Tag Archives: Fredo

Taming the Black Sheep

When parents are not united in their words and actions, display conflicting messages and continue to tolerate the black sheep family member’s damaging actions, Prof. Eddelston correctly painted two scenarios:

  • The black sheep or “Fredo” will either withdraw from the family business and/or;
  • Lash out with selfish behaviors in an effort to gain compensation for their circumstances

Another aggravating scenario that will further add strain to the family is the tendency of the children to pit parents against each other.

On one hand, a parent, usually the mother, has the natural tendency to coddle underperforming family members by way of covertly supporting the children (financial and advice) often against the wishes of the father who in most cases is the disciplinarian.

Unknowingly, the actions of the coddling parent (rewarding/reinforcing bad behavior) will eventually lead to more problems effectively undermining an already strained relationship among family members.

On the other hand, the children who have communication issues with the stricter parent will gravitate to the coddling parent resulting in real conflict and constant clashes between parents and the children.

To mitigate the tension, the family will “sweep the issues under the rug”, ignore the tension and for most family members, would rather just “suffer in silence.”

This unstable “ceasefire” will allow a semblance of numbing peace but it will only be temporary. When a sensitive topic is raised and a raw nerve is touched, expect an avalanche of problems to come out in the open and a new round of discord is activated.

With the “elephant in the room” becoming so big but deliberately ignored, stress levels will continue to surge and one trigger, just one, can discharge another round of infighting. This event, if left unresolved, becomes a vicious cycle that consumes and zaps the energy of every family member.

At this juncture, the family is in a state of helplessness and on the brink of finally “throwing in the towel.” When left unresolved, this negative energy spills over to the business.

Unfortunately, when the parents are already old or are gone, you can expect the children (and in-laws) to slug it out, employing higher levels of relationship conflict. With their newly inherited ownership rights, the problems are compounded and another bruising conflict awaits the siblings. This highly charged situation becomes a precursor for family members to sell out and marks the beginning of the end of the family business.

Do you want to have a united and harmonious family? Do you want family members to become responsible owners and stewards? Eddelston offers some advice in dealing with black sheep and underperforming family members.

First, confront the child, either one-on-one or through an experienced advisor. Sometimes children do not realize the harm they bring to the family and the business so articulating the family’s clear position is important. Show that the bad behavior has major consequences and expulsion, suspension or demotion are options available.

Second, give the child another job – one that better suits his/her interests and experience. Sometimes an otherwise “good” family member can seem like a black sheep because the person is ill-suited to the industry and business.

Third, consider firing or buying out the child’s shares. Unfortunately, in reality, there are also situations when firing him/her is not practical since the person does not have career options and needs to provide for a family.

You are not alone. Having a black sheep family member is universal. Initiating these actions are unpleasant but in the end you just have to do what is best for the family and the business.

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Dealing with a Black Sheep

I highlighted in my last column the word “elephant” suggesting that the issue or problem is so big and so heavy that no one wants to confront it or try to move it.

These “elephants” eventually become embedded in how the business operates and how family members interact at all levels. When ignored, a very large problem will continue to shadow whatever successes the family business has achieved and when the issues become emotional and highly charged, they can compromise the business and split the family apart.

For this article, instead of a black sheep, I will use “Fredo” as the “elephant in the room”.

Having a “Fredo” in the family is a result of inconsistencies that are far and wide. Fredo as a family member grew up with values such as unconditional love, being nurtured and equality among siblings while expectations of “Fredo” as a business manager or employee centers on performance, meritocracy and accountability.

Prof. Kimberly Eddleston explained it succinctly, “When this logic (of love and equality) transfers to the business, however, it can be dangerous since it encourages the family to compensate for the weaknesses and failings of family members and to forgive indiscretions.”

While it is indeed difficult for a family business leader to initiate change, it will always start with a firm resolve of separating the family and the business.

