Air India; culture change when PSU turns corporate

The handover of Air India to the Tata Group was a historical event in the Indian business world. These are two different cultures how will they align the people strategy?


The recent handover of Air India to the Tata Group has been grabbing headlines for some time now. People say that Air India has finally arrived! However, things are not the same at all.

Merging of two private entities is quite common, and this isn’t the first time Tata has taken over a business. It has done so in the past too, and that too, around the world. So, what makes this takeover different?

Here, we are talking about a private company taking over a public-sector undertaking (PSU) with the aim of making it profitable again.

“The employees know that since it is the Tatas, they do not have to worry about their jobs. However, they now certainly will be worried about the fact that they will have to deliver”

Pankaj Lochan, CHRO, Jindal Steel and Power

There will definitely be challenges and hiccups along the way. In fact, there have been many instances of businesses failing after mergers due to the lack of understanding of the cultural nuances of the companies involved. Such mergers are often unable to sustain the workforce of the new entity.

It is pertinent to recall the takeover of Snapple — which manufactures bottled teas and juices — by Quaker Oats, which also owns the drink, Gatorade. The $1 Billion deal took place in 1994, and at that time, many experts believed the amount was quite high. Eventually, after 27 months, Quaker Oats sold Snapple at a mere $300 million price. Quaker thought it could turnaround things leveraging its relationships with the supermarkets.

Snapple originally gained revenue from smaller channels such as small retail stores and gas stations. The executives of Quaker were not even able to understand the cultural nuances of Snapple, which reflected in poor brand communication strategy. Eventually, big brands such as Coca-Cola and Pepsico launched various competing products in the market and Snapple failed to sustain.

So, while many are hoping that Tata will turnaround Air India, there are several challeges that may need to be overcome.

Challenges and solutions

Changing employee mindset — Since the employees at Air India are used to the old ways of working, they need to bring about a change in their mindset, so that they can be part of a company which now wants to make profits. Acceptance of new processes and people systems will be a big challenge, as it would be for any private company. Jacob Jacob, CHRO, Malabar Group, who has worked for Emirates in the past, and has witnessed major mergers and acquisitions at a global level, believes that there should be clear and frequent communication on what is going to be the new culture and the vision of Tata Values. “Top leadership will have to play a key role in embedding the Tata Values,” emphasises Jacob Jacob.

“It is challenging to change people’s old ways of working, sometimes the only way is to weed out those and bring new blood”

Kinjal Choudhary, management consultant, D360One Consultant

Expectations of a high-performing culture – With the Tata Group taking over Air India to turn it into one of the finest Airlines ever, the expectation of a high- performing culture is natural. Since many of the PSU employees are not really used to the performance review systems and high expectations of corporates, it would be difficult for them to adapt. “The employees know that since it is the Tatas, they do not have to worry about their jobs. However, they now certainly will be worried about the fact that they will have to deliver,” says Pankaj Lochan, CHRO, Jindal Steel and Power.

To overcome this, the employees will need to be given a value proposition. They need to be given a meaningful purpose to achieve those goals and align them with the organisational strategy.

This is where the rewards come in. The employees need to be told what the organisation’s vision is, and then, link the same with an appropriate rewards strategy.

Aligning two very different cultures – Air India and Tata are culturally different organisations. In such situations, aligning two different cultures becomes a challenge. Basically, the culture of the entity taking over should be aligned with the strategy of the two entities involved. While efforts are needed to change the manifested behaviour of employees to align the culture to the strategy, in reality, it becomes quite a challenge, especially if employees have been deeply rooted to the old ways for years or decades.

“Top leadership will have to play a key role in embedding the Tata Values”

Jacob Jacob, CHRO, Malabar Group

“The only option is to weed out some of those who are unable to adapt to the new ways and replace them with new blood capable of displaying the desired behaviour required to execute the strategy,” says Kinjal Choudhary, management consultant, D360One Consultant.

“This also sends out a loud and clear message to all those fence sitters who may still be waiting and watching to see if the new management is truly serious about changing the culture to align it with the new strategy. Although separations have their own nuances, many times that is the only option,” adds Choudhary.

Culture is like the motor of the strategy. If it is not aligned with the engine of the strategy, things will fall apart. In Tata’ s case as well, the Company will have to take baby steps — make plans for three, six and 12 months — to achieve the desired results and make it all work. The turnaround will take time, but consistency will need to be maintained.

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