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July 2007
Hendrick—Earnhardt Exhibit Classic Family Business Behavior
By John Paul Galles

     One man who lost his father joins another man who lost his son.

     Dale Earnhardt Jr. joining Rick Hendrick just might be a match made in heaven. Who knows whether Dale Sr. met up with Ricky Hendrick in heaven and inspired this combination to fill the voids left by their tragic departures from this earth? While it might seem difficult for Earnhardt Jr. fans to accept him driving for Hendrick Motorsports, hopefully they will come to appreciate how natural and comfortable a fit it will be.

      Dale Earnhardt’s departure from DEI and his agreement to race for Hendrick Motorsports is a classic illustration of the difficulties that exist within many family-owned businesses, as some members age and pass on while others grow up and mature wanting to assume greater ownership, leadership and decision-making authority. Without knowing the details of the situation and the expectations of the family members involved, it is clear Earnhardt Jr. has been unhappy for some time with DEI and discomfited by his inability to obtain a controlling interest in the company started by his father but run by his stepmother since his father’s demise in 2001. His exodus from DEI will certainly test the ability of DEI to continue the legacy of Earnhardt Sr. with competitive teams.

     At the same time, Hendrick Motorsports is still recovering from its own loss of Hendrick family members and friends in an awful plane crash outside of Martinsville, Va., in October of 2004. One of those who died was Hendrick’s son, Ricky, who had been a NASCAR driver himself. Hendrick’s relationship with his drivers is known to be extremely close; his entire operation is like family. They have all been through so much together.

     Running a small business is tough enough by itself, but working through the involvement of a spouse, parents, siblings, children or other family members presents even more obstacles and challenges. Achieving business harmony may work with one family member as leader and may not work with another. It is especially prudent for members of family businesses to discuss a succession strategy in the event of the unexpected and to prepare in advance a succession plan. It may very well be critical to their survival.

     Family firms make up almost 90 percent of all companies and 37 percent of the Fortune 500, yet only 30 percent of all family firms survive to the second generation. Most of these failures result from not recognizing the many unique issues that arise in closely held firms and not adequately planning for them. Most successful closely held and family firms seek outside expertise and regularly attend seminars to learn how to handle critical issues.

     Fortunately, there are local resources available to family businesses which specialize in just such issues. From organizations like the Wake Forest Family Business Center, very active in our region, to specialized practitioners like Robert Norris of the Wishart Norris, Henninger & Pittman law firm who specializes in succession planning, there are ample opportunities to address potential pitfalls and current crises.

When Earnhardt Jr. announced his decision to join Hendrick, his mother and sister were right by his side. He is leaving one family business and entering into new family business. We will be watching to see how DEI recovers from the family divided. We will also be watching to see how the Hendrick family accommodates this addition and what it will mean to other team members Jeff Gordon, Jimmie Johnson and Casey Mears. While business operations will be important, the individual spirits within the family businesses will have a major impact on their futures.

      For now, it appears to be a great combination. Earnhardt Jr. will be working for a highly successful team where he can apply his full attention to driving and winning. Just like any other family member, he will have to do his part to actively participate and communicate, whether it’s follow or lead, taking his lumps or winning with pride and humility.

      We wish them well!

John Paul Galles is the publisher of Greater Charlotte Biz.
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