Family business case studies

Case study 1 - The Mondavi Family

It is said that while every family business is different, as different as the people who work in them, the challenges they face are often very similar. Regardless of the size of the business, or in fact the industry, just about every family’s experiences can evoke some identification.

One example of this is the now well documented travails of the Mondavi family.

Cesare Mondavi left Italy to settle in California with his young family in the 1930s and plant his own vineyard. His two sons, Robert and Peter were sibling rivals from the outset, competing in the summer, along with groups of workers, to see who could nail together the most wooden boxes. Robert usually came out on top, and made much of his superior skill.

During WW11, the family business took an important opportunity to acquire the Charles Krug winery and move into higher-margin bottled wines. Cesare made only one stipulation for his son Robert – that he work harmoniously with his brother Peter, forcing Robert and Peter to work together, after Peter’s discharge from the army. Thus, in years to come, Cesare would continue to rule from the grave.

The brothers however, had differing visions. They did not share the same values or interests, and this division widened after the death of the patriarch, who had been effectively the peacemaker.  The conflict came to the surface over what transpired to be a misunderstanding; Robert and Peter got into a fist fight over an argument about Peter’s wife’s mink coat and whether or nt it had been bought with company funds.

The incident divided the family, and left Rosa the matriarch heartbroken. Robert felt forced out and demanded that he be allowed to cash in his 20 percent shareholding.

Once the shareholding dispute was resolved, not entirely to his satisfaction, Robert set up a rival high-quality wine venture with a partner in the Napa Valley. Once the new business began to flourish, Robert was able to buy out his partner. His success attracted the interest of Baron Philippe de Rothschild, who seeing the potential of the New World wines, approached Robert to set up a joint venture.

As is sometimes the case, history repeated itself when Robert wanted his own two sons, Michael and Tim to join the family business. Maybe he should have considered his daughter Marcia as the best leader for the family business. He tended to make all the same mistakes his own father had made with regard to family succession, exhibiting the older generation’s tendency to hand onto power too long. Perhaps it was the failure of the next generation to rise to the challenge that led members of the family to explore an initial public offering.  It was Marcia who challenged the idea to float the business, and perhaps she who had the greatest sense of stewardship.  She was unsuccessful, and the company was put up for sale in 2004.

Although Michael remained as chairman of the board, he was soon ousted, without opposition from his father.

In their  book, from which this story is taken, Grant Gordon and Nigel Nicholson comment that for people with visionary gifts and temperament, like Robert, the answer is to bring in professional leadership and create a real partnership for business success.

Clear and distinctive separation of roles between family members working in the business would have helped avoid much of the conflict, and the inclusion of outside facilitators might have helped resolve some of the mismatched vision and expectations.

 

 

 

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