“McLaren’s Most Foolish Move,” read the headlines in the world press on October 22, citing the way the McLaren team messed up the finals of the Formula 1 world championship in Brazil. Ferrari and driver Kimi Raikkonen were proclaimed world champions at a time when Ron Dennis, head of the McLaren Mercedes team, had two of the world’s best drivers at his disposal — Britain’s Lewis Hamilton and Spain’s Fernando Alonso. Dennis’s mistake, say management experts, was to base his strategy on setting off a personal battle between the two. They forgot that they shared a common goal — winning the gold medal for McLaren.


Alonso finished third in the competition but wound up smiling like a winner. He wanted to make it clear that he had not made any mistakes. In Spain, the victory of driver Kimi Raikkonen, who is from Finland, was celebrated as a big personal triumph. Why, given the fact that the Spaniard (Alonso) had lost?


Observers agree that the final race, where everything was decided, became more than just a battle between the Italian and English teams. They also agree that in both sports and business, competitiveness is a critical ingredient, but that you need to manage and control that competitiveness. According to Ignacio Urrutia, professor at the IESE business school in Spain, Ron Dennis and his team insisted that Hamilton was their “golden boy.” He needed to make history by winning the championship this year, the year of his debut. Dennis’s pigheaded attitude made him forget that Ferrari and Raikkonen, the icy Finn, were not going to give up. “Dennis and everyone around Hamilton made the mistake of believing that a newcomer could become world champion during his first year of competition,” says Urrutia.


Dennis’s Costly Mistake


Dennis, owner of the Anglo-German racing team, argued strongly that the more you divide your team and the more the members of your team fight one another, the greater the performance you can get from them. Championing this premise in a short-sighted effort to win, Dennis made his team look like the century’s worst fools, demanding too much from his drivers.


“He hired Fernando Alonso, a world champion, in order to guarantee that with a good car and Alonso’s experience as a two-time champion, McLaren would walk off with the grand prize. But he did not know how to manage the team,” says Sandalio Gómez, professor at IESE. In any company, “the more brilliant the people you have, the harder it is to create a good team. That’s because you make those people your priority. In order to get your team into good shape, each person has to contribute everything he or she knows and put that to use in pursuing the same goals.” That’s where Ron Dennis failed. His goal was to win the world championship. Says Gómez: He “hired Alonso to do that, but halfway through [the competition] he noticed that Hamilton could copy all of Alonso’s moves, so he changed his goal. His mistake was to change his objective halfway down the road.”


Hamilton’s mistake, say the experts, was that he failed to learn from Alonso, although he was aware that Alonso had been champion for two consecutive seasons. “Hamilton needed to learn from Alonso, not to try to outdo him. He displayed a great deal of short-term ambition,” says Gómez. During his training period, adds Urrutia, they didn’t have any good advisor. They needed someone “who could have explained that this was not the year to win but that he [Hamilton] could learn from Alonso, who had beaten the big drivers of Formula 1.”


According to Gómez, “Dennis depended entirely on a driver who did not have experience and he wound up losing everything.” Dennis also erred by over-estimating Hamilton. At the beginning of the season, almost no one thought that the Englishman would bring home the world championship. But the pressure grew, to the degree that people started to believe that Hamilton could do just that. No one advised Dennis that he was simply a Formula 1 racing driver. Eduardo Fernandez-Cantelli, professor at the Instituto de Empresa (IE) business school in Spain, notes that Dennis “underestimated Alonso and, on the contrary, overestimated Hamilton. That was his failing.”


In any environment so competitive, you also need managers who hunger for competition. “You need very good people, but you have to set a goal, use your resources and make adjustments that help the company,” notes Urrutia. Or, as Fernandez-Cantelli puts it, “Dennis managed to bring together today’s two best drivers but at the moment of truth, they were not competitive.”


Fernandez-Cantelli argues that Dennis’s mistake was that “he did not figure out how to maximize the two drivers’ strengths.” Urrutia suggests that this mistake stemmed from the fact that Ferrari, his most direct rival, was not competing the same way as he was. “There are companies that like to get their entire team angry in order to get the best out of each team member, even though the team members don’t feel comfortable with that approach. Success will come if the entire organization moves in the same direction.”


For Pedro Parada, professor at ESADE, this was simply a case of a failed strategy. “Dennis bet on a strategy that did not work — generating hyper-competitiveness among his drivers. He wanted one of the two drivers to win. Another option would have been to play them as a team in order to beat Ferrari but he wanted to win this particular way. This is a very respectable strategy but it didn’t work out here.” Urrutia believes that Dennis forgot that Ferrari was his direct competitor. Ferrari, says Urrutia, “showed what it means to work as a good team.”


Santander and Bankinter


Hamilton’s only competitor was Alonso, and he wound up unbalancing his own team, say the experts. “Dennis hired Alonso because he was ranked number-one, and his goal was for McLaren to benefit from having a champion onboard the team,” says Gómez. “Halfway down the road, he decided that Hamilton was now the real star of the team, so he relegated Alonso to secondary status. That’s the moment when the internal competition began.” The only difference between McLaren’s strategy and Ferrari’s, says Parada, is that McLaren wanted to win by creating a competition that would get the best out of each driver while Ferrari opted for team collaboration [rather than competition]. “But both of these strategies are totally acceptable,” notes Parada. “We can compare this situation with banks. The strategy of Santander, for example, is based on globalization, acquisitions and greater efficiencies. Bankinter, for its part, only operates in Spain. Its growth is organic and it focuses on differentiating itself. When we have two distinct strategies, how can we argue that one is better than the other one?” asks Parada.