As part of my governance advocacy, every next generation family member interested to join the family business must demonstrate that they have something of value to contribute to the business. In short, the family member must apply just like any employee and be deserving of the employment.

We are aware that not all family members are capable, therefore I encourage leaders to resist the urge of including all family members in the business. Guaranteed employment may have been the practice of the founding generation but the growing complexity and the increasing number of family members have made it unwieldy to manage the family and the business.

To operationalize these initiatives, the enterprise must also invest in HR consultants and professional managers so they can formulate “best practices” policies and introduce an environment that promotes accountability, transparency and consequences for bad behaviors.

I am suggesting a few rules to avoid or deter a “Fredo” from creating problems for the family business:

  • Avoid hiring a “Fredo”
  • Develop and communicate rules of entry and exit for family members
  • With the guidance of an HR consultant, establish minimum standards for entry such as education level and years of experience. The rule of “No Nepotism” must apply
  • Do not create jobs for relatives. Avoid becoming an employer of last resort
  • Don’t force family members into the business if they are not interested. You are compromising the business by having demotivated, unfocused, dispassionate employees who happens to share your bloodline and last name
  • Do not reward bad behavior

Kim Eddelston also pointed out several points worth mentioning, “if you feel you must hire a family member with questionable abilities and drive, place him or her in a job where the rewards are based on commission, such as sales.

She also added that “having clear job requirements tend to decrease the prevalence of “Fredos” since they know what tasks are expected of them and how their performance will be evaluated.

And finally, Eddelston cautioned business leaders by raising the alarm bells regarding this issue: “do not allow family employees to have special privileges. This creates an us-against-them mentality with non-family employees, spurring feelings of injustice. It also encourages a sense of entitlement among family”

Don’t Ignore the Elephant in the Room

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One of the most common and pervasive causes of family tension that I have learned over my years as a Family Business consultant is that every family business has what is commonly referred to as having “elephants in the room.”

According to Wikipedia, an Elephant in the room is an “English-language metaphorical idiom that means that there is an obvious problem or risk that no one wants to discuss, or a condition that people do not want to talk about.” This has been a challenge for me coaching family businesses. They find merit in pursuing governance but when it’s time to talk about forbidden issues and I press them to let these “elephants” out of the room, they become uncomfortable and prefer to share the issues individually and in complete confidence.

For the sake of discussion, the word “elephant” suggests that the problem is so big and so heavy that no one wants to confront it or try to move it.

By virtue of its size, it takes up so much energy, time and productivity. The phrase “in the room” implies that the issue is large that no one can help but notice it. And since it is in the middle of the room, it means that family members have deliberately avoided and walked around it and worse, pretended it is not there rather than deal with it.

For family enterprises, the term refers to a question, problem or controversial issue that is obvious, but which is ignored by family members especially the business leader, generally because it causes embarrassment and may “rock the boat.”

Rocking the boat means stirring up trouble where none is welcome, disrupting things, promoting disharmony, upsetting family members and causing disagreement.

There are qualitative truths that business leaders (usually patriarchs) must understand about elephants in the room:

  1. Ignoring the elephants in the family business does not make them go away. In fact, once they have found a home, they tend to stay for good
  2. Baby elephants tend to get bigger over time. Most of the time, the problem starts small and escalates into something weighty
  3. I am also highlighting the top “elephants” that must be addressed immediately lest setting them aside can cause disruption and will throw the family business off-course creating unnecessary frayed nerves and strained relationships:
    • A “Fredo” or a black sheep family member causing problems
    • Sibling rivalry spilling over to power struggle
    • Next generation sense of entitlement
    • Patriarchal Shadow (refusing to hand over power to the next generation)
    • Misaligned ownership
    • A wide array of Conflict of interest and self-dealing among family members
    • No succession plan in place
    • No estate planning
  4. Having an elephant in the room is demotivating to the family and the business as well as to non- family members especially the professionals who will not hesitate to abandon ship when these issues are wantonly ignored by the patriarch
  5. If the elephant is not dealt with, the leader/patriarch is perceived as weak, ineffective, bias, and lacking in leadership skills

The consequences of ignoring “elephants” are extremely risky! And the “do nothing” attitude, aggravated by a procrastinating mindset among family members should never be an option! As a business leader and family member, it is important that you deal with these elephants with the help of experienced family business advisors before it’s too late.

