Richard O’Driscoll, chief financial officer of Jordan Grand Prix, is not an accountant. In fact he has no finance, economics or commerce degree of any kind.
And if you ask him what his professional qualification is, he would probably tell you, tongue-in-cheek, that he has a QBE – ‘qualified by experience’.
Indeed, this burly, determined Irishman, who hails from Kinsale in County Cork, has risen to his position as head of finance at one of the more successful independent Formula One racing teams almost by ‘experience’ alone, and by coping with what he describes as a ‘very steep’ learning curve.
O’Driscoll’s career with Jordan Grand Prix began in 1992 when Formula One maverick Eddie Jordan persuaded him to leave a 15-year career at Allied Irish Bank and try his hand at running the finances of the fledgling racing team.
Eleven years and 11 Grand Prix seasons later, he and the legendary ‘Eddie’ have developed a robust, agile, entrepreneurial £55m racing business.
The company has not only survived the mercilessly competitive world of Formula One, overcome tough economic conditions and financial worries, but also triumphed on the racetrack.
While its successes on the track might hardly seem worth shouting about – just four wins out of more than 200 races to date – it is one of only four of the current competing teams – including Ferrari, McLaren and Williams – to have ever won a race.
From a financial point of view, when O’Driscoll first joined Jordan in 1992, it was immediately apparent that things would need to change. He explains that the company, which had revenues of just £10m ‘was also devoid of any financial reporting system’.
‘With the help of KPMG, who we brought in as auditors, we implemented some very robust financial procedures and techniques, which have stood the test of time.’
O’Driscoll says he was honest and recognised that in the early days his accounting skills were a problem, and so he enlisted the help of KPMG to set up the best reporting and budgeting systems to manage the business.
Today the changes are obvious. In 1992, when the company had only been racing for a year, running the finances would involve a meeting between O’Driscoll and the company bookkeeper.
Today the business has a dedicated finance function, run by Peter Young, a chartered accountant formerly with KPMG in Leeds.
Young says O’Driscoll allows him to manage his own department, but is always there when advice is needed. As testimony to this, he describes O’Driscoll as ‘one of the few people I trust in the business’.
O’Driscoll says he no longer gets involved in ‘hardcore book-keeping’, admitting that ‘Young is technically far superior to me’.
Similarly Roy Summerfield, factory manager at Jordan, describes O’Driscoll as a ‘good boss’ who allows him the space he needs to do his job, while HR manager Dot Shipperley describes him as ‘fair and tough’ but not afraid to make a decision.
These hallmarks of letting people do their jobs, but making decisions and taking action when necessary owes much to his relationship with Eddie.
‘What I have learned from Eddie is delegation. To delegate properly you need to have the right kind of team surrounding you.’ This skill is vital as O’Driscoll is also responsible for IT, administration, human resources and legal affairs at the company.
Operating efficiently is absolutely essential for an independent racing team. Jordan does not have access to the kind of capital a team like Ferrari has, which has been bankrolled by Fiat for almost 50 years, or Williams, which has ties with BMW.
Instead, O’Driscoll must ensure the company has the income to match its expenditure, but he says the real trick is to ‘judge in real terms what prospects there are for potential sales’.
Forecasting future sales allows O’Driscoll to develop a business model that the racing team can use to budget on items such as test cars, test personnel and wind tunnels.
O’Driscoll describes the mood at Jordan as very entrepreneurial, but not for the faint-hearted. Still, he says, if you look at the accounts over the years, Jordan has made more profits than losses.
Innovation has also been at the heart of the company’s finances. In 1998, O’Driscoll involved venture capital firm Warburg Pincus as a private equity investor, and was the first Formula One team to do so. Along with the Eddie Jordan Family Trust, the firm is the only other shareholder in the business.
As investor and minority shareholder, Warburg Pincus plays a corporate governance role (as a private company, Jordan does not have non-executive directors) by helping to ensure Jordan is aware of its obligations and by providing what would be an otherwise absent ‘degree of scrutiny’.
Key to meeting these obligations is generating the necessary revenue streams. According to O’Driscoll, between 60% and 80% of revenue comes from sponsorship, with the remainder coming from areas such as television and video rights and from racing successes.
For Jordan, sponsorship is a prerequisite to staying in business, something O’Driscoll says most of his competitors do not have to worry about. Unlike Ferrari, Williams and McLaren, Jordan does not have a holding company willing to write a cheque.
But winning sponsorship is a battle in itself: ‘We have to compete with the Olympics, the World Cup, the UEFA Cup, Champions league, the Premiership, the PGA and the US PGA for sponsorship,’ O’Driscoll explains.
