Report and conclusion on impact of labor welfare policies And its correlation to organizational success Tata Steel is one of the highest employer/job providers for blue-collar workers in India

Report and conclusion on impact of labor welfare policies
And its correlation to organizational success
Tata Steel is one of the highest employer/job providers for blue-collar workers in India. It has successfully built and maintained a cordial, mutual and productive relationship with its workforce through effective Industrial Relations management for more than a century.
This is largely attributed to the Management’s concern for its employees and the pre-emptive yet symbiotic attitude of the labor unions. In Jamshedji Tata’s own words, “We do not claim to be more unselfish, more philanthropic than other people. But we believe in sound and generous business principles and regard the health and the welfare of our employees as a sure foundation of our prosperity”.
Throughout the history of the organization, the industrial relations set up in Tata Steel have set many labor standards and precedents. The structure, dynamics, and orientation of IR in Tata Steel have witnessed drastic changes over the years and in spite of measures such as wages regulation, participatory decision making, etc., the relationship between company and labor has not been without discord and drama.
Formation of TWU and TEU:
Trade unions were formed in Tata Steel in the early 1900’s for the same reason unions were being formed elsewhere in America and Europe – growing dissatisfaction amongst the workers and the need to have a collective say and representation for the laborers. As a result of this, the trade unions were formed as early as in 1920’s under the aegis of freedom fighters such as Netaji Subash Chandra Bose and Rajendra Prasad to name a few.
The formation of trade unions was given further impetus in the freedom struggle against British colonialism. One of the earliest trade unions, Tata Workers Union (also alternatively known as Jamshedpur’s Workers’ Union) (http://www.tataworkersunion.org/) was formed in 1920. TWU is politically affiliated to the Indian National Trade Union Congress (INTUC) and is the most powerful trade union at Tata Steel and Jamshedpur today.
TWU further came to the forefront during the 1942 Quit India Movement. Apart from TWU, another union which holds considerable sway in the organization is the Tata Employees Union (TEU) formed in 1935. There are two ranks of the workforce at Tata Steel, i.e., officers and non-officers (workers who work in mines and plants and staff members). TWU has a representation of both the classes whereas TEU consists of officers only. Though only TWU is recognized by the management for the purpose of collective bargaining, the domains of negotiation are clearly demarcated for each union.

Tata Steel and TWU:
Apart from the strike of 1956 (when the Communist Party tried to usurp the Congress-affiliated TWU) and the disruptions during Quit India Movement in 1942 when work was suspended, the overall scenario has been harmonious. The 1920’s unrest finally led to resolution of critical matter such as an increase in wages, the introduction of fringe benefits such as Provident Fund and recognition of TWU. This was marked by the intervention of leaders like Gandhi and resulted in better working conditions, safety measures, etc.
Consolidation of the Movement:
Marked with the appearance of leaders such as Prof. Abdul Bari, the period from the 1930s to 1940s saw the union taking deep roots into the culture of the organization. It was a period marked with strikes and negotiation and resulted in revised wage structure, revised bonus schemes, systematic relationship with management, etc. It was also the period of formation of joint committees (which exist to date) between trade union and management for better communication and negotiation.
An era of Constructive Trade Union Movement:
After Prof. Abdul Badri, Shri Michael John took over as the leader of the TWU. His tenure and subsequent years saw windfall gains for the trade unions and many collaborative agreements with the management. One such as agreement was the Agreement of 1956 between Tata Steel and TWU. This agreement saw the formation of a three-tier program of association between the union and management for better dispute redressal and negotiation for terms and conditions for working conditions, benefits such as education, medical facilities, etc. At the bottom level was the Joint Departmental Council responsible for representation purposes. At the next level was the Joint Workers Committee and at the top level was the Joint Consultative Council of Management.
Between 1920 and 2008, a total of 19 agreements have been signed between Tata Steel and TWU. TWU presently has a membership of over 93% of Tata Steel employees. It is the only recognized union by Tata Steel. All benefits (financial, fringe and social) have been gained through peaceful means and there has been no industrial strike in TISCO since 1928. From a crude mechanism set up as a reactive dispute redressal mechanism almost a century back, the trade unions and the management of Tata Steel have come a long way to create an environment of harmony and progressive relationship building.
Evolution of IR in Tata Steel
Every organization has got its own organizational culture. This is definable by the modes in which the Industrial Relations Management policies are practiced. TISCO’s first and foremost value is the development of human resources and adequately compensated them. TISCO believes that when the employees are well treated, then production and productivity increase will take care of them. This philosophy is true as far as TISCO organization is concerned.
In Tata Steel, Personnel Management and Industrial Relations were never considered the monopoly of the personnel manager. On the contrary, it was thought that every supervisor and the officer are fully responsible for looking to the welfare of the men who work with them. However, to look after the labor matters, a special officer was appointed in Tata Steel as early as in 1923.
