All in the Family

The Tabard Inn, a family-and-employee-owned small restaurant and hotel in Washington D.C., has charmed visitors for decades. Right now, however, it has a management problem.

For employees, Tim Carman wrote in Sunday’s Washington Post, “the Tabard was something delightfully subversive in the top-down, coldblooded world of corporate America: a business that could blur the lines between work and family, between owner and employee, and still return a profit for all involved.”

Now, however, the owner of the Tabard, 75-year-old Fritzi Cohen, has given her companion Keith Stavrum, 56, lots of power over the establishment, and eight high-level staffers have resigned or been removed from their posts. Among them: Fritzi Cohen’s own son, Jeremiah Cohen, who ran the daily operations of the inn and was beloved by employees.

The primary sin of Jeremiah, it seems, was to have taken on the extra task of managing, and quite possibly mismanaging, the inn’s employee stock ownership plan.

Purged employees say the inn was profitable, that Jeremiah Cohen’s handling of the ESOP was irrelevant to his skills as general manager, and that Stavrum is to blame for exerting a baleful influence over the organization.  Fritzi Cohen rejects those accusations. “If you have a job where you don’t have any real rules or regulations and you get paid well, you get used to that,” she told the Post. “The business had a good run, but the way it was run needed to come to an end or it would have meant disaster.”

Peter Drucker would, of course, have wanted more facts before pronouncing on who is right and wrong in this dispute. Certainly, causing eight top managers to flee is not a sign of good management. But he would also have expressed concern about how the Tabard Inn was being run before the changeover. That’s, as he wrote in Managing in a Time of Great Change, “the family business requires its own and very different rules.”

The first rule was the family must work as hard as anyone else, and Jeremiah Cohen seems to have followed that one. Rule two, that “one top job is always filled by an outsider who is not a member of the family,” seems also to have been honored up to a point, because the hotel manager, the restaurant manager and special events manager were not Cohens.

Still, the Cohens clearly seem to have broken rule three, which is that a family business needs to know when to hire non-family management professionals. Jeremiah Cohen probably had no business running the ESOP.

“The knowledge and expertise needed, whether in manufacturing or in marketing, in finance, in research, in human resource management, have become far too great to be satisfied by any but the most competent family member, no matter how well-intentioned he may be,” Drucker wrote.

What do you think are the greatest pitfalls of running a family business?