Therefore, as the head, perhaps it is high time to ask yourself: Are you ignoring and tolerating “elephants” in your family business?

 

Stop Behaving Like a Father

I want to start 2018 by upsetting the family and business systems in a positive way.

Knowledge is power and ignorance breeds conflict so allow me to share a powerful quote from Prof Kim Eddelston related to a “Fredo” child or better known as a black sheep family member,

“As Fredo demonstrates, these bad apples can disrupt both family relationships and the firm. Continuing to reward Fredos while ignoring their damaging behavior leads to more problems: the child’s sense of entitlement increases, higher levels of relationship conflict in the family firm result, and more problems with productivity and teamwork emerge.”

Unmasking Fredo

A “Fredo” behavior rears its ugly head when the business leader, usually the patriarch, behaves more like a father than a business owner and his actions are manifested in many ways:

  • Bias in choosing family over the business
  • Is motivated in hiring family members regardless of their qualifications and competence
  • Failure to enforce discipline against the erring or underperforming family members

With the next generation family members getting “kid glove” treatment, a “Fredo” will naturally surface and is emboldened to flaunt his or her entitled behavior.

Paradoxically, as the parents continue to ignore the telltale signs of misbehavior, they remain hopeful that their “Fredo” will change and become motivated. Despite the “Fredo” child’s inadequacies, they reward him or her with promotions and bigger compensation.

Creating this environment will naturally make the child demonstrate poor business decisions, commit abuses, initiate tension against his or her siblings and inevitably create conflict after conflict with whoever crosses his or her path. This phase is characterized with constant clashes during meetings, poor performance, high employee attrition rate and professional managers leaving their jobs as a result of the heightened conflict.

When the “Fredo” child is left to do things on his or her own, the disruptive behavior will worsen over time and the acrimony spilling over to the rest of the siblings. When the parents are no longer around, the conflict escalates to an ownership tussle among heirs.

In “The Godfather” novels, Vito Corleone realizes his son Fredo’s shortcomings, but he insists that Fredo, like his siblings must also be given the same opportunity in the family business.

Parental Action Spells Danger

I have witnessed many family businesses led by patriarchs, where the dysfunctional behavior of their “Fredos” are generously rewarded by way of higher pay and new positions in the hopes that the change will motivate them to perform better.

The actions are dangerous, unwise and counterproductive. In the absence of any deliberate effort to contain an aberrant family member, any form of appeasement that parents do to win their “Fredo” to their side will likely fail. And to rub salt into the wound, business owners may unknowingly foment a conflict if they are currently doing the following:

  • Rewarding an underperforming family member
  • Tolerating the family member’s bad and disruptive behavior in the workplace
  • Continually providing financial support to non-working family members
  • Appointing unqualified family members in managerial positions and worse, elevating them to the Board of Directors
  • Giving equal compensation to active family members
  • Giving higher compensation to family members over professionals
  • Not subjecting active family members to performance and Accountability Rules
  • Flip flops on the issue of wanting to retire but refuses to relinquish control
  • Letting the next generation family members decide for themselves on the issue of succession and direction of the business but retains the patriarchal shadow

When parents reward bad behavior (Part 3)

The “Fredo” behavior manifests as early as when a child confronts a major dilemma: the crossing over from a healthy family where unconditional love, inspiration, encouragement, equality and full support are ingrained during the child’s growth years.

Instinctively, parents tend to further extend care and nourishment on the more fragile child expending and nurturing him or her until the child bounces back and intermingles with the other siblings. While the parents demonstrate the handholding process, the family is also expected to care for one another especially on someone who needs it the most.