The seed of Industrial Relations Management in TISCO was sown by the appointment in 1946 of a Deputy Agent (Personnel) and followed up a few months later by the setting up of Personnel Division under a Director 0f Personnel in January 1941. The department, however, ran into difficulties from an inadequate appreciation of its powers and functions; which, in the early stages, remained undefined.
The relations between Management and Labour in Jamshedpur may be regarded as passing through three stages. The first, roughly up to the end of the ‘First World War’ was dominated by the Tata attitude of imaginative sympathy and kindly concern for employees, but this attitude had not yet been fully translated in action. The second, which was more or less co-extensive with the troubled years after the War up to the middle thirties, was one of inadequate adjustment and some conflict. The third stage saw the transformation of an attitude into a philosophy, its detailed application to concrete situations, and the consequent improvement of relations all along the line.
From the 1920s, the first stirrings of organized trade union movement were noticed in Jamshedpur. As in the case of other trade union struggles in India, the one at Jamshedpur had a political origin. The major landmarks in the trade union movement that started about this time were strikes of 1922 and 1928 in which Indian national leaders of eminence tried to intervene on behalf of workers and lead them towards a healthy trade union movement.
Since 1938, the trade union movement in Jamshedpur has been under one union leader. But the principal factor was the steel company which welcomed and assisted the growth of healthy trade unionism by all means. It recognized the trade union, afforded those facilities for organizing and raising funds and made all Industrial Relations decisions in close cooperation with them, as evident from the collective bargaining agreements concluded between the union and management on 4th June 1938.
The last stage is a closer association of employees with management in the nature of Joint Consultations which has existed very successfully right from its date of inception in 1956 to date.
Currently, more than 25 trade unions exist in Tata Steel. Some of them are autonomous trade unions while some are affiliated to Central trade union organizations, for example, CITU, AITUC, etc. Be that as it may, these trade unions have barely any following among the laborers and supervisors of Tata Steel. This is the essential purpose behind the non-political nature of the union. At present only one strong trade union is existing since long called Tata Workers’ Union (TWU).
One of the earliest trade unions in India, the Tata Worker’s Union (TWU), came into being in 1920 initially as Jamshedpur Labour Association (JLA) during a prolonged strike at TISCO. Since then, it has had a chequered career, characterized by occasional setbacks, full support from eminent national leaders during pre-Independence days, political pressures, and a prolonged struggle for worker’s rights. From its very inception, it has had the advantage of being headed by renowned trade union personalities like Prof. Abdul Bari and Mr. Michael John.
The TWU has 85% membership, 14792 in numbers and is the sole bargaining agent and the only recognized union in TISCO. Despite the existence of several other trade unions affiliated to central federations, TWU, which is affiliated to the Indian National Trade Union Congress (INTUC).
Interestingly, TWU is Asia’s richest trade union valued at INR 35 crore as of 2015. The membership fee is INR 80 per month which is collected by the check-off method. The political linkage of the union is pluralistic in nature. The office bearers have different political orientations, with some being a part of Youth INTUC, while others are linked to BJP. But, the union still works in complete harmony and there are no issues as such because of these linkages.
Important attributes of TWU are that it has a written constitution and is legally registered.
It is also affiliated to INTUC, and through INTUC it is affiliated to International Confederations of Free Trade Unions, and a member of International Metal Worker’s federation.
HISTORY AND ACHIEVEMENT OF TATA WORKERS’ UNION
Tata Workers’ Union is one of the earliest trade unions in India. Its history dates back to March 1920. Formerly known as ‘Labour Association’, the trade union at Jamshedpur, as elsewhere, was born out of workers’ suffering and sacrifices caused by a prolonged strike which ultimately resulted in the increase of wages, the introduction of fringe benefits like Provident Fund and, above all, recognition of the Labour Association. An Advisory Joint Committee with representatives from Labour and Management was formed as a precursor to the concept of workers’ participation in management, which was to become in later years a remarkable success in Tata Steel.
There was, however, a serious setback in 1922 when the Union launched a strike for securing certain basic demands like the security of service, better service conditions, etc. the strike failed. The Management promptly withdrew its recognition and discharged the General Secretary of the Union from service. The labor at Jamshedpur soon drew all-India leaders like C.F. Andrews, C.R. Das, and Motilal Nehru into the field. A conciliation committee with C.R. Das as Chairman was formed to break the deadlock. It failed. Mahatma Gandhi was persuaded by Andrews to intervene. Gandhi visited Jamshedpur in 1925 and through his good offices, a settlement was reached. The recognition of the Union was restored and its General Secretary reinstated. As C.F. Andrews was abroad, Subhas Chandra Bose was inducted into the organization as President. Thus, this Union had the unique privilege of all the political stalwarts of the day association with its activities. But, unfortunately, trade union rivalry also ran high during this period and the Management exploited it to the full.
