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The Steinberg Story- Falling Apart, Together

Source : Family Wars – Grant Gordon & Nigel Nicholson

Ira’s Brood

Steinberg family business is a story of a firm that stood on the verge of great success but then comprehensively lost its way. Their story offers a clear illustration of how brutal the roller-coaster of fortune can be when a family has no recourse to external agencies that could help it resolve internal dissent over strategy and identity.

The family started with a modest beginning as an immigrant family arriving in Montreal from Russia before the First World War and set themselves up as retailers in order to make a living. In the early stages, Ida- the matriarch was running the business and raising her six children all alone as her husband Vilmos left the family. Her characteristics of maintaining a strong work ethic, and her belief in sacrifice and mutual support became deeply ingrained themes of the family firm for many years to come.

The Rise of Sam

Sam, Ira’s second son, was a passionate and committed young man. During the Great Depression Period, he started his career in business and quickly rose through the ranks. By the onset of the Second World War, he had taken control of the family firm.

Sam’s business acumen was matched by his entrepreneurial spirit. The time when he married Helen, his first cousin on his mother’s side of the family, he saw it as an opportunity in his extended family and formed a partnership with his father-in- law, which helped to expand the company. When his father-in-law died in 1930, the majority ownership of the company moved into his hands, with the rest of the shares divided among his siblings.

In 1942 Ida died, however, Sam continued to lead the firm with great gusto, creating security and wealth for his family. The firm was thriving and was on its way to emerging as a successful supermarket chain. Similar to many successful family businesses, the profits from the organization were reinvested to help the company expand rather than being spent supporting luxury lifestyles.

Growing Pains

The company grew rapidly in the 1950s by raising external share capital in 1955 by way of the preference share issue and by partial flotation of non-voting shares on the Montreal Stock Exchange in 1958.

But his leadership style alienated employees and undermined the authority of his key managers, leading to an abnormally high staff turnover.

The effects started to show up in business performance. And high staff turnover combined with a number of strategic failures, such as the misjudged acquisition of Grand Union stores, and the launch of Miracle Mart, caused the company to decline. Each new venture away from the core business stretched the thinning resources of the business and increased the risk levels. Blinded by the demands of the moment, Sam also lacked the insight or humility to recruit and retain the outside talent that the company so badly needed.

A New Generation

Sam Steinberg was a strong-willed and dominant figure. His siblings accepted him as the leader of their generation, but his children were a different story. They had been raised in a wealthy and privileged environment, and they were not prepared to be pushed around by their father. Sam and Helen both didn’t encourage their four daughters to get a good education and even didn’t expect them to work in the family company.

His elder daughter, Mitzi was as ambitious and driven as her father. Once she had raised her family she decided to further her education and became a lawyer. She didn’t let her gender or her lack of business experience hold her back. Even in 1973, Sam asked her to help turn around his ailing Miracle Mart chain, and she jumped at the chance.

Even though Sam showed the same insular instincts of considering his sons-in-law as preferable to outsiders, still two of them joined the business: Mel Dobrin and Leo Golfard, husbands of Mitzi and her younger sister Rita, respectively. They started off in executive ranks, but Sam favored Leo more to be his successor because of Leo’s entrepreneurial personality. However, this plan was shelved when Leo and Rita’s marriage started heading for the rocks and Leo resigned from the company.

This led Mel Dobrin to be the prime candidate as successor CEO. However, he lacked the strong leadership qualities that Sam possessed. This docility encouraged Sam to stay on as the effective head of the company and take all the key decisions. Sam’s inability to let go of power and the unavailability of a loyal and non-effective team of non-family leaders began to create chaos. Senior management interpreted the unwritten policy of nepotism as a sign that the top jobs would never be theirs, and the most capable executives started to leave the company.

Musical Chairs in the Boardroom

Post Sam’s sudden death in 1978, Mel took a sensible decision of moving to the Chairman’s role and appointing a trusted long-serving non- family lieutenant, Jack Levine as the President. However, Mitzi’s presence on the board and her forceful personality caused problems for the new management team.

This was followed by Levine announcing his retirement in 1982 and the appointment of the second non-family president. The gentleman was discredited because of failed marketing campaign at Steinberg’s and he lasted a mere 17 months of his five-year contract.

Post this Steinberg’s former senior executive, Irving Ludmer was approached to be the company’s President. He only accepted the job on the condition that he will be given the full support of the board to lead the company, and with explicit assurance that the family members would not undermine his authority. However, backstage the family was once again rumbling, and he too fell into a disagreement with the owners over key issues.

Ludmer was more decisive than his predecessors and started to turn the company around. However, he soon fell out with Mitzi, who was still a powerful force on the board. Ludmer threatened to quit unless Mitzi resigned from management, and she eventually agreed. Steinberg’s now had none of the family bloodline involved in a managerial capacity in the business, although Mitzi continued to wield influence through her position.

Coming Unstuck

The Steinberg family was once known for its togetherness. But after the death of patriarch Sam Steinberg in 1978, the family began to fall apart. One of the main sources of conflict was the financial future of Sam’s three daughters, who were the beneficiaries of trusts that held voting shares in the business.

The sisters had different ideas about how to manage the trusts. Mitzi, the eldest sister, wanted to sell the company. Marilyn, the middle sister, wanted to keep the company and run it herself. Evelyn, the youngest sister, was torn between the two.

The conflict between the sisters escalated, eventually leading to a lawsuit. Mitzi sued Marilyn and Evelyn, alleging that they were guilty of a conflict of interest. The lawsuit was eventually withdrawn, but the damage had been done. The Steinberg family was no longer united.

In 1989, the Steinberg family sold the business to rival Canadian retailers Loblaw’s. The sale was a bitter pill for the Steinbergs to swallow, but it was the only way to end the conflict between the sisters.

The Steinberg family story is a cautionary tale about the dangers of family businesses. When there is no clear succession plan, and when family members are unable to agree on how to run the business, the company can quickly fall apart.

The Steinberg family was once a successful business dynasty. But in the end, their lack of unity and their inability to manage their family business led to its downfall.