Why Your Finance Team Should Operate Like A Formula 1 Team.
My passion for Formula One was driven primarily by the Netflix Documentary Drive to Survive. If you’re unfamiliar with Formula One or Netflix (really?), give it a shot. F1 is a team sport. It is a team sport with a high emphasis on building efficiencies in the ‘back-office’ to put points on the board on the track. Naturally, I paralleled much of what F1 does to how a finance team operates. Here are several of my observations.
Everyone is accountable for performance
In F1, the Commercial Team identifies sponsors to fill the budget for the engineers to deliver the best product to the on-track team. The Pit Crew ensures that the drivers are as prepared as possible for their race. The Team Boss manages the race day and long-term team strategy. The Drivers tirelessly train and execute. If a single member of the team fails to deliver, the entire team suffers.
Similarly, in your finance department, you must create efficiency and accuracy across the entire vertical in order to deliver results — systems, people, process, reporting, etc. Your accountants manage the day-to-day that feeds into your reporting processes. Your Controller manages the technical accounting, monthly reporting, and elements of your forecasting/budgeting. Your CFO is driving the team, distilling the data, and looking for the levers to pull in order to continue growth.
Role delineation is incredibly important
Have you seen a sub 2-second pit stop in Formula 1? Hint: It’s a work of art. Incredible. (Here are the top 10 fastest pit stops of 2021 thus far)
Every single member of an F1 team is responsible for a specific task or series of tasks. Those responsibilities are very clearly articulated at the start of each season and countless hours are dedicated to honing their craft. If the front-left tire guy runs out to change the front-right tire, the single (5-second) failure can ruin the team’s chance to win the race.
In order to create efficiencies and reduce redundancy in your finance department, each member of your team and outside partners (tax, audit, fractional resources, etc.) should have their processes clearly documented. Policy and procedure documentation is critical when it comes to role delineation, ease of bringing on new partners, reducing transition time, and smooth facilitation of the M&A process.
Set yourself up for consistency and repeatability
Winning a race in F1 is incredibly challenging. Winning a Constructor’s Championship in F1 takes a tremendous amount of consistently performing at the highest level and winning many races throughout the season.
The key to season-long high performance is to create repeatable processes and data output that guides decision making. A Team Boss is only as effective as the quality of information they are given. When they receive consistent data that is easily measurable, it allows them to pull the right levers time and time again.
A great example of data input to guide decision making comes from the 2021 Russian GP where Mercedes Head of Trackside Engineering, Andrew Shovlin, says his outfit was boosted by knowledge of how the tyres were performing on team’s car (Mercedes tyre gamble). They won the race after quickly shifting strategies mid-race.
Likewise, when your CFO is equipped with quality data inputs from your accounting team — in a consistent and comparable fashion, you are enabling your CFO to make effective data-driven decisions. The consistency and repeatability is a culmination of having effective systems, processes, controls and role delineation. It all comes together beautifully.
It may take a village, but it’s all about how that village is run. Think about how you can build an F1-like finance department — if done correctly, it may help you win more races, improve your margins, and make more consistent meaningful decisions for your business.