Labour Association, Jamshedpur formed in 1920, much before AITUC. Even the Communist party of India was not in existence during that period.
Consolidation of the Movement
With the appearance of Prof. Abdul Bari on the scene in 1936, the movement took deep roots. A psychological thrust was given to the movement when he changed the name of the Labour Association to “Tata Workers’ Union”. The unity and maturity that he brought about among the Tisco workers were so strong that they survived all political onslaughts with perfect confidence. Under his dynamic leadership the Union launched its struggle for a thorough revision of the wage structure, introduction of the incentive bonus scheme, etc. through the efforts of Prof. Bari, the Bihar Labour Enquiry Committee was constituted with Dr. Rajendra Prasad as Chairman and Prof. Bari as one of the members. The Report submitted by this august body in 1940 constituted the first authentic document on labor situation in Bihar in general and at Jamshedpur in particular.
After a prolonged struggle for a decade and repeated strike threats in 1945 and 1946, an Agreement was signed in February 1948 by the Union and the Management which not only secured higher wages and better working conditions but also, what is more significant, stipulated the formation of joint committees with equal representation to ensure better understanding and settlement of disputes by negotiations. But, before the advent of this new era of conciliation in place of conflict, our beloved leader, and a great patriot, Prof. Bari, died under tragic circumstances on 28th March 1947.
An era of Constructive Trade Union Movement
Shri Michael John, who took over the president-ship of the Union after Prof. Bari’s death, was the architect of this new era. Sri John as President and Sri V. G. Gopal as General Secretary, both of whom came from the working class, provided a formidable and harmonious leadership which could secure maximum gains to the workers with minimum sufferings, a phenomenon rarely evidenced anywhere else.
As a first step to reduce tension within the ranks, the supervisory and technical staff was brought under the same roof by forming the Supervisory and Technicians Unit as an integral part of the Union-a unique feature in industrial relations.
A shining example of this new era and new outlook was the famous Agreement of 1956 which has been hailed as the ‘Magna Carta’ of the working class and reckoned as a landmark in the history of the trade union movement in India. Besides the usual benefits it secured for the workers by way of higher wages, more houses, improved medical facilities, etc., the Agreement laid down a three-tier programmed of closer association of employees with management. At the bottom, departmental councils were formed with equal representation of workers and officers; at the middle, Joint Works Council and Joint Town Council were constituted, and at the apex, Joint Consultative Council of Management was set up. Another feature of this Agreement was the introduction of a streamlined grievance procedure, which aimed at redressing individual grievances in the shortest possible time at the lowest possible level. A provision of far-reaching importance incorporated in the Agreement was to the effect that there should be no retrenchment as a result of any rationalization scheme in Tisco. Further, redundant labor shall be provided with training and retraining facilities and absorbed in suitable jobs without any monetary loss.
Tata Workers’ Union has always given a stable leadership with continuous guidance, which stands as its major strength. Between 1920 and 2006 there were 9 presidents, in comparison with the other national trade union organizations such as AITUC and TLA. The Tata Workers’ Union has always given utmost importance in their collective bargaining with the management in the sphere of the
* Revision of wage, * Incentive Bonus, * House
* Medical Facilities, * Family Welfare, * Community & Social Development,
* Annual Bonus.
Minimum wage per month has increased progressively:
* 1920 – Rs. 13/-; * 1970 – Rs. 240/-: * 1986 – Rs. 550/-;
* 1989 – Rs. 1350/-; * 1995 – Rs. 2100/-; * 2001 – Rs. 4000/- ; * 2007 – Rs. 8080/-
The Tata Workers’ Union has the membership over 93% employees in Tata Steel. It is the only union recognized by Tata Steel since 1920. Over the last 85 years, Tata Workers’ Union (formerly Labour Association, Jamshedpur) has a long way to become a responsible union. The leadership has been matured and consistent.
Tata Workers’ Union leaders took an active part in the freedom movement from 1928 to 1942 Quit India Movement and went to jail several times. A total of 19 agreements between TISCO and Tata Workers’ Union are completed through collective bargaining between the periods of 1920-2008.
President or general secretary of the Tata workers Union since 1920 was either employees or former employees of the company or Tata workers union. All financial, social and fringe benefits gained through non-violent and peaceful means. Since 1928 there is no industrial strike in TISCO.
In 1962, the Tata Workers’ Union spent Lakhs of rupees to run two high schools for the education of member’s children. Later on, Government of Bihar took over the charge of these schools.
Since 1954 Tata Workers’ Union has introduced a sickness benefit scheme for the benefit of its member in the event of their sickness causing loss of pay. If a Tata workers’ Union member worker retires a token gift is given to the retired member.
