Family Schism:The Legal Seafoods Saga
by Shel Horowitz
Legal Seafoods is a popular Boston-area chain of five fish stores, 10 restaurants, a processing center, and a frozen line. Founder George Berkowitz started his business from nothing and built it into a major enterprise. But who would succeed him? Berkowitz had three sons--and the two oldest both wanted to run the family firm.
In some families, the brothers could have worked it out. But although Mark and Roger Berkowitz worked together in the firm for 17 years, their relationship had never been smooth. Even as kids they'd been rivals. Neither brother wanted to share power.
George Berkowitz shared his story before a group of some 60 family business owners at the Family Business Center's October 21, 1994 seminar in downtown Springfield. How did he choose? "I watched when someone came up with a problem: how those individuals handled decisions, coworkers, their ethics, were they where they said they were going to be, I had time and it was an easy decision."
The existing business went to the oldest son, Roger. George Berkowitz set up a new corporation, Legal Ventures, and installed Mark as its head. "They had the same title, made the same money--but it wasn't enough." Mark walked out, bitterly, severing ties with his father and brother--and separating his own children from their grandparents. Later, Mark Berkowitz opened a competing operation directly across the street from a Legal Seafoods.
Although George Berkowitz predicted that Mark wouldn't accept the deal, he felt he needed to make the decision in the best interests of the business. His motto, paraphrasing business consultant Peter Drucker, is, "You take care of the business, it will take care of the business and the family. If you only take care of the family, the business won't do anybody any good."
And several years later, Berkowitz still insists it was the right decision, in spite of the family rift it caused. "If my oldest son was not capable, I would have sold the business. I have 1400 people on the payroll who are dependent on us to make good decisions. I gave the business to my oldest child and my middle son walked out. Roger is proving to me that he can make the decisions. He went to Marriott (to negotiate a deal to set up a branch at Logan Airport), spent hours working with the financial officer. He closed the research division--we didn't need it and it was costing more than $300,000 a year. It's such a wonderful thing to raise children to be able to take over. It's a great moment when my son makes a decision that makes me proud."
Still, there are things about the process that he would do differently, even though the business benefited from the outcome. He would have preferred to avoid the family squabbles and the pain of only rarely seeing Mark's children. "It's a great moment when my son makes decision that makes me proud. But I have two grandchildren I almost never see because of it."
George Berkowitz believes that spouses are important influences in such a situation, and that one mistake he made was in not letting his sons' wives know exactly where they stood. "If you don't inform everybody of where you are, you don't know where you're going to be. In-laws should be informed that this is a family business and that's the way it's going to be. Maybe if the women or men who married into the business thought about how their actions will make the business blow up, maybe they would think differently about how to make decisions." He cautions executives not to step in as an intermediary in family feuds that don't directly affect the business.
He would also have outside advisors--non-family members--take an active role in creating and evaluating performance standards for his successor. Still, that wouldn't have solved his particular problem. "It would have made it much easier if someone outside who had the ability to choose had made the choice. But the hurt would have been there. He would have felt that it was a biased opinion." And outsiders, he cautions, must recognize that the family is a unit beyond the business. "The dynamics are different. When we have a fight, it doesn't mean it's the end of the world. But we always come back. It's not dysfunctional--it's family business."