CFO MAGAZINE ON
WHAT NASCAR TEACHES LEADERS.
markets -- two new research papers say finance executives can learn a whole
lot from stock cars.
Lisa Yoon, CFO.com
June 13, 2003
Looking for the perfect Father's Day present? Dale
Earnhardt Inc., the racing team founded by the late Nascar champion, has an
idea: the Dale Earnhardt Tribute Concert at the Daytona International
Speedway. The Web site is offering two-for-one tickets in honor of the old
Whether or not you take them up on the offer -- the
concert is on June 28, almost two weeks after Father's Day -- it's hard not
to pause and admire the made-for-each-other combo of Dad and Nascar. In fact,
Nascar itself is known for its racing dynasties, including the Earnhardts,
the Pettys, the Marlins. This is no coincidence: Dads and NASCAR have a lot
more in common than a love of fast cars. They're also both rich sources of
That's right: experts say you can learn a lot about career
choices from watching Nascar. Two research papers examining stock-car racing
patterns show a remarkable similarity between racing and corporate behavior.
In one paper, researchers from the University of Chicago Graduate School of
Business analyzed the effect of crowding in races and the propensity to
crash. The findings are eerily similar to the way executives react when their
competitors are on their heels.
Another paper on draft lines by RAND researcher David
Ronfeldt offers something of a cautionary tale about exercising prudence in
choosing career allies, not to mention jobs.
In the Chicago research, assistant professor of
organization and strategy Matthew Bothner and his colleagues Toby Stuart and
Jeong-han Kang found that drivers don't crash as often when they're trying to
outplace the driver ahead, but when they're feeling competitors closing in.
To preserve their position, drivers tend to act more aggressively -- at the
risk of crashing.
The same thing happens at corporations, at both
organizational and individual levels. When Oracle put a hostile bid on
PeopleSoft last week, some -- including PeopleSoft CEO Craig Conway -- saw
the move as a desperate measure to block a merger between PeopleSoft and J.D.
Edwards, a union that could pose a serious threat to Oracle's place in the
market. The move was also potentially risky, which Bothner says is a key
aspect of aggressive behavior to avoid crashing. In an interview with Dow
Jones, Conway suggested that Oracle's move might confuse customers.
Similarly, if a controller feels that another finance
executive is emerging as a threat, the controller may take aggressive
measures to save his/her place in the race -- measures that could be
potentially risky. The controller might, for instance, suddenly increase
hours spent at the office --at the risk of health or personal relationships.
"Over the course of a career, there's always
implicitly a tournament going on; you're always being ranked by
someone," says Bothner.
The sudden awareness of competitors is something that
"happens all the time," according to CFO recruiter John Wilson of
J.C. Wilson Associates, especially with controllers, often the next in line
in internal CFO successions. Controllers "can get lulled into a false
sense of security," Wilson explains. This is not smart.
"Controllers have to understand that you're a controller today, but you
need to project a CFO image." Translation: lose the green eyeshades and
become a strategic player.
Another finding in Bothner's research is that the effect
-- that is, the increasing likelihood of crashing as competitors behind get
closer -- only surfaces after the first few races of a season. Why? Because
in the first few races, explains Bothner, "everything is so chaotic and
fluid that it's not clear who's crowding you. It's not until [a few races
later] that you pay attention."
Here is where stock-car racers and career-climbing
executives differ: Executives can and should pay attention to the competition
-- at any stage of the career. The day you notice the competition, it's
probably too late for aggressive band-aid measures. "If you haven't been
[managing your career development], your fate is probably sealed -- even
without your knowing it," says Wilson, the recruiter.
Too Furious, Too Fast
Indeed, career coaches agree that knee-jerk reactions are
almost always bad news for a career. "If I react rather than respond, I
may be my biggest enemy," says Susan Wilson of Executive Strategies Inc.
"For executives, it's not good to act under instinct" or knee-jerk
reactions, says executive career consultant Maryanne Peabody of Stybel
Peabody Lincolnshire of Boston