The Changing of the Guard

The Changing of the Guard

Refinement in senior management is critical for companies if they are to become market leaders. Once they attain a market leadership position, reviewing and refining the ownership and management structure is instrumental in staying ahead of the competition. Certainly every organization faces change, but for family businesses, facilitating the necessary change is frequently an even more daunting task.

As is the case with so many businesses built from the ground up by the family's patriarch, there comes a point when success has been established and the baton must be passed to others who are charged with sustaining the momentum. It happens in sports, such as when Rick Pitino replaced Denny Crum at Louisville, and it frequently happens in big business.

In 1901, Charles Walgreen started his first drugstore in Dixon, Illinois. Through low prices, stellar service, and even good food—his wife Myrtle cooked everything in the early years—Walgreens grew impressively over the years. In 1919, Walgreen's had 20 stores; a decade later it boasted 525. By 1934 when Charles Walgreen turned 60, he was ready for his son to take over as president. Growth under Charles Jr. continued. Charles Jr. then groomed his son, Charles III, who oversaw the opening of the 1,000th Walgreen's store in 1984.

Walgreen III handed over the reigns to the first non-Walgreen to head the company, Daniel Jorndt, in January 1998. By the time Walgreen III left office as Walgreen's chief executive and became chairman emeritus, the company had a streak of nine years in a row in which it increased the number of store openings. By 2001, with the help of Jorndt—who would step down in January 2002—the number of stores surpassed 3,500, the annual streak of an increased number of openings was up to 13 and the company was listed 90th on Fortune's list of America's largest companies. Despite having fewer stores than CVS or Rite Aid, it was still number one in sales.

To its credit, NASCAR, like Walgreen's, has grown because of its willingness to hand over the reigns when other businesses might have remained reluctant to do so.

NASCAR's complete family leadership lasted for more than 50 years. When Bill France, Sr. retired in 1972, his family took over the business. Bill Jr. was named president and Sr.'s other son, Jim, became executive vice president and president of the ISC.

Bill Jr., who had a stroke in 1997 and survived cancer in 1999, ran NASCAR until November 2000, when he became chairman of a five-member board with Jim, Brian France (executive vice president of NASCAR), Lesa France Kennedy (executive vice president of ISC)—Bill Jr.'s son and daughter—and significantly, Mike Helton, whom he named COO of NASCAR in February 1999 and president in November 2000. Even though NASCAR's board remained 80 percent "France," the top position now belonged to a nonfamily member.

While a more in-depth look at NASCAR's handling of Dale Earnhardt's death on the final lap of the 2000 Daytona 500 can be found in Chapter 7, important managerial issues surfaced following the accident. Among these issues was how a rapidly growing business would deal with the largest tragedy to ever befall the industry.

Helton, the highest ranking non-France-family member in the organization, has been widely credited with opening up the Association's management style by being more accessible and forthright about NASCAR matters. He did so as the increasing popularity of the sport brought with it added scrutiny, particularly from the media.

This "opening up" even included outsourcing much of the investigation into what caused Earnhardt's death, a decision lauded by many as a defining moment for NASCAR now that it had penetrated mainstream sports.

Helton said he viewed that moment in NASCAR's history as being as much a tribute to Dale Earnhardt as it was to NASCAR's changing style.

Even drivers and car owners such as Kyle Petty acknowledged the management style of Helton during a period of intense growth and scrutiny. Petty thought NASCAR had undergone a philosophical change in their attitude and in the way they did business, and the majority of it was due to Mike Helton. Petty also noted that when Bill France, Jr. ran NASCAR some drivers had difficulty relating to him, whereas most people in the garage had seen Mike come up through the ranks and were comfortable with his presence.

Rick Hendrick, owner of cars driven by Jeff Gordon, Terry Labonte, and Jerry Nadeau, said he felt more like a partner than an adversary. In years past, Hendrick felt NASCAR made the rules and enforced them with little or no input from its constituents. He now notices that NASCAR solicits input from everybody, making for an improved working environment.

Unilateral decision making doesn't foster confidence within organizations, especially when small or family business structures begin to depend on outsiders for input and resources.

The change from the France family to Helton enabled NASCAR drivers to feel as if they were more a part of the process and the product that they helped build, even if four of five board members were still from the France family. When France announced Helton as president he said that Helton would be given the final word. This did not mean, however, that France would be completely out of the picture. After his successful battle with cancer, France continued to assist NASCAR by helping to fine-tune and clarify the organization's mission when necessary.

Decision makers all too often make unilateral decisions without helping their employees to understand the reasoning behind them. Employees don't need to be involved in every decision but they must at least feel as though they are being engaged in the company's business.

Managers might think that their control suggests to the others that they are more personally involved and hope to be given complete credit for the successful implementation of a company's agenda. However, if the employees don't feel as if they are part of the process, and they can't predict the direction in which managers want them to go, the company's growth could be slowed as employee "buy-in" could prove difficult to secure. Control is a big issue in taking businesses, which have typically been controlled by families, to the next level.

Working for a family-controlled business can be very trying, as in the case of Carly Fiorina, who took over as Hewlett-Packard CEO in 1999. Throughout 2001 and much of 2002, Fiorina tried to complete a $19 billion merger with Compaq to help Hewlett-Packard grow beyond its core competency in printing and further penetrate the personal computer and computer repair business. But Walter B. Hewlett, the eldest son of company cofounder William Hewlett, reneged on his "yes" vote, setting the stage for a highly public face-off.

Fiorina wasn't scared of Hewlett's lack of support and, after launching a national advertising campaign, as well as a Web site, and making her opinion known in the press, she eventually prevailed.