Tata workers’ Union publishes a paper “ISPAT MAZDUR “to give up-to-date information and enlighten the member. Each year Tata workers’ union organizes a memorial lecture in the name of its fifth President, Late Michael john in which national and international reputed personality, who has made an important contribution in this sphere, is recognized and a gold medal is rewarded to him.
The Tata workers’ union also considers the improvement of workers education and awareness level as one of its responsibilities and keeping this in view Michael John Center is established, which conducts trained and developmental programmers for workers and supervisors.
The long-felt desire of the union to have its own building has been fulfilled with turning a new leaf in the history. The building is being dedicated to the cherished memory of Prof. Abdul Bari, the founder president of Tata workers’ union and Auditorium named after Shri Michael John who provided all the inspiration and direction for 30 years as president of the union.
The Tata workers’ union took the lead in forming the Indian National Metalworkers Federation, embracing all the steel and engineering industry. Tata workers’ union has the credit of participating in the founding competence of two union centers in India.

Case study on the Taj hotel incident
(To illustrate labor welfare and correlation to organizational success)
In the weeks that followed 26/11 the day on which rampaging terrorists killed some 150 people at 10 locations in South Mumbai, including 11 employees of the Taj Mahal Palace hotel Ratan Tata made visits to some of the bereaved families. The chief of the Tata group, which owns the Taj via group company Indian Hotels, met a woman who pointed to the garlanded figure of her late husband and said: “My children never realized their father was a hero.” It took Tata by surprise, as he expected anger and sorrow.
The above anecdote is narrated by Rohit Deshpande, a professor at Harvard Business School (HBS), who was interviewing Tata for a five-part video case study on crisis management at the Taj during 26/11. Deshpande started to teach the course at Harvard in October 2010. His students, especially non-Indians, 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 student reaction prodded Deshpande, and along with Anjali Raina, executive director at HBS India Research Centre in Mumbai he delved deeper into the HR practices of the organization. The uncommon valor of those who worked at the Taj convinced the duo to research the human resource (HR) practices of the organization. After all, there 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.
Deshpande started to research the HR practices of the company and found three pillars of practices that explained the courage and actions of employees: A recruitment system that hires for character and not for grades; training programmers that not just mentor employees but also empower them to take decisions; and a reward programme that recognizes employees on a real-time basis.
“I teach both MBA and executive programme. In my experience, these practices have been unique,” Deshpande said. Just one aspect— that of recruiting from small towns and recruiting for attitude rather than grades — was unheard of, he added.
This research is interspersed with tales of employee heroism — a 20-something 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.
One executive chef at the hotel told the researchers that other groups have tried to hire him, but he refused to go. Reason: 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.
“(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,” said Deshpande.
The culture of employee-empowerment has been ingrained in the Taj workforce for some time now. For instance, the researchers found similar displays of gallantry at the at the Taj properties in the Maldives at the time of tsunami in December 2004. “I realized that just like the character of a human being is the sum of choices made over the years, the culture of an organization is the sum of values, policies, and practices consciously fostered over the years,” said Raina.
The siege of the Taj quickly became an international story. Lots of people covered it, including CNN’s Fareed Zakaria, who grew up in Mumbai. In a report that aired the day after the attacks, Zakaria spoke eloquently about the horror of what had happened in Mumbai, and then pointed to a silver lining: the behavior of the employees at the Taj.
Apparently, something extraordinary had happened during the siege. According to hotel managers, none of the Taj employees had fled the scene to protect themselves during the attack: They all stayed at the hotel to help the guests.
“I was told many stories of Taj hotel employees who made sure that every guest they could find was safely ferreted out of the hotel, at grave risk to their own lives,” Zakaria said on his program.
There was the story of the kitchen employees who formed a human shield to assist guests who were evacuating and lost their lives as a result. Of the telephone operators who, after being evacuated, chose to return to the hotel so they could call guests and tell them what to do. Of Karambir Singh Kang, the general manager of the Taj, who worked to save people even after his wife and two sons, who lived on the sixth floor of the hotel, died in the fire set by the terrorists.
Often during a crisis, a single hero or small group of heroes who take action and risk their lives will emerge. But what happened at the Taj was much broader. During the crisis, dozens of workers — waiters and busboys, and room cleaners who knew back exits and paths through the hotel — chose to stay in a building under siege until their customers were safe. They were the very model of ethical, selfless behavior.
What could possibly explain it?
Getting To the Bottom of It
The study was done by Rohit Deshpande, a Harvard business professor who researches both business ethics and global branding. In the article that appeared in the December 2011 issue of Harvard Business Review MR. Rohit Deshpande – Sebastian S. Kresge Professor of Marketing at the Harvard Business School and MRS. Anjali Raina the executive director of the HBS India Research Center in Mumbai who analyzed extraordinary behavior came up with their theory.
