A New Will to Win

October 14th, 2010 by Daniel McGinn

How a NASCAR team owner got his company back on track after losing his senior management group--and son--in a 2004 plane crash.

Brought to you by Liberty Mutual's
The Responsibility Project

Rick Hendrick was driving home from lunch on a Sunday afternoon in 2004 when his cell phone rang. A longtime employee was on the line, and he nervously asked the boss to pull over so they could talk.

Hendrick was 55 years old. He owned a $3 billion chain of automotive dealerships and a 460-employee NASCAR racing operation. As he eased his BMW X5 off the road, he figured there’d been a wreck at that afternoon’s race and that one of his drivers was injured.

In fact, the news was far worse. A company plane en route to the race had disappeared from the radar. Initial reports said it carried 10 passengers, including Hendrick’s only son, Ricky, age 24; his brother, John, 53, who was the racing company’s president; two nieces; two of his top managers; and two other employees. “At first I thought they just had to fly somewhere else to land because of the weather, and they were OK,” Hendrick says. So he began dialing the passengers’ cell phones. “That’s when I knew something was wrong—if they’d been on the ground, they would have answered.” He drove home, told his wife, Linda, what had happened, and waited. By midafternoon authorities had located the crash and notified the Hendrick family that there were no survivors. “They’re very strong Christian people—they were devastated, but everybody prayed,” says Felix Sabates, a close friend and rival NASCAR team owner who was with them. “It was a tough day.”

For the family, the events of October 24, 2004, were a personal tragedy. And for the racing business, Hendrick Motorsports, the accident had far-reaching business consequences. Aside from Hendrick, who served as CEO, the company’s entire leadership group was on board the plane when it hit Bull Mountain, and Ricky was being groomed to take over the operation. The next morning everyone wondered if it would survive. “It’s just human nature to ask yourself that question,” says Mike Helton, NASCAR’s president. “How could his organization get through this?”

Hendrick had grown up around racing. His father worked on race cars, and in his teens and twenties Rick raced stock cars and powerboats. At 22 he became a car salesman, by 26 he’d become the youngest Chevrolet dealer in the U.S., and by the early 1990s Hendrick Automotive was one of the country’s largest dealership groups. Along the way, Hendrick had created a successful NASCAR franchise by pioneering the idea that one owner could support multiple drivers, spreading fixed costs over several teams—a practice that’s now standard.

Hendrick had faced serious adversity before. In 1996 he was diagnosed with leukemia; doctors didn’t expect him to survive. Only days later he was indicted on federal bribery charges in a case involving payments to Honda executives. Rather than enduring a trial while undergoing treatment for an illness that might kill him, he pled guilty to mail fraud and served a year of home confinement as he fought the cancer into remission. He was pardoned by President Clinton in 2000, at which point he’d returned to running his businesses. By 2004, Ricky, who’d driven in NASCAR’s Craftsman Truck and Busch series, had retired from driving and was learning to run the Motorsports company. “My goal was to start weaning myself away and to let Ricky move up,” Hendrick says.

The morning after the plane crash, employees were paralyzed. There was a race in six days, but no one knew if Hendrick’s teams would even compete. Ken Howes, the company’s chief of competition, gathered the shaken employees and delivered a simple message: “We’re going to race, because that’s what we do.” On Wednesday hundreds of people showed up for a public memorial service; the next two days were consumed by funerals. A week after the crash, Hendrick driver Jimmie Johnson won the Bass Pro Shops MBNA 500 while Rick Hendrick watched on television at home.

Eight days after the plane crash, Hendrick returned to the racing operation’s 100-acre campus for the first time. “When I left home that morning, I wasn’t sure if I could get over what happened and walk in here,” he says. In front of employees, however, he was resolute. “For him to stand in front of close to 500 employees at that time and say, ‘Listen, we’re going to get through this, and we’re going to do it together’—it was unbelievable,” says Jeff Gordon, the four-time NASCAR Cup Series champion who’s driven for Hendrick since 1993. “That moment made us as a group stronger than we’ve ever been.”

The crash caused the company to replace a centralized management structure with a more collaborative culture led by a joint leadership team. Previously, Hendrick Motorsports operated informally, with critical technical knowledge carried mostly in key employees’ heads. Hendrick decided that a triumvirate of old and new talent should take the business forward. He appointed his son-in-law, Marshall Carlson, a company veteran, to be general manager—providing proof that the family was still committed to it. He promoted Howes, who’d taken charge in the hours after the crash, to vice president and hired Doug Duchardt, who oversaw General Motors’ racing program, as another VP.

To overcome the gaps in their knowledge, the three leaders set up offices a few steps apart—and spent much of their days in a conference room, hashing out decisions. Howes provided valuable historical context, and Duchardt brought a fresh set of eyes. “We spent a lot of time making sure we were on the same page,” Duchardt says. The owner was a distant presence in the first months after the accident, but friends say that was a smart move. “He was able to separate his grief from the business,” says Sabates. “Rick has great people, and he let those people run with the ball until he was able to come back and take over.”

Managers say the new setup forced them to become more collaborative. While each of Hendrick’s four teams has its own cars, driver, and crew chief, the teams share resources (like engineering talent) and information (like technical data on tire pressure or suspension), even though the drivers race against one another. Hendrick has long tried to incentivize cooperation—for instance, all the teams get a bonus if any of the four drivers wins a race—but managers say the cultural shift after the crash made them work together even better. “That’s been our secret weapon—the fact that Rick can get extremely talented, motivated, driven, competitive people to communicate, support each other, and share best practices,” Carlson says.

Since the crash, Rick Hendrick has become fanatical about contingency planning. In meetings, he now routinely asks, “What’s the backup?” He’s especially concerned that technical, legal, and financial information is shared among multiple managers. “We definitely think about how many people are going to understand what’s going on in here. We don’t want it to be only one person,” Carlson says.

When it comes to travel, top managers no longer fly together on the same aircraft, and everyone is extremely cautious about flying in dicey weather. In addition to a standard estate plan, Hendrick now keeps a written succession document, detailing how responsibilities will be divided in both the automotive and the racing groups upon his death. He updates it with his lawyers every 90 days. “We call it our bible,” Hendrick says. “I know from experience—you have to be prepared.”

He says the crash has made him more conservative in setting strategy. “I used to throw for the end zone all the time,” he says. “Today I’m more selective. You try to prepare for the things you can’t control.” That attitude helped when the global economic crisis hit. Though overall auto industry revenue dropped sharply, revenue at Hendrick’s dealership group dipped just 2.8%, to $3.67 billion, in 2009, and by early 2010 the dealerships were again posting record months.

Meanwhile, the racing group has been racking up trophies: Since 2006, driver Jimmie Johnson has won a record four straight NASCAR championships. Hendrick says that if things had worked out the way he’d intended, he’d have probably turned the operation over to Ricky by this point. “We had a plan, but God had other plans,” he says quietly. “It’s your faith, your family, and your friends who get you through these deals.” But he looks back on the crash as a galvanizing event. “It just made everybody want to fight harder. We immediately turned something that was a tragedy into a motivation to do well, to honor them, to pull together.”