Does Your Family Business Have a ‘Fredo’?

Sure, the Corleones in the “Godfather” books and movies are an extreme example of a “family business.” But a lot of real-life family businesses experience similar problems—for example, a family member involved in the enterprise who consistently undermines it. Maybe they’re showing up late, not doing what they say they’re going to do or even misusing company resources. You keep them around because, well, you’re kind of stuck with them.

Who’s Fredo?

Fredo was the Corleone brother who just couldn’t get it right, no matter how hard he tried. He was blood, so he was included in the mafia family’s business ventures, but he was constantly flubbing even the simplest tasks he was given. Ultimately his screw-ups lead to the family falling out of power and his own brother turning against him (not to give too much away).

A “Fredo” can appear in a family business when the head of the business is more motivated to involve family members in the firm than select them based on their skills and personality in order to maximize profits—in other words, when the head of the company is behaving more like a parent than a boss. Often families will continue to reward their Fredos with more responsibilities even when they’re incompetent, unproductive or lazy.

Kimberly A. Eddleston of Northeastern University and the Entrepreneur and Innovation Exchange, Roland E. Kidwell of Florida Atlantic University, John James Cater III of the University of Texas at Tyler and Franz W. Kellermanns of the University of North Carolina at Charlotte studied “the Fredo effect” (and coined the term) and explained how families can prevent it from happening in their business.

fredo“We coined the term… to describe a negative force in the family firm that can emerge due to the way parents relate to and interact with their children, and the resulting damage to the firm that those children can cause despite any good intentions,” the researchers wrote. “Generous actions toward a child and unwarranted faith in the child beyond what’s justified by his or her abilities can lead to poor performance and dysfunctional behavior once the child enters the family business.”

“The rub is that 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,” the research team wrote.

How can you nip your Fredo in the bud?

No family wants their business to end up like the Corleones’. So how can you deal with your own Fredo situation? There are several steps you can take before and after hiring a family member to make sure there are no weak links in your chain.

Try not to hire a Fredo

1. Set the same hiring standards for family members as you would for non-family employees.

2. Make sure each family member is a good fit for the business. In other words, don’t create a job for a relative just for the sake of giving them a job.

3. Don’t force family members into the firm if they don’t want to be there.

4. Don’t hire the family member if they don’t meet the guidelines you’ve set.

Once you’ve hired a family member, watch for Fredo behavior

1. Hold them to the same standards to which you hold non-family employees, including the same human resources practices.

2. Monitor them to the same extent, too.

3. Hold them accountable for their actions, just as you would an employee who’s not related to you.

4. Separate family goals from business goals. Job expectations should be clear.

How to get rid of a Fredo (don’t worry, we don’t mean it in the Corleone way)

1. Confront the Fredo, either one-on-one or via a trained third-party advisor.

2. Show that the bad behavior has consequences, like suspension or demotion.

3. If all else fails, consider firing the Fredo or buying out his or her stock.

fredo

This article is part of America’s Entrepreneurs, a Rewire initiative made possible by the Richard M. Schulze Family Foundation and EIX, the Entrepreneur and Innovation Exchange.

Katie Moritz

Katie Moritz is Rewire’s senior editor and a Pisces who enjoys thrift stores, rock concerts and pho. She covered politics for a newspaper in Juneau, Alaska, before driving down to balmy Minnesota to help produce long-standing public affairs show “Almanac” at Twin Cities PBS. Now she works on this here website. Reach her via email at [email protected] Follow her on Twitter @katecmoritz.