About nine months after the attacks on the Taj, Deshpande was in India interviewing senior management of the hotel on a completely different topic but found that the people he was talking too kept steering the conversation back to the terrorist attacks.
“What was interesting about all those interviews with senior management was that they could not explain the behavior of their own employees,” he told me. “They simply couldn’t explain it.” And so Deshpande decided to do his own investigation of the company to see if he might be able to untangle the cause. Last year, Deshpande flew to India to review the company’s HR policies and also do interviews with the hotel staff, everyone from managers to kitchen workers.
What he published in the Harvard Business Review is his case study of the company. Now, because this is a case study and not a double-blind research study, it’s impossible to draw definitive conclusions. But this is what Deshpande thinks: “It perhaps has something to do with the kinds of people that they recruit to become employees at the Taj, and then the manner that they train them and reward them,” he says.
From A to Z — Recruitment to Reward
First, recruitment. In their search to find maids and bellhops, the Taj avoids big cities and instead turns to small towns and semi-urban areas. There the Taj develops relationships with local schools, asking the leaders of those schools to hand-select people who have the qualifications they want.
“They don’t look for students who have the highest grades. They’re actually recruiting for personal characteristics,” Deshpande says, “most specifically, respect and empathy.”
Taj managers explained to Deshpande that they recruited for traits like empathy because that kind of underlying value is hard to teach. This, he says, is also why recruiters avoid hiring managers for the hotel from the top business schools in India. They deliberately go to second-tier business schools, on the theory that the people there will be less motivated by money.
And this strategy, as Deshpande points out, is highly unusual in India. “Let me put this into a little cultural context for you,” he says. “India is a country where people are almost obsessed about grades. In order to get ahead, you have to have really high grades. But here is an organization that is doing just the opposite — they’re recruiting not for grades, they’re recruiting for character.”
Part of this focus on character is ideological, he says.
The Taj is owned by a corporation called the Tata group, which for the past hundred years has been run by an extremely religious family that’s interested in social justice: The Company typically channels about two-thirds of its profits into a charitable trust.
But Deshpande says there are also practical reasons for this focus on character. The Taj hotel has made its name on customer service, and they are near maniacal about it, treating it almost like a science.
For example, managers have mapped the number of interactions that happen between customers and hotel employees in a typical 24-hour stay. There are on average 42, often unsupervised, interactions between employees and guests.
Each of these interactions is viewed by the company as an opportunity for employees to delight their customers with their kindness. So everything — everything — about the training and rewards systems set up by the Taj is designed to encourage kindness.
Deshpande gives one example. “If guests say something or write something very complimentary about an employee, within 48 hours of the recording of that compliment, there is some sort of reward that is made.”
Rewards range from gifts to job promotions.
This system — of immediately rewarding desired behavior — will likely sound familiar to people interested in psychology.
It is by-the-book conditioning, the same kind of conditioning used by B.F. Skinner to train his pigeons.
And in his study, Deshpande argues that it is this combination of selection and reutilized rewards that explain what happened during those terrible three days when the Taj hotel was under siege.
The employees, he argues, were essentially performing the behaviors they were selected and trained to perform. In this case, extreme kindness to customers.
Enabling Ethics
Deshpande suggested all of this has much larger implications: For him, what happened at the Taj is proof positive that organizations can create ethical behavior. “I am absolutely convinced that corporations can enable ethical behavior, and I think what happened at the Taj on Nov. 26, 2008 is a great example,” he says.
But Tom Donaldson, professor of business ethics at the Wharton School, says producing ethics isn’t so simple. “If ethics could be engineered by the organization infallibly, we wouldn’t be hearing about so many scandals in church organizations,” he says.
It’s not that rewards don’t matter, Donaldson argues. They profoundly influence behavior, he says. But Donaldson wonders if all the training and conditioning done by the Taj can really be said to have produced truly ethical behavior.
What would happen, he wonders, if those employees had confronted a different kind of ethical dilemma, one presented by the customers they’d been conditioned to serve?
“I’d like to know what a Taj employee would do,” he says, “for example, if one of the guests ended up striking a homeless person or one of the guests attempted to sexually assault a hotel worker.” It’s hard to condition real ethics, he says.
But for Deshpande, in the example of the Taj and the incredible sacrifices of the employees who work there, there is still a clear, and very compelling, lesson.
“Corporate design is absolutely critical,” Deshpande says. “For good, and for evil.”

A few instances/cases of employee bravery
On November 26, 2008, Harish Manwani, chairman, and Nitin Paranjpe, CEO, of Hindustan Unilever hosted a dinner at the Taj Mahal Palace hotel in Mumbai (Taj Mumbai, for short). Unilever’s directors, senior executives, and their spouses were bidding farewell to Patrick Cescau, the CEO, and welcoming Paul Polman, the CEO-elect. About 35 Taj Mumbai employees, led by a 24-year-old banquet manager, Mallika Jagad, were assigned to manage the event in a second-floor banquet room. Around 9:30, as they served the main course, they heard what they thought were fireworks at a nearby wedding. In reality, these were the first gunshots from terrorists who were storming the Taj.