Full of Inconsistencies

The danger is unmasked when this “culture of love and equality” is carried over to the business. Here lies the inconsistency! Let me articulate why?

Business represents a huge contrast to the norms and culture embedded in the family. While family nurtures love, feelings and equality regardless of behavior, business singularly focus on key metrics like meritocracy, profits, results and accountability.

On one hand, family encourages the family to compensate for the weaknesses and failings of family members and to forgive indiscretions but on the other hand, business in its truest form can be unforgiving on matters related to under performance and mediocrity. Aggravating this paradox is the natural tension between two or three generations working together. You don’t just have a sandwich generation but the gaps between a baby boomer and the millennial generation is far and wide.

Allow me to list down a number of contradictions and divergent values that have created a confused mindset among family members as they cross over to the two other circles (as managers and or owners).

The weakest family member will inevitably end as a likely “Fredo” candidate.

If the family breeds feelings emotion, entitlement and equality plus a slew of varying C’s like confidentiality, culture, career, control and conflict, the business on its own pursues a totally different approach bereft of any emotion. As the family member moves on to the more difficult and measurable metric like profits, policies and plans, you can almost conclude the makings of a full blown conflict.

In an article penned by Kimberly Eddleston, she highlights a critical part in the transition of the child.

“When a child joins a family business expecting the same treatment he or she experiences in the family, where resources are allocated based on equality and need, trouble can result. Patriarchs that treat family employees as children encourage immaturity and dependence, and lead family employees to see them as responsible for their well-being. Moreover, well-meaning family patriarchs often feel they must reward their children equally in the business realm, without regard to their contributions. Their altruism ends up hurting them and costing the business.”

In a very recent family governance engagement assigned to me by our family business advisory firm, Wong+Berstein, a son (sibling A) actively working in the family business was given a house by his parents right after he got married. On hearing the news, his only sibling (B) known to be lazy and underperforming, demanded a house of his own with the same number of bedrooms! Sibling B felt it was not ‘fair’ that sibling A received a house and he did not.

Situations like this as Eddelston opined “are very common in family businesses and demonstrate how family members often expect resources and rewards to be allocated based on the family norm of equality rather than the business norm of merit.”

“Fredos” Are Certified Trouble Makers Part 2

According to Wikipedia, Frederico “Fredo” Corleone is a fictional character in Mario. There are real-life “Fredos” working in Family Businesses out there.

While the Corleone’s of the Godfather movies are fictitious, I have seen many examples of Fredos who are disruptive, dangerous and have wreak havoc on their family’s business.

Family Case 1

A restaurant chain, majority owned by the eldest brother Rey (not his real name) with contribution from his other siblings, repeatedly suffered at the hands of a Fredo named Rodney (not his real name). The latter was Rodney’s first born son. Barely straight out of college, Rey insisted that his son work for the family business.

However, Rodney was lazy, performed below expectations and showed poor human relations skills. His abrasive behavior drew complaints from colleagues and customers. He also had a penchant for sitting on major decisions, reports to the office as he pleases and displayed a very bad temper.

To hide Rodney’s incompetence, the father helped him with his work but over time, the son relied more and more on his father to do his work.

Things came to a head when a cousin discovered that Rodney was making a cut (commissions) on his preferred suppliers. Because of the overprice in the purchase of raw materials, the company struggled to compete in the industry they once dominated. While all the cousins wanted Rodney suspended, his father refused and continued to make excuses. When the animosity escalated into regular skirmishes amongst cousins, several key non family employees opted to resign instead of being caught in the crossfire. Soon after, the family business suffered a decline. The other founders then decided it was time to step in.

Family Case 2

This is the case of a leather retailer chain that had to deal with multiple Fredos who felt entitled to the products for their personal use. Two brothers would often shop at the stores, taking merchandise without paying or documenting what they took.