‘The good thing about Formula One is that its TV audience is huge: on average 300 million people tune in to watch each race.’
But, as is the nature of the sport, it’s not all plain sailing. Benson & Hedges has been a key sponsor of Jordan since 1996, but this could become an ‘issue’ when new EU legislation banning tobacco advertising comes into place in August 2004.
O’Driscoll says the natural replacements to tobacco sponsors were expected to be found in the IT and telecom sectors, but they are no longer in a position to replace them.
‘They just don’t generate the amount of success that the tobacco companies generate. We have to be mindful of that,’ he says.
Jordan, like other independents, such as Minardi and Sauber, is looking to other areas for potential sponsors, with eyes on the financial sector.
He explains: ‘(The finance houses) have a need to rebrand their products and a need for corporate hospitality and of course they are global businesses so they fit in well with Formula One.’
Besides sponsorship worries, O’Driscoll says that red tape over the past few years with regard to protecting staff has made it harder to extricate underperformers, while accounting rules are becoming tougher every day, even for a private company like Jordan.
‘Because of its high profile, Jordan Grand Prix gets all the attention of a UK plc,’ he says.
And then there was the so-called near collapse of Jordan in 2002, which suggested something of a crisis among the independent teams in the sport following the loss of Arrows and Prost.
But O’Driscoll is quick to dismiss media reports at the time as ‘ill informed’. He described the measures taken back then, including a workforce cull, as ‘proactive steps to reduce our cost base’, which were wrongly perceived by the press as a sign of weakness. ‘In actual fact, we were pre-empting a downturn in the market and reducing our cost base appropriately. Teams that didn’t are not around now to tell the tale.’
Clearly in Formula One, big is not always better, especially for the independent teams. O’Driscoll explains: ‘In 1999, we finished the season in third position in both the drivers’ championship and the constructors’ championship (Jordan’s best-ever result). We felt we were in a great position to challenge the traditional leaders of Formula One and believed that the only way we could realistically do that was by expansion.
‘In hindsight, we probably did not manage that exercise terribly well. In 2001/02 we reduced the number of staff to the level they are at today – 200 personnel – and funnily enough we have started winning races again.’
Indeed, in April this year, Jordan driver Giancarlo Fisichella won the Brazilian Grand Prix.
But O’Driscoll’s primary thoughts are no longer on past triumphs or this season’s racing. In terms of securing income, ‘that business has already been done’.
Instead, his thoughts turn to the 2004/05 season and securing the level of income necessary for Jordan to be on the starting grid in Melbourne in 2004.
He remains hopeful: ‘The independents are going through a difficult time at the moment, but there could be a resurgence in 2004/05. Formula One needs colourful characters and mavericks like Eddie. The public will start losing interest if you only have 10 corporations towing the line.’
Sadly, for the ruddy-cheeked Irishman, this means it is unlikely that he will get to work on one of his other great passions – golf.
‘I’m a 14 handicap and not really playing to it at the moment. I need more time, Eddie!’
WORKING CLOSELY WITH COLLEAGUES
Roy Summerfield, factory manager, Jordan Grand Prix:
‘It’s relatively recently that Richard’s responsibility has encompassed that of facilities management and health and safety. He demonstrates a commitment and desire to build a profitable organisation but one which also maintains a safe, prestigious and functional environment.
‘He has established a strong working relationship with me and I have benefited from his logical approach. As a good boss should, Richard allows me to do my job by distancing himself enough, but he keeps his finger on the pulse. He will always lend an ear should it be required.
‘Not one for mincing his words, he has a wicked sense of humour, which could shock the uninitiated. He’s a good character who has earned my respect.’
Joseph Schull, MD of Jordan investor Warburg Pincus International:
‘What has impressed me most about Richard is that he understands the uniqueness of the Formula One business but is not blinded by it: he insists on applying the same financial discipline and perspective that needs to be brought to any business and does so with a consistent focus on long-term value creation. He is also an effective communicator. This is particularly important in a business that is as technology and engineering driven as Formula One and where it is critical for the finance director to secure company-wide buy-in for critical budgeting and financial planning processes.’
Richard Young, company accountant, Jordan Grand Prix:
‘Richard’s longstanding relationship with Eddie Jordan is extremely important to the stability of the business. Richard has proved that he can take control and successfully manage an unusual business in difficult times. I have learned a great deal from him. He can be harsh, but is very fair.’
Dot Shipperley, HR manager, Jordan Grand Prix:
‘I have worked closely with Richard on some difficult HR issues and find him to be a very fair and thorough in his approach to ‘people’ issues. He tackles problems head on and is not afraid to make decisions. It is demanding working for him – he keeps me on my toes, but he is very supportive.’