The staff quickly realized something was wrong. Jagad 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 group stayed there all night, listening to the terrorists rampaging through the hotel, hurling grenades, firing automatic weapons, and tearing the place apart. The Taj staff kept calm, according to the guests, and constantly went around offering water and asking people if they needed anything else. Early the 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….I may have been the youngest person in the room, but I was still doing my job,” Jagad later told one of us. Elsewhere in the hotel, the upscale Japanese restaurant Wasabi by Morimoto was busy at 9:30 PM. A warning call from a hotel operator alerted the staff that terrorists had entered the building and were heading toward the restaurant. Forty-eight-year-old Thomas Varghese, the senior waiter at Wasabi, immediately instructed his 50-odd guests to crouch under tables, and he 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 30-year 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. Kang thought they would be safe, but when he realized that the terrorists were on the upper floors, 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 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.”
During the onslaught on the Taj Mumbai, 31 people died and 28 were hurt, but the hotel received only praise the day after. Its guests were overwhelmed by employees’ dedication to duty, their desire to protect guests without regard to personal safety, and their quick thinking. Restaurant and banquet staff rushed people to safe locations such as kitchens and basements. Telephone operators stayed at their posts, alerting guests to lock doors and not step out. Kitchen staff formed human shields to protect guests during evacuation attempts. As many as 11 Taj Mumbai employees—a third of the hotel’s casualties—laid down their lives while helping between 1,200 and 1,500 guests escape.
At some level, that isn’t surprising. One of the world’s top hotels, the Taj Mumbai is ranked number 20 by Condé Nast Traveler in the overseas business hotel category. The hotel is known for the highest levels of quality, its ability to go many extra miles to delight customers, and its staff of highly trained employees, some of whom have worked there for decades. It is a well-oiled machine, where every employee knows his or her job, has an encyclopedic knowledge about regular guests, and is comfortable taking orders.
Even so, the Taj Mumbai’s employees gave customer service a whole new meaning during the terrorist strike. What created that extreme customer-centric culture of an employee after employee staying back to rescue guests when they could have saved themselves? What can other organizations do to emulate that level of service, both in times of crisis and in periods of normalcy? Can companies scale up and perpetuate extreme customer centricity?
Our studies show that the Taj employees’ actions weren’t prescribed in manuals; no official policies or procedures existed for an event such as 26/11. Some contextual factors could have had a bearing, such as India’s ancient culture of hospitality; the values of the House of Tata, which owns the Taj Group; and the Taj Mumbai’s historical roots in the patriotic movement for a free India. The story, probably apocryphal, goes that in the 1890s, when security men denied J.N. Tata entry into the Royal Navy Yacht Club, pointing to a board that apparently said “No Entry for Indians and Dogs,” he vowed to set up a hotel the likes of which the British had never seen. The Taj opened its doors in 1903.
Still, something unique happened on 26/11. We believe that the unusual hiring, training, and incentive systems of the Taj Group—which operates 108 hotels in 12 countries—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. To be sure, no single factor can explain the employees’ valor. Designing an organization for extreme customer centricity requires several dimensions, the most critical of which we describe in this article.

The Taj Approach to HR
A Values-Driven Recruitment System
The Taj Group’s three-pronged recruiting system helps to identify people it can train to be customer-centric. Unlike other companies that recruit mainly from India’s metropolitan areas, the chain hires most of its frontline staff from smaller cities and towns such as Pune (not Mumbai); Chandigarh and Dehradun (not Delhi); Trichirappalli and Coimbatore (not Chennai); Mysore and Manipal (not Bangalore); and Haldia (not Calcutta).
According to senior executives, the rationale is neither the larger size of the labor pool outside the big cities nor the desire to reduce salary costs, although both may be additional benefits. The Taj Group prefers to go into the hinterland because that’s where traditional Indian values—such as respect for elders and teachers, humility, consideration of others, discipline, and honesty—still hold sway. In the cities, by contrast, youngsters are increasingly driven by money, are happy to cut corners, and are unlikely to be loyal to the company or empathetic with customers.
The Taj Group prefers to recruit employees from the hinterland because that’s where traditional Indian values still hold sway.
The Taj Group believes in hiring young people, often straight out of high school. Its recruitment teams start out in small towns and semi-urban areas by identifying schools that, in the local people’s opinion, have good teaching standards. They call on the schools’ headmasters to help them choose prospective candidates. Contrary to popular perception, the Taj Group doesn’t scout for the best English speakers or math whizzes; it will even recruit would-be dropouts. Its recruiters look for three character traits: respect for elders (how does he treat his teachers?); cheerfulness (does she perceive life positively even in adversity?); and neediness (how badly does his family need the income from a job?).
