What NFPs can learn from F1
I spent a weekend painting a room, which is a great excuse for a four hour podcast (on someone’s recommendation; whose?). Acquired’s Formula 1 episode is a wild ride. I kept stopping the podcast, and the painting, to take notes.
Bernie Ecclestone started out selling second-hand cars on the outskirts of London, and by the time he was finished he had run Formula 1 for 45 years and been the highest paid executive in Britain. He turned a shambolic enthusiasts’ racing series into one of the world’s biggest sports. Acquired quotes team owner Eddie Jordan: Ecclestone sold Formula 1 four times, never bought it back, never lost control of it, and never owned it in the first place.
Formula 1 in the 1970s was not an organisation. It was a strange ecosystem of parties with divergent interests who both needed each other and resented each other. The Grand Prix races each had their own promoter and their own track. The teams each built their own car; most went broke doing it. The Federation Internationale de l’Automobile (FIA) wrote the rules but ran nothing. Every team negotiated separately with every race, which meant roughly 135 separate agreements in a season and no way for a spectator to know in advance which teams would turn up. Never mind the drivers, changing teams when it suited them.
Ecclestone inserted himself into the middle of this mess. He negotiated for everyone with everyone else, creaming a percentage off each time. While everyone else was trying to host or win races, he built the connective tissue between them and pocketed a portion of every transaction. He never built any coherence, because there was no position from which coherence could be created. The rules body had no commercial stake. The tracks sold tickets. The teams built cars. Nobody was in really control, and Bernie made money while the system creaked.
The same shape, higher stakes
Many NFP sectors in Australia have the same shape at much higher stakes than twenty cars speeding in circles. To take health as an example: the Commonwealth funds primary care, the Pharmaceutical Benefits Scheme and aged care. The jurisdictions run hospitals, ambulance services and community health. The Australian Health Practitioner Regulation Agency (AHPRA), the Therapeutic Goods Administration (TGA) and the Aged Care Quality and Safety Commission set rules and deliver nothing. Private insurers have multiple connections and are starting their own health delivery services.
Like F1, the system grew organically by layering rather than intentionally by design, and it is held together by a funding agreement renegotiated every few years. Formula 1’s Concorde Agreement does a similar job: a periodic settlement that keeps the parts connected while nobody is really in charge.
There is one big difference. The tensions in Formula 1 mostly pointed in one direction; everyone wanted bigger spectacle, more fans and more money. In NFPs the same ecosystem logic produces negative effects such as workforce poaching, confusion of partner with competitor, and competition for scarce funding.
Three assumptions that leave a board exposed
Most NFP organisations sit inside a system of this kind. Boards do their work at the level of their own organisation, which is the only level they control, and they carry a working picture of the system around it. Three versions of that picture cause trouble.
We all agree we are all good people
The other organisations in the system share our purpose, so their movements and ours are natural allyship. This is comfortable and it is about half true. Shared purpose and divergent interest sit together easily. Two organisations with the same purpose still compete for the same workforce and the same minister’s attention.
We think the background is static
Funding models, policy settings and referral pathways get treated as fixed conditions of the work. They are not. Boards can focus inwards and miss how the system around them is shifting.
We believe the system will give us a soft landing
Nobody is in charge of the whole system. There is no parent who will collect us when we miss the last train. There are funders with their own constraints, regulators who set rules and run nothing, and peers with their own problems.
Why this catches NFPs so badly
The sector’s self-image does the damage. Collaboration and a shared mission are real and valuable, but they also obscure that shifts in the external environment do not only happen because of bad actors. You can be hurt by someone else’s sensible decision.
The pattern that follows is familiar. External pressure builds, genuine pressure that everyone in the sector faces. The organisation names it accurately (funding is too low, the system is poorly structured), and then puts its energy into the external problem and away from the parts of the operation the board actually controls. Advocacy to improve the system is worth doing but advocacy on the basis that once they hear our truth they will fix the problem is not a strategy.
What is left to act on?
A board can only act on two things. It can read the system around it as live and dynamic; like an ecosystem, the tree is not intentionally shading the flowers beneath, but the flowers suffer nonetheless. And it can keep its own organisation viable on its own terms, on the assumption that no rescue is coming, because in a system nobody owns, none is.
As many organisations start to think about renewing their strategy over the coming year, three questions are worth putting on the table:
How are we watching the external environment?
What choices would we make if we stopped reading our ecosystem as benign?
What would we do differently if we fully understood that no rescue is coming?
Coda
One other point from the podcast is worth mentioning. They apply Hamilton Helmer’s 7 Powers to Formula 1 teams and conclude that operational excellence is the only route to winning. There is no new product a team can offer, because the rules define the car and you cannot turn up in a jet aircraft. There are no customers to lock in. So the teams endlessly tweak tiny details - a tenth of a millimeter change in the diameter of a tube might make the difference between winning and losing.
Many NFPs discount operational excellence as a route to success. Values alignment and sector background often matter more in hiring than specialist skills in non-sector functions, which replicates the existing strengths and weaknesses of the ecosystem. Board agendas often focus on compliance and strategic initiatives, and miss the potential in ratcheting up operational excellence over time.
I toured a hospital once where the staff room showcased examples of staff-led change. When I was there, it cited shuffling storage spaces, high use at chest level and low use at knee level, as leading to improved care outcomes, and asked for more staff ideas.
How might an NFP’s strategy set ongoing compounding improvement as a long-term goal, to be owned, resourced, led and monitored?
First published in Strategy, Applied.
