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Family Business Matters       05/31 11:20

   The Fall of a Family and Business

   Lessons can be learned from a brewery empire that fell into financial ruin.

By Lance Woodbury
DTN Farm Business Adviser

   Much can be learned from the experiences of other family businesses -- when 
you can find a guide willing to share their mistakes. In "Beer Money: A Memoir 
of Privilege and Loss," Frances Stroh offers a critical look inside the family 
dynamics and business trials faced by the Stroh family and its iconic brewing 
company as it plummeted from market dominance to financial ruin. 

   At its height in the early 1980s, Stroh was the third-largest brewer in the 
country and owned other labels like Schlitz and Old Milwaukee. But between poor 
financial habits and bad business decisions, the family company fell from a 
Forbes magazine estimated net worth of $700 million to almost nothing today. 
Here are a few of the lessons I took from the book.


   The company paid significant dividends to family members, enabling lavish 
lifestyles disconnected from the financial trajectory of the company. Family 
members became dependent on a constant stream of cash, regardless of their 
involvement or the company's profitability. Coupled with losses, high debt and 
poor business strategy, such reliance made the future of the business 
unsustainable. Had the families benefitting from the dividend policy adjusted 
their standard of living, it might have created a larger window of time to 
address some of the other difficulties faced by the company.

   A related risk I see in families where money is ever available is the lack 
of structure and motivation helpful to finding one's passion. Because money is 
no object, and the next generation can do anything, they sometimes end up doing 
nothing. The sheer range of possibilities, along with the lack of a need to 
make a living, creates a paralyzing environment. Family members float from one 
idea to the next, never forced through the rough patches and decisions that are 
part of a "normal" career. The result is often a lack of confidence and 
self-esteem. Sometimes, family members even turn to substance abuse.


   Stroh is brutally honest about the role alcohol and drug addiction played in 
her family. From her father's drinking to her brother's drug habits and 
"slow-motion suicide," she insightfully recognizes the twin role substance 
abuse plays as both a symptom and a cause of family dysfunction. 

   For some family members, the pressures of family and business, coupled with 
family history and mental illness, create the need for an escape, be it through 
alcohol, drugs or suicide. Too many families won't proactively address 
mental-health or substance-abuse issues. They stigmatize, hide, ignore or sweep 
under the rug these destructive diseases that require admission, treatment and 
support. And, while not easy to address, the outcome of unchecked mental 
illness or substance abuse is almost always family tragedy.


   Another of Stroh's observations is the lack of non-family talent in the 
company's leadership. "'Family-owned and operated since 1775,' our beer labels 
had boasted, but that was exactly our problem: In our system, fathers promoted 
their sons, sons who too often had neither attended business school nor proven 
themselves in other corporate settings." 

   Not every farm or ranch leader needs to attend business school, but the 
point is clear. Are those who will lead your family business qualified? Have 
they had a range of experiences, responsibilities and training that will 
prepare them for leadership? It's increasingly common for family agriculture 
businesses to codify the requirements of returning to the family business in a 
family employment policy.

   While the author did not actually work for the family company, she 
participated in shareholder meetings and was a keen observer of her family's 
interaction. The failure of the business is certainly unfortunate, but the 
family dynamics and ruined relationships make it even more tragic.


   Editor's Note: Write Lance Woodbury at Family Business Matters, 2204 
Lakeshore Dr., Suite 415, Birmingham, AL 35209, or email lance@agprogress.com. 


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