The chosen few are sent to the nearest of six residential Taj Group skill-certification centers, located in the metros. The trainees learn and earn for the next 18 months, staying in no-rent company dormitories, eating free food, and receiving an annual stipend of about 5,000 rupees a month (roughly $100) in the first year, which rises to 7,000 rupees a month ($142) in the second year. Trainees remit most of their stipends to their families because the Taj Group pays their living costs. As a result, most work hard and display good values despite the temptations of the big city, and they want to build careers with the Taj Group. The company offers traineeships to those who exhibit potential and haven’t made any egregious errors or dropped out.
One level up, the Taj Group recruits supervisors and junior managers from approximately half of the more than 100 hotel-­management and catering institutes in India. It cultivates relationships with about 30 through a campus-connect program under which the Taj Group trains faculty and facilitates student visits. It maintains about 10 permanent relationships while other institutes rotate in and out of the program.
Although the Taj Group administers a battery of tests to gauge candidates’ domain knowledge and to develop psychometric profiles, recruiters admit that they primarily assess the prospects’ sense of values and desire to contribute. What the Taj Group looks for in managers is integrity, along with the ability to work consistently and conscientiously, to always put guests first, to respond beyond the call of duty, and to work well under pressure.
For the company’s topmost echelons, the Taj Group signs up 50 or so management trainees every year from India’s second- and third-tier B-schools such as Infinity Business School, in Delhi, or Symbiosis Institute, in Pune, usually for functions such as marketing or sales. It doesn’t recruit from the premier institutions, as the Taj Group has found that MBA graduates from lower-tier B-schools want to build careers with a single company, tend to fit in better with a customer-centric culture, and aren’t driven solely by money. An hotelier must want, above all else, to make other people happy, and the Taj Group keeps that top of mind in its recruitment processes.
Training Customer Ambassadors
The Taj Group has a long history of training and mentoring, which helps to sustain its customer centricity. The practice began in the 1960s when CEO Ajit Kerkar—who personally interviewed every recruit, including cooks, bellhops, and wait staff, before employing them—mentored generations of employees. The effort has become more process-driven over time.
Most hotel chains train frontline employees for 12 months, on average, but the Taj Group insists on an 18-month program. Managers, too, go through 18 months of classroom and on-the-job operations training. For instance, trainee managers will spend a fortnight focusing on service in the Taj Group’s training restaurant and the next 15 days working hands-on in a hotel restaurant.
The Taj Group’s experience and research have shown that employees make 70% to 80% of their contacts with guests in an unsupervised environment. Training protocols, therefore, assume, first, that employees will usually have to deal with guests without supervision—that is, employees must know what to do and how to do it, whatever the circumstances, without needing to turn to a supervisor.
One tool the company uses is a two-hour weekly debriefing session with every trainee, who must answer two questions: What did you learn this week? What did you see this week? The process forces trainee managers to absorb essential concepts in the classroom, try out newfound skills in live settings, and learn to negotiate the differences between them. This helps managers develop the ability to sense and respond on the fly.
The Taj Group also estimates that a 24-hour stay in a hotel results in between 40 and 45 guest-employee interactions, which it labels “moments of truth.” This leads to the second key assumption underlying its programs: It must train employees to manage those interactions so that each one creates a favorable impression on the guest. To ensure that result, the company imparts three kinds of skills: technical skills, so that employees master their jobs (for instance, wait staff must know foods, wines, how to serve, and so on); grooming, personality, and language skills, which are hygiene factors; and customer-handling skills, so that employees learn to listen to guests, understand their needs, and customize service or improvise to meet those needs.
In a counterintuitive twist, the Taj Group insists that employees must act as the customer’s, not the company’s, ambassadors. Employees obviously represent the chain, but that logic could become counterproductive if they start watching out for the hotel’s interests, not the guests’, especially at moments of truth. Trainees are assured that the company’s leadership, right up to the CEO, will support any employment decision that puts guest’s front and center and that shows that employees did everything possible to delight them.
Trainees are assured that the company’s leadership, right up to the CEO, will support any employment decision that puts guest’s front and center.
According to senior executives, this shift in perspective changes the way employees responds to situations. Moreover, it alters the extent to which they act—and believe they can act—in order to please a guest. A senior executive told us that when an irate guest swore he would never stay at the Taj Mumbai again because the air conditioner hadn’t worked all night, a trainee manager offered him breakfast on the house and provided complimentary transportation to the airport. She also ensured that someone from the next Taj property at which he was booked picked him up from the airport. Did the trainee spend a lot of the company’s money on a single guest? Yes. Did she have to ask for permission or justify her actions? No. In the Taj Group’s unwritten rule book, all that mattered was that the employee did her best to mollify an angry guest so that he would return to the Taj.
