Trouble in Tuscany - Exploring Family Business Relationships

Giuseppe Baldini's internationally famous olive orchards had survived, and even thrived, despite war and personal tragedies. His sons had succeeded in careers of their own choosing. But as Professor in Entrepreneurial Leadership Randel S. Carlock and Professor for Technological Innovation, Ludo Van der Heyden, illustrate, a combination of blood ties, emotions and issues of succession came, over many years, to combine in a mixture that was to prove unpalatable for all concerned.

by Randel Carlock, Ludo Van der Heyden
Last Updated: 23 Jul 2013

The Baldini family have nurtured their olive orchards near the Tuscany-Umbria border in Italy for nearly a century, earning an international reputation for purity and flavour.* Founder Giuseppe and his fields had survived - and even thrived - despite the Fascists, the Second World War, and personal tragedy. By the time of his death in 1950, Giuseppe's obsessive devotion to quality had paid off nicely, most notably with the "Pure Gold" olive oil brand.

Having confidence in all of his five sons, Giuseppe had encouraged the eldest, Julio, to follow in his footsteps, and the others to pursue careers of their own choosing. Happily, this arrangement suited everyone, with clearly defined delineations between personal and business lives. Serious troubles only surfaced for the family business within the following generations.

The Berghmans Lhoist Professor in Entrepreneurial Leadership Randel S. Carlock and the Solvay Professor for Technological Innovation Ludo Van der Heyden examine the dynamics of a family enterprise when ongoing success; subsequent changes in business practices and philosophy, and different, sometimes clashing priorities amongst family members/shareholders can all help generate a gradual, but potent atmosphere of disharmony.

Julio married longtime girlfriend Olivia shortly after his father's death. His father-in-law, a successful winemaker, advised Julio to buy out the rest of his family. The latter were quite willing, retaining only minor stakes for mainly sentimental reasons. This new corporate structure freed Julio and Olivia to enact their own production and marketing policies, which soon proved very fruitful. Olivia's concept of distributing Baldini olive oil as a premium product across the continent became especially profitable.

The seeds of eventual discord were only really sown the following generation, in the form of daughter Julietta. Joining the operation at her parent's urging, she gradually took on more responsibilities in administration and marketing. Her younger sister, Cordelia, became an accountant for a multinational firm. Cordelia's husband, Romeo, managed a thriving dairy.

Julio had long wished for a son to succeed him, and eventually urged Cordelia and her husband to form an executive team to manage Baldini. While Julio and Olivia's relationship with their son-in-law was quite positive, the same could not be said with the increasingly headstrong and alienated Julietta.

Familial tensions soon came to a head. Julietta kept away from the christening of Cordelia and Romeo's daughter. Julio and Olivia, wishing to step aside as Baldini's chief executives in the near future, were soon faced with a dilemma. How could they now hope to propose Julietta and Romeo as co-managing directors of a business that, if things went according to plan, would eventually be owned by both their daughters?

Julietta increasingly heightened open conflict with her sister, who in turn grew increasingly irritated with her. Juliette was now openly insisting on being given the more senior management duties that her father had long promised would be hers "at some point".

The form of confrontation which this case illustrates is, unfortunately all too common in family firms where blood ties, emotions and issues of succession combine in a mixture that proves unpalatable for all concerned. The analysis points out that the roots of the conflict lie not only in the individuals openly in conflict, but often also has much deeper roots, particularly in events affecting previous generation(s). Such a discovery typically leads to a de-escalation of conflict, by virtue of a better understanding of the interpersonal issues at play. This then can become a major first step towards facing such conflicts constructively.

(* All names and some readily identifying features in this case have been disguised.)

INSEAD 2005

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