Thursday 19 July 2012 8:28 pm

Formula One shows real experts should be driving our companies

NEW research into the success of Formula One teams shows that a leader’s genuine expertise in a company’s core business really matters. Being a capable general manager alone is not sufficient. This is a hot topic – there is recent evidence that major firms have moved away from hiring chief executives with technical expertise, towards hiring leaders who are generalists. 50 years ago, as society switched from family-owned businesses and employment through entitlement to a more meritocratic and efficient approach to enterprise, good management was crucial – as it still is today. But the pendulum may have swung too far towards general management functions and away from core business functions. Although we admire entrepreneurs, scientists, engineers, artists, and others with ideas, we typically assume that they’re no good at actually running a business of any real size. I have found these assumptions to be wrong. For example, in professional basketball, we found that teams that win the most are led by former star players. Managers with no medical training run hospitals in the US and the UK, yet the most outstanding hospitals in the US are led by chief executives who are doctors. Similarly, the most successful universities in the world are led by presidents who are also highly respected academics. My most recent study, with co-author Ganna Pogrebna from Sheffield University, looks at one of the world’s most competitive high-technology sectors – Formula One. Our study collects and analyses 60 years of Formula One data, from which each organisation’s performance can be measured objectively. We find that the most successful team leaders are more likely to have started their careers as drivers or mechanics, compared with professional managers or engineers with degrees. We find a notable association between driving and later success as a leader. Within the sub-sample of former drivers, those with the longest driving careers go on to be the most successful leaders. Prominent examples include former top drivers like Jean Todt of Ferrari, and comparative newcomers like Red Bull’s leader, ex-driver Christian Horner. So why might experts, like former drivers, make better leaders? We believe that hands-on experts have a deep intuition and wisdom that helps inform their decision-making. The understanding that expert leaders have of a core business gives them better strategic vision, helping them to identify more business opportunities and challenges. Having been on the floor, they know how to create the right work environment and command greater respect. The long period of training and on-the-job experience required of experts may endow them with a longer view, both towards success and towards income and profit generation. And as leaders in a specific field, experts are a model of excellence, inspiring the people who work for them to go above and beyond in their own quest for quality. The top team at Google all have degrees in computer science, which explains why Yahoo has just chosen one of them, Marissa Mayer, to be its new chief executive. We all admire German cars. These firms perform well because their engineers are on the shop floor and in the boardroom. Debates are common between sports enthusiasts about whether the coach of their beloved football team should have been a good player. Vicente del Bosque, Spain’s current manager, used to be a brilliant midfielder for Real Madrid. Let’s be clear: to be an expert leader you also have to be an expert manager. But we’re accustomed to seeing Fortune 500 firms choosing charismatic general managers for senior leadership positions over core business experts. We’re also used to seeing chief executives flit back and forth across industries, becoming jacks-of-all-trades, masters of none. Might our organisations be paying the price? If we want to boost our economies and our companies through innovation and entrepreneurship we need more specialists and fewer generalists running the show – real experts not managers. Amanda H. Goodall is a visiting fellow at Cass Business School and senior research fellow at IZA Institute for the Study of Labor in Bonn.

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