With racing teams, just as with companies, you can establish internal competition, but some goals will come into conflict that way. The ultimate goal of any company or team is to win. This approach is totally compatible with the private interests of an employee or a driver, say the academics. “Workers need to give priority to the interests of their team over their personal interests. That means making a super-human effort to think about others. This doesn’t mean that, on an individual level, a person doesn’t want to shine within the company,” says Gómez.


He adds that when a company decides to make personal goals compatible with its corporate goals, it must work hard on various levels. First, “You have to define the goals of a strong company and make the goals of each department complementary with each other.” Second, your compensation should be “tied to the business results of your team.” Next, there are professional considerations. “You have to make each employee a participant, and each must be aware that the ultimate goals of the group also depend on their personal collaboration.”


Finally, “you have to make professionals realize that they have to collaborate with others in achieving a common goal.” The work of the manager is to achieve this objective. “You have to show your staff that the company is something they share. Learning how to manage means building loyalty and solidarity from everyone about a shared goal,” says Gómez, adding, however, that he does not believe that success can be taken for granted. “You have to learn how to manage with a single system. If you don’t do that, look at what happened to McLaren: It had the best cars, the top drivers, and an unbeatable sponsor. But that wasn’t enough. McLaren lacked internal coherence.”


In any organization, say the experts, it’s difficult to get support from the best people, take advantage of their potential and achieve a high level of competitiveness and commitment, all while maintaining a hunger for competition. The big mistake Dennis made was “to put his personal goal first – that is, to have an English champion – over the goal of his racing team, which was to win the competition,” says Urrutia. It is possible to take advantage of a high level of competition within the organization, “but there are no guarantees,” Urrutia adds.


Luck and Lots of Perseverance


Ferrari took the opposite approach. Experts say that Ferrari had many excuses for giving up early, but the Italian team persevered, operating with the idea that so long as there is life, there is hope. They came out looking like professionals, and demonstrated that they could form a real team in a sport that is quite individualistic. The two men on the team — Jean Todt, its head, and Kimi Raikkonen, its super-driver — wanted to achieve the same end: to crown Ferrari as the winner. Teamwork, say the experts, was the key to Ferrari’s success.


“This is a team that has always competed for the title, and it has a very deeply rooted culture,” says Urrutia. Its success depended on a little bit of luck and a great deal of perseverance. “Being hungry for a win and persevering so much; that’s what led them to victory. Ferrari had nothing to lose and so much to gain.” For his part, Fernandez-Cantelli argues that “the prudence they showed, their sound management of resources along the way and the fact that they have more experience than McLaren in managing under these conditions; all these factors were the keys that opened the door to success for Ferrari.”


Ferrari is the only racing team that has competed in every Formula 1 since 1950. “The foundations for Ferrari’s victory were perseverance and tenacity; continuing the fight even when everything was almost lost, even when McLaren had won the first part of the competition,” Gómez says. “Ferrari also continued to improve so that Raikkonen could become world champion.” Parada argues that Ferrari’s success came from “focusing on beating one competitor – McLaren – and depending entirely on one driver, Raikkonen.”


Although the Ferrari team won, the experts agreed that Britain’s Bernie Ecclestone, who had won the Formula 1 before, was the big star among many stars. “The sport needs competition, and Ecclestone managed to maintain a level of competitive interest until the last turn around the Brazilian track. It had been a long time since anyone experienced a Formula 1 that had so much passion,” says Gómez. Along the same lines, Urrutia maintains that in the era of Michael Schumacher (a former Formula 1 driver and seven-time world champion), fascination about the Formula 1 had fallen off. “When you know who is going to win, 99% of the time, the thrill is entirely gone. Ecclestone showed that in a final race, anything can happen as it did in this race. Nothing was decided until the final minutes.”


Setting the Same Goal


Given current conditions, who is going to share a racing team with McLaren’s protégé? “McLaren has to wonder now if they want to continue to go with Hamilton or get someone else and make him [Hamilton] the second-ranked player on the team,” says Gómez. Urrutia advises McLaren to sign up a driver who, from the outset, accepts the idea that Hamilton is going to be the leader of the team. “It’s been shown that you can’t have two champions on the same racing team.” The big problems facing McLaren are “how to build confidence and clean up its image, and to figure out which driver to rely on in the next world competition.”


Over the course of history, Dennis will be recorded as an example of all the things that a good manager must avoid doing, says Gómez. “The damage is irreparable. We were talking about being number one, and lots of money was at stake. He [Dennis] is an irresponsible person.” Nevertheless, Gómez is convinced that the hard part is to create any team that has two stars. “Just as in a company, stars have to put themselves at the service of the company or the team. They must comply with its global goals.”


Parada is much more optimistic, arguing that Dennis has not been branded for life as a bad manager. “He is simply one type of manager. He depended on one strategy and it turned out poorly. He relied on internal competitiveness. There are many companies where things turn out very well using this strategy.” For his part, Fernandez-Cantelli also thinks that it is not at all obvious that Dennis has ruined his professional career. “He has lost a battle but not the war. Besides, people don’t harbor grudges when they look back at sports events. If Dennis manages to make history next year, everyone will forget what happened in this world championship. In any case, you have to hold your head up high even if you continue to fail.”


Several lessons can be learned from this story, say the business professors. According to Gómez, “It demonstrated that it is very hard to manage a team made up of stars. What’s important is to set a goal and a strategy, and to maintain that over time. You have to make decisions that strengthen the team and lead it toward the goal your team set out to pursue.” Urrutia says that as a manager, Dennis’s main problem was “his inability to understand who his competition was. There are a lot of companies where people occasionally don’t know that there are people within their own team who are competing with one another.” Fernandez-Cantelli attributes only one failing to Dennis – “his failure to squeeze everything possible out of the resources at his disposal.” For Parada, the major lesson learned in this mess is to “depend on the best talent but realize that success is not always guaranteed.”