Elsevier

Business Horizons

Volume 56, Issue 1, January–February 2013, Pages 5-12
Business Horizons

Organizational Performance
How one bad family member can undermine a family firm: Preventing the Fredo effect

https://doi.org/10.1016/j.bushor.2012.08.004Get rights and content

Abstract

Family owned and managed firms represent a large proportion of businesses operating domestically and globally. Dynamics introduced by family members can develop into significant problems for the family-owned firm, and have far-reaching implications for its performance. One challenge entails coping with a family member employee who, for various reasons, behaves in ways that have toxic and damaging effects on the business. We label this phenomenon ‘the Fredo effect,’ referencing the incompetent brother from The Godfather books and movies. Herein, we discuss the Fredo effect in a family firm context, why the Fredo effect is unique to family firms, and how the effect develops over time in family relationships. We further analyze how the Fredo effect hurts family firms in terms of leadership succession and performance, and what family firm leaders can do to address it.

Section snippets

What's a Fredo?

Entertainment fans may recall Fredo Corleone, a character from the films of Francis Ford Coppola and The Godfather novels of Mario Puzo and Mark Winegardner, as the bumbling middle brother whose betrayal of his mobster family damaged the organization and led to his ultimate demise. Unfortunately, many family firm owners may also be reminded of Fredo as they gaze across the table at a holiday dinner and see a son, brother, daughter, sister, or other relative who—well intended or not—has proven

How did I get a Fredo in my family firm?

Family firms can be defined as those businesses owned/managed by a single family or small group of families, reflecting the vision and goals of the same (Chua, Chrisman, & Sharma, 1999). Family firms are unique in that firm ownership, the family, and the management subsystems overlap (Gersick, Davis, Hampton, & Lansberg, 1997). The differences between family and non-family firms lend themselves to the development of a Fredo in that family firm executives may intertwine family goals with

How does Fredo damage the firm?

Taken care of me?! You’re my kid brother and you take care of me? Did you ever think about that, huh? Did you ever once think about that? Send Fredo off to do this, send Fredo off to do that! Let Fredo take care of some Mickey Mouse night club somewhere! Send Fredo to pick somebody up at the airport! I’m your older brother, Mike, and I was stepped over!. . . .I can handle things! I’m smart! Not like everybody says. . .like dumb. . .I’m smart and I want respect! ∼Fredo Corleone, from The Godfather,

What can I do about Fredo before he takes our firm down?

To conclude this article, we offer several suggestions as to what a family firm leader might do regarding the presence of a Fredo in the family business. We portray an overview of potential actions in Figure 1. The best action, of course, would be to prevent a Fredo from springing up in the first place. Paying attention to the effects that early parent-child relationship dynamics can have on children once they become involved in the business is an important strategy. It is also vital to

Acknowledgment

The authors wish to thank Ted Clark, director of Northeastern University's Center for Family Business, for sharing his insights regarding this topic.

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    Copyright © 2012 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.