While Formula 1 has captivated audiences around the world for many decades, the recent introduction of Drive to Survive by Netflix has introduced many new viewers to the thrilling sport of professional motor racing. As an F1 fan, I’m ecstatic to finally discuss the interest more broadly with my colleagues — step aside Sunday Night Football, hello Sunday morning Grand Prix.
Competition breeds innovation and I can’t think of a better example where this is so fundamental than in Formula 1. A core piece to sustain innovation is attracting and retaining talent, as well as actively keeping top talent from joining your closest rivals. Thus, there are many lessons in F1 that could provide business leaders some principles in managing critical talent in a competitive market.
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What’s fascinating about F1 as a sport is the unique combination of athlete, machine, and team — with both a constructor’s championship as well as a driver’s championship (the former determined by the sum of their drivers’ individual points throughout a season). Besides their machine counterparts, each driver also has a “teammate” — and unlike any other sport, your teammate can be your greatest rival as there can only be one winner! The entire grid comprises only 20 drivers each season. When any driver moves from one team to another, it usually sets off a chain reaction of musical chairs. It’s a fitting analogy as it is common for a veteran driver to be without a seat when the dust settles with young guns moving up from a feeder series.
In this post, the drivers will take a backseat as we focus on the broader talent and organization that makes a F1 team.
How hard is it to make a car go ‘round?
On any given GP weekend, the casual observer will see 20 cars, each with 2 drivers belonging to a constructor. Each constructor will have their pit crew + field operations, which looks like to be somewhere in the ~50 personnel range.
What may surprise you thereafter is that some teams have more than 800 staffers back at HQ (not counting shared resources with parent companies and other subsidiaries!). That’s an astonishing athlete to staff ratio of 1:400.
Within this analysis however, we can see drastic disparity between the front and the back of the grid. Haas, being the youngest team on grid (2016 entry) has fewer than 200 team members, with a ratio of 1:100 and yet they compete in the same arena as the likes of Mercedes and Red Bull. This lack of resources has translated clearly to their poor performances to-date (currently sitting dead last in 2021 with zero points scored).
You might be wondering “why do you need these many people to run a car?” Consider the following:
- Constructors are building a new car every single year
- Parts are custom made and are at the cutting-edge of technology
- Most competitive cars are running within a tenth of a second of each other in qualifying — the slightest advantage in pace from an innovative part can mean all the difference
- You can choose to buy some parts from other constructors (if they’re willing to sell - e.g. Mercedes motors), which becomes a double-edged sword — your supplier intimately knows your build and you will have no advantage in that department but you can then focus on other areas of development, which can create a stronger competitive advantage (classic build vs. buy that we see in software development everywhere)
- The more custom (and theoretically, more competitive) your car is, the more people you’ll need, with diminishing returns to scale
- Then tack on all the business operations folks (e.g. marketing & sponsorships — have you seen the number of logos on these cars and drivers?)
Winners keep winning
In the past decade, we have seen strong repeat performances from a few constructors, usually resulting in back-to-back titles and it’s no surprise then to see their relative abundance of resources come through in their team headcount. Even the end of Red Bull’s streak and the ushering in of the Mercedes era can be seen through headcount.
A significant portion of the team size disparity and trend can be explained through F1’s distribution of resources. Without getting into too much detail, the largest contributing factors to redistribution of earnings to teams are related to:
- Past Performance (various constructor’s championship bonuses)
- Continuity in series (long-standing teams, heritage teams)
Additionally, stronger performing teams will be able to command higher sponsorship packages with longer contract durations, which provides budget stability.
With this in mind, you can see how difficult it is for new teams to survive and thrive in modern F1.
Everyone wants to be on the winning team
I think very key as well to [Mercedes’] success is this continuity — they have the same people there for like 10 years, all the same people…you can believe it that Red Bull and Ferrari have been offering these people 20% more salary every year
Nico Rosberg (2016 F1 Champion)
Taking a look at company tenure and career experience, Rosberg’s insight does seem true when we compare the front to the back markers with Mercedes vs. Haas on total career experience of their engineering crew.
However, looking at company tenure between Mercedes and Red Bull, there isn’t much difference between them — in fact, Red Bull seems to have had their team under one roof together for longer.
Given the unique skillsets of talent who work in Formula 1, it’s not uncommon to see teams hiring away (or “poaching”) from each other. If we look at Red Bull’s top sources and destinations over the past 5 years, they are almost exclusively other Formula 1 teams or related subsidiaries. Looking at top sources, we observe that Red Bull has had success hiring away Mercedes as of late.
On the flip side, Red Bull is only losing a few employees to Mercedes. If the first half of the 2021 season is any indication (with Mercedes now yielding to Red Bull in current standings on both driver’s championship and constructor’s championship), we could see an end to Mercedes’ 7-year winning streak.
Using modern Formula 1 as a case study, we can see how outside-in talent data can be used creatively and effectively to:
- Understand the “back-end” required to operate an elite customer-facing front-end
- See the positive flywheel of a “winning culture” that can be analyzed through tenure and attrition