If you are a true Formula One fan, you would have been fully enthralled by the racing drama at the Brazilian Grand Prix, which was the finale to the Formula One season. Of course if you are a Lewis Hamilton fan or a Fernando Alonso fan, that drama became heartache. But this was really sporting drama at its best and a real reminder of why one would watch live sport over anything else. No one could possibly have scripted the race better, from a racing purist point of view of course. Now before you wonder if Oaktree Research has become a sports website, let me clarify. There are actually some interesting HR questions that arise from this whole Formula One season.

The Human Resource department or role is very much a fixture in any firm or organization. Going back to its economic roots, labour is one of the three traditional factors of production. Compared to land and capital, labour would always require more management given the complexities of the human being as opposed to land and capital.

At the basic level, HR is about hiring and paying the staff. At a more intermediate level, it is about managing performance and promotion as well as training and “integration” into the firm or organization. At the highest level, it is the orchestrating of talent (if you believe that everybody has some talent to contribute to an organization) to maximize the financial return or objective achievement for the company or organisation. This links well with the profit maximization objective of any firm or the objective achievement of any organization.

So now that we have set the basic premise of HR, let’s get on with the meat of the article. I would request for non-Formula One fans to indulge me a little. There is a lot more to Formula One then getting cars to go round and round the same circuit. I will stick to the crux of the article and anyone who wants a deeper discussion or appreciation on Formula One can email me.

Different Management for Different Talents (Kimi Raikkonen vs Michael Schumacher)

Kimi Raikkonen was crowned the new F1 Drivers’ Champion and was hired to emulate the legendary Michael Schumacher who won five Drivers’ Championship with Ferrari. Often it is hard to follow in the footsteps of someone who had extraordinary success. The burden of comparisons is often very high. The fact that F1 is very much a team sport that includes working with the team engineers, mechanics and designers adds to that difficulty.

Kimi Raikkonen and Michael Schumacher are also very different drivers and bring different aspects to the team. From reports, Michael was known to have a very strong work ethnic and wanted to be involved in every aspect of the car from design to testing. Kimi on the other hand is said to be quite a party animal and tended to focus on the driving aspect.

The point here is that Ferrari, despite the very successful experience of working with someone like Michael Schumacher did not expect his “successor” Kimi to be the same. And credit needs to be given to Team Principal, Jean Todt for his appreciation on how to manage Kimi differently from Michael.

Expectations of Talent need to be Managed (Fernando Alonso and McLaren)

Fernando Alonso, the 2005 and 2006 Drivers’ Champion who just joined the McLaren team in 2007 was a huge favourite for the Drivers’ title in 2007. But things were not plain sailing because of the emergence of Lewis Hamilton. Lewis is in his first year as a Driver (each team has two drivers). In the middle of the year, there were rumblings from Fernando that he was not being according special treatment or even treated fairly, despite being the reigning Drivers’ Champion.

Despite Ron Dennis, McLaren Team Principal, coming out to declare that he would be fair to both drivers and support both equally for the championship, it was a little too late. And this is coming from a man who has managed two hugely talented and competitive drivers before Alain Prost and Ayrton Senna.

The point here is that when you have talents who are potentially in competition either directly or indirectly, then you need to manage them carefully and make sure that their expectations are in order. There is a saying in Chinese that a mountain cannot have two tigers. Anyone who places two tigers on one mountain had better make sure that both tigers are well managed in their expectation of each other. Because when the tigers fight, it is not just the tigers who will suffer, the whole mountain ecosystem actually suffers even more.

What Value to place on Experience (Lewis Hamilton’s meteoric rise)

There have been a lot of stories and accolades about Lewis Hamilton, the rookie driver, who has completely defied the odds to narrowly lose out to Kimi Raikkonen by just one championship point. In fact Lewis was leading Kimi by seven points and Fernando by four points going into the last race of the season. And if it was not a gearbox malfunction (which was reportedly no fault of his) which cost him about 30 seconds, I would most possibly be writing about him now as the 2007 Drivers’ Champion.

For a sport like Formula One, which is really the pinnacle of driving skill, experience and tenacity, it is totally incomprehensible to most that a driver could achieve such a result in his first season in Formula One. Some drivers try all their lives and probably do not even achieve half of Lewis’ success.

Lewis’ rise really makes a mockery of the value of experience and we see it in the world today where seniority based wage schemes are being discouraged. Of course, it would take a brave and and truly forward looking organization to carry out such wage and hiring reforms. But also because people with experience are already in senior positions in most firms and organizations and so they can be a natural barrier even to positive reform.

The point here is that experience should never be taken as an absolute. Just because Lewis is a first year driver, does not mean that he is less likely to succeed. In this case, the relevant facts are how many hours Lewis has spent on the driving simulator, his personal knowledge of the workings of the car and tracks as well as his personal makeup on whether he has the tenacity and temperament to be a formula one driver. Experience is not an absolute, the truly enlightened should look beyond it and examine more closely the relevant skillsets, expertise, knowledge and character.

Formula One is a Team Sport

A lot of fuss and publicity is often made about the drivers and their driving skill and style. But really for those who understand the sport, the driver is only one important aspect of Formula One. There are whole teams of people who contribute just as importantly to the success of the team. These include the design and testing team who are constantly working on the car design to shave off seconds or microseconds off lap times. There are the mechanics and engineers who fine-tune the car for each track, determining the right mix of downforce, straightline speed, tyre wear,  weight balance, suspension setting, maneuverability and pit stop strategy. They also religiously practise their pit-stop routines to perfection as even a second can make a difference come race day. There are also those who have the simple but enormous task of handling all the administration and logistics.

So while all the limelight is rightly on the drivers, since they are the leading actors on the formula one stage, there is a whole host of supporting cast that also have their various important parts to play. We seldom hear about or read about the rest of the team. We do not even know their names. But that should not detract from the fact that they are just as important to the success of the team.

The point here is simple. Not everyone in a team or firm or organization is in the limelight. It is not efficient and probably not appropriate for everyone to be in the limelight. But just because they are not on stage blowing their own trumpet, doesn’t mean that we should assume they are not doing any work or they do not contribute any significant effort. Being unsung should not be an excuse for the bosses to fail to recognize or reward their contributions.

For better or worse, I am sure you agree that land and capital are more easily managed than labour. That is why we have this entire movement of Human Resource Management. This is no rocket science despite all the human complexities. To execute good HR practices, we have to appreciate the basic Management Principles of Objectivity, Measurability, Tradeoffs and Implementation Friction. There is no solution to make everyone happy, but there is probably one or two that can maximize the return on human capital for the firm and organization.

Till next year’s Formula One season, which will include the new night race leg in Singapore, let’s wait in anticipation of more human drama.  

Any opinions or comments ?