When an in law was hired as part of the accounting team, things got even worse since she had access to the cash registers. The brothers and the in-law started to take cash out of the registers to pay for their personal expenses. Eventually the business went bankrupt because the older generation looked the other way and never lifted a finger to put an end to the children and the in laws’ misbehavior.

Such dilemmas are so common in family firms that I have advised in Asia. Fredos are a different breed. They sincerely feel they are deserving of rewards and privileges even without earning it. They also have the temerity to demand an equal share of the business’s wealth, simply because they are part of the family and their last name is their birthright.

With the two cases presented, the message is clear…when you are contemplating in hiring a family member, watch for a Fredo behavior or better still before inviting a family member to join, make sure the family has already set in place the governance infrastructure.

Kimberly Eddelston in her research accurately observed the issue of a Fredo feeling entitled… “Research has shown that children with a strong sense of entitlement may be more likely to engage in theft because they see the business’s riches as compensation for their poor and neglected childhood during the firm’s early-year struggles.  No wonder that those who study family businesses have found that 85% of them go from “shirtsleeves to shirtsleeves” by the third generation.

Who Is “Fredo”? (Part I)

According to Wikipedia, Frederico “Fredo” Corleone is a fictional character in Mario Puzo’s novel The Godfather.

He is the second son of the mafia don Vito Corleone, younger brother of Sonny and elder brother to Michael (portrayed by Al Pacino) and sister, Connie. In the films, Fredo’s feelings of personal inadequacy and his inability to act effectively on his own behalf are character flaws leading to greater consequences.

With so much insecurity starting in childhood, Fredo exhibited poor coping mechanism and would always complain how he was ignored by his siblings and deprived of parental love during his adolescent years.

Eventually, his selfishness led to serious problems for the family, which ended when his own brother (Al Pacino) disowned him. In short, “Fredo” Corleone was known for his incompetence, bad business ideas, heavy drinking and betrayals. If you watch Godfather II, you will discover what happened to Fredo.

Do you have a “Fredo” in your family?

In a well written article by Kimberly Eddelston, Fredo is described as “the kind of sibling who just couldn’t get it right, no matter how hard he tried. But because he was family, Fredo was involved in some of the family’s business ventures.  Due to his weak personality and below average intelligence, he was constantly failing at even the simplest tasks he was given.”

In Asia, Fredo is often compared to a “black sheep” in the family. They display similar patterns of behavior and end up as a disgrace to the family. They are known as trouble makers, often left out, branded as outcasts because they choose to do other things than live up to their parent’s standards.

A Fredo in the family business is likely to be the least capable amongst siblings so when the family patriarch coddles him and looks the other way, he will do whatever possible means to take advantage of the family business for personal gain.

Like many family businesses with Fredos working, their presence in the business poses a serious hindrance to the enterprise. In a 2012 study by Kidwell, Kellermanns, Eddleston, they revealed that approximately one-third of family businesses admit to having a family employee who is an impediment to the business and only has a job because he or she is ‘family’.

What are the most common traits of a Fredo working in the family business? I have listed a handful of attributes below so family members are aware of the potential dangers that lie ahead.

Fredos can be any or all of the following:

  • They are irresponsible and consistently performs poorly in the family business
  • They disrupt the work of colleagues including business decisions initiated by family members
  • They strongly resent their parents especially with the way they were treated when they were young
  • They are naturally demanding and expect parents to support them especially when they experience setbacks or misfortunes
  • They misuse company resources and continue to commit conflict of interest
  • They are selfish, quick to blame others except themselves
  • They have no sense of responsibility nor accountability
  • To compensate for their failure, they usually engage in get rich quick schemes at the expense of the parent’s (and the business’) financial support.

In dozens of family businesses in Asia where I was tasked to intervene, I would always come across “Fredos”, either male or female, responsible for causing unnecessary pain and conflict in the family and the business.

In Mario Puzo’s The Godfather novel, Fredo nearly destroyed the first and second generations of the Corleone dynasty.

To be continued…

(esoriano@wongadvisory.com)