two fields took in 41% of the school’s graduating class. And many of them would play a significant role in downsizing the traditional manufacturing and product firms that previous HBS graduates had helped build.
• Before the 1970s, companies’ increased cash piles had lessened their dependence on banks. But as those cash piles evaporated, the pendulum had swung back in finance’s favor. 
• In a capitalist economy, power equals money. Between 1983 and 1992, professional managers in the nation’s top 1% of household wealth holders showed decline, while that of people working in finance spiked. And so that’s where the MBAs went.
• Any lingering doubt about the purpose of the corporation, or its commitment to various stakeholders was resolved. The corporation existed to create shareholder value; other commitments were means to that end.
• Business educators legitimized the notion that good management might mean dissolving the firm to improve shareholder return, without concern for the social costs to employees who lost their jobs or to communities that lost employers.
• All that is nonsense about the social responsibility of business. When students enter business school, they believe that the purpose of a corporation is to produce goods and services for the benefit of society. When they graduate, they believe that it is to maximize shareholder value.
• During 1980s, the threat of being taken over and fired effectively created a market for corporate control, which helped executives stay focused.
• High indebtedness engendered by leveraged buyouts forced executives to be much more focused on the operations of their companies. If and when executives did participate in LBOs by amassing their ownership stake, their incentives would then be directly linked to the company’s stock price following the argument that, takeovers and LBOs would cure the nation’s economic woes.
• An a HBS article in 2012 pointed out that the rising tide didn’t lift all boats. In the name of beating foreign competition, completing (or avoiding) takeovers, and serving the interests of shareholders, it became acceptable to sell off businesses that didn’t fit the new corporate strategy and to lay off battalions of workers.
• Corporate takeovers do not waste resources; they use assets productively. Shareholders gain when golden parachutes are adopted. Such blanket claims came with the good seal of approval of Harvard Business School.
• Excessive CEO compensation is not the biggest issue. The relentless focus on how much CEOs are paid diverts public attention from the real problem - how CEOs are paid.
• In 1992, CEOs of Fortune 500 firms made an average of $2.7 million. By 2000, it was up to $14 million. Stock options as a percentage of compensation rose from 19% in the 1980s to nearly 50% in 2000. What also increased is the short-termism and the tendency for executives to manage earnings, using aggressive accounting to give Wall Street analysts a smooth earnings trajectory on which to base their forecasts.
• The compensation of America’s corporate executives shot up in the 1990s, regardless of their performance.
• Corporations lost significant credibility in the wake of the 2007-10 financial crisis. There is no doubt that finance and financial markets are central to what public corporations do. What is less clear is that an ownership society is a workable model for prosperity and security.
• In 1951, John D. Rockefeller said that the job of management is to maintain an equitable and working balance among the claims of the various directly affected interest groups - stockholders, employees, customers, and the public at large. Nowadays, many people forgot that.
• In March 2009, Jack Welch the longtime CEO of General Electric said that “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy. Your main constituencies are your employees, your customers and your products. Managers and investors should not set share price increases as their overarching goal. Short-term profits should be allied with an increase in the long-term value of a company.
• HBS students were all going to Wall Street, and Wall Street firms were all sending money back to HBS. The net effect of it all was that agency theory rendered business history irrelevant.
• They had a tradition at HBS which could have said that this isn’t the way business should be operating. Instead, they just went with the flow. 
• Shareholders are the owners of a company. They’re not, at least if by 'own' one means it in the way one can 'own' a car or an iPhone. We know that the value a company creates is produced through a combination of resources contributed by different constituencies. If the value creation is achieved by combining the resources of both employees and shareholders, why should the value distribution favor only the latter?
• American managers loaded their companies with debt, they started paying themselves in equity and options, and they did everything they could to juice the value of that equity. And in doing so, they sacrificed long-term value for short-term gain, often engaging in outright fraud.
• The wondrous world of hostile takeovers unleashed the insider trading. It was insider trading in the shares of Enron, that tipped investigators and number of HBS graduates were ensnared in the ensuing investigation.
• The propensity of executives is to be overly optimistic about forecasts that support lofty share prices. If executives would present the market with realistic numbers rather than overoptimistic expectations, the stock price would stay realistic. But the scholars don’t yet know the real answer to how to make this happen. That’s called ethics and the Harvard Business School doesn’t know how to teach ethics as well as it knows how to teach financial engineering, and it never will.
• In 2003, the HBS added a Leadership and Corporate Accountability course that sounds like: “decisions that involve responsibilities to each of a company’s core constituencies - investors, customers, employees, suppliers, and the public,” with discussions on insider trading rules, the fall of Enron, human character, employee responsibilities, labor laws, corporate citizenship, socially responsible investing and serving the public interest. But in this, its influence is akin to pushing on a string but no one knows how to kill the monster.

 

    

 

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