The Taj Group’s training programs not only motivate employees, but they also create a favorable organizational culture. H.N. Shrinivas, the senior vice president of human resources for the Taj Group, notes: “If you empower employees to take decisions as agents of the customer, it energizes them and makes them feel in command.” That’s in part why the Taj Group has won Gallup’s Great Workplace Award in India for two years in a row.
Incumbent managers conduct all the training in the Taj Group, which uses few consultants. This allows the chain to impart not just technical skills but also the tacit knowledge, values, and elements of organizational culture that differentiate it from the competition. Every hotel has a training manager to coordinate the process, and given that Taj properties impart training only in the areas in which they excel, they vie with one another to become training grounds.
Like all the other companies in the House of Tata, the Taj Group uses the Tata Leadership Practices framework, which lays out three sets of leadership competencies that managers must develop: leadership of results, business, and people. Every year 150 to 200 managers attend training sessions designed to address those competencies. The company thereafter tailors plans on the basis of individuals’ strengths and weaknesses, and it hires an external coach to support each manager on his or her leadership journey.
The Taj Group expects managers to lead by example. For instance, after a day of work, the general manager of every hotel is expected to be in the lobby in the evenings, to welcome guests. That might seem old-fashioned, but that’s the Taj tradition of hospitality.
A Recognition-as-Reward System
Underpinning the Taj Group’s rewards system is the notion that happy employees lead to happy customers. One way of ensuring that outcome, the organization believes, is to show that it values the efforts of both frontline and heart-of-the-house employees by thanking them personally. These expressions of gratitude, senior executives find, must come from immediate supervisors, who are central in determining how employees feel about the company. In addition, the timing of the recognition is usually more important than the reward itself.
Using these ideas, in 2001 the Taj Group created a Special Thanks and Recognition System (STARS) that links customer delight to employee rewards. Employees accumulate points throughout the year in three domains: compliments from guests, compliments from colleagues, and their own suggestions. Crucially, at the end of each day, a STARS committee comprising each hotel’s general manager, HR manager, training manager, and the concerned department head review all the nominations and suggestions. The members of this group decide whether the compliments are evidence of exceptional performance and if the employee’s suggestions are good. Then they post their comments on the company’s intranet. If the committee doesn’t make a decision within 48 hours, the employee gets the points by default.
By accumulating points, Taj Group employees aspire to reach one of five performance levels: the managing director’s club; the COO’s club; and the platinum, gold, and silver levels. Departments honor workers who reach those last three levels with gift vouchers, STARS lapel pins, and STARS shields and trophies, whereas the hotel bestows the COO’s club awards. At an annual organization-wide celebration called the Taj Business Excellence Awards ceremony, employees who have made the managing director’s club get crystal trophies, gift vouchers, and certificates.
According to independent experts, the Taj Group’s service standards and customer-­retention rates rose after it launched the STARS program because employees felt that their contributions were valued. In fact, STARS won the Hermes Award in 2002 for the best human resource innovation in the global hospitality industry. The Taj Group’s hiring, training, and recognition systems have together created an extraordinary service culture, but you may still wonder if the response of the Taj Mumbai’s employees to 26/11 was unique. Perhaps. Perhaps not.
At about 9:30 AM on December 26, 2004, a tsunami rippled across the Indian Ocean, wreaking havoc on coastal populations from Indonesia to India, killing about 185,000 people. Among those affected was the island nation of the Maldives, where tidal waves devastated several resort hotels, including two belonging to the Taj Group: the Taj Exotica and the Taj Coral Reef.
Many guests were panic-stricken, but the Taj staff members remained calm and optimistic.
As soon as the giant waves struck, guests say, Taj Group employees rushed to every room and escorted them to high ground. Women and children were sheltered in the island’s only two-story building. Many guests were panic-stricken, believing that more waves could follow, but staff members remained calm and optimistic.
No more waves arrived, but the first one had inundated kitchens and storerooms. A Taj Group team, led by the head chef, immediately set about salvaging food supplies, carrying cooking equipment to high ground, and preparing a hot meal. Housekeeping staff retrieved furniture from the lagoon, pumped water out of a restaurant, and restored a semblance of normalcy. Despite the trying circumstances, lunch was served by 1:00 PM.
The two Taj hotels continued to improvise for two more days until help arrived from India, and then they evacuated all the guests to Chennai in an aircraft that the Taj Group had chartered. There were no casualties and no panic, according to guests, some of whom were so thankful that they later volunteered to help rebuild the island nation. These Taj Group employees behaved like ordinary heroes, just like their colleagues at the Taj Mumbai would four years later. That, it appears, is indeed the Taj Way.
From these instances we can see how important employee welfare and relationship is and how Tata group is a pioneer and trend setter in labor welfare and safety. This has allowed it to stand the test of time and stay true to its values and long standing tradition of serving people.