What NASCAR Teaches Leaders

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What NASCAR Teaches Leaders

Forget stock markets -- two new research papers say finance executives can learn a whole lot from stock cars.
June 13, 2003Author: Lisa Yoon, CFO.com

What NASCAR Teaches Leaders
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 man.

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 career advice.

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.