Family Business and Steinberg Case Essay

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Family Business and Steinberg Case

Steinberg's Success -- Sam Steinberg (1905-1978), was a Canadian of Hungarian descent who transformed the grocery story founded by his mother Ida, into one of the largest chains in the Quebec, Steinberg's Supermarket. One of his key successes was helping to transform food retailing in the post-World War II era into mass merchandising, mechanization, and personnel management that fed into and exploited the bilingual nature of Quebec, and the Ontario. Sam had a unique ability to find optimal locations for his stores by using the old-fashioned technique of driving around the area, watching who drove where, who shopped where, and learning about the areas, then purchasing properties and building on sites he believed would service the public in the most expeditious manner. At the time of his death, Steinberg's was the largest supermarket chain in Quebec. Sam left a legacy of philanthropic ideas and causes, typically focused on the Jewish community. Disagreement among the daughters led to the sale of the family business in 1989, the name disappeared from the stores in 1992, but the family remains one of the wealthiest and most respected in Canada (Ray & Kearney 2002).

Sam's initial success in the business came from shrewd purchasing and the ability to connect with clients. Later, in the mid-30s and beyond, Sam saw that old model of small, limited stores with a counter and customers asking for products was giving way to larger, more spacious locations in which customers would shop with a self-service model. This, of course, meant more employees and more investment, but Sam's view was that the stores became a way of life. In fact, some of Sam's later success was directly attributable to the use of his cash reserves during the war to acquire land at attractive prices, as well as the continued migration into the suburbs -- a move Sam was well ahead of, as well as learning to manufacturing many of its own products like coffee, nuts, tea backs, and baked goods

Part 2 -- What is the Family's role? From the very inception when Sam's mother Ida purchased the small store in 1917, the family was everything to the business. Ida had 6 children and 2 sisters, all of who worked parts of the operation as soon as they were able. According to Sam, it was Ida who instilled the set of values into her children, and the idea that family had to take care of family in the store. As their operation grew and Sam showed talent, Ida would continue to push the role of looking after the family, so much so that Steinberg reports that in order to handle cash in the store, you had to be part of the family (Roberts 1992 p. 3).

Continued expansion was still with the family. Sam formed a company with his mother's borther, Lewis Roth, then continued to open stores putting family in charge, as long as he kept 51% under his control to be careful. Cousins and brothers-in-law, their children, the wives and family of those children, all had a role -- maintenance, fruit buying, grocery buying, construction, accounting, etc.

However, once the business moved from the full service, order, and delivery model to the self-service and expanded warehouse model, Sam realized that he had to hire non-family members, there simply were not enough Steinberg's to adequately expand. Sam looked at the model of the type of person he wanted, and sought out those kinds of people for management, still employing family when possible. What was key is that he and his upper family management never lost sight of the day-to-day operations and treated the stores as a family business; regardless of their location and number; and even the name; even as Groceteria, the idea was the same. High quality product and top notch service for the individual model of store. This was especially true during the war years when many of Sam's competitors would divert scarce products to special customers or sell them privately for black-market prices. Sam never did this, and kept his mark-up the same, often letting clients know when he was able to get rare finds so they could both budget and make the time to get the product. This caused customers to believe that they were also "part of the family" and after the Depression and War were even more loyal to Sam.

Part 3 -- What made the transition from Ida to Sam so successful? The transition from Ida to Sam was almost seamless for a variety of reasons.

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First, Sam was 12 when his mother opened the first store. Ida explained to all the children that it was necessary for them to pull together as a family in order to survive the departure of their father. Sam became the leader of the business, and within 2 years, by the time he was 14, he stopped attending school and worked at the store full time. He made many of the key decisions, helping to expand the store and then purchased another property across town that, because Sam had cash, was an excellent acquisition. Because Sam focused on the stores, as opposed to play and school, his upbringing was focused on the needs of the firm, and because he was constantly involved in the business, he knew everything he needed to about its operation -- all the details. It was this constancy that became Sam's textbook, so that as he took on more responsibilities, purchased new stores, and became the titular head of the family, the transition from Ida to Sam seemed more than natural -- it seemed fated.

Part 4- What issues are raised by the succession question at Steinberg's? First, by all accounts, "Sam ran the company with a paternalistic, controlling style; it was said that 250 people reported directly to him. There was a hard side to this approach. Same could criticize and intimidate his employees to achieve the results he wanted" (Roberts, p. 9). This engendered the business seeming like a family; particularly because Sam also had time for an employee's problem, etc. Sam treated the bsuienss like a kingdom, and when someone left, he considered it a personal act of betrayal. Sam knew at times he should stay out of a manager's authority -- as with sugar, but in some of his divisions, he put incompetent family members in charge, necessitating Sam to be involved, but with one caveat -- Sam would put a competent person, from outside the family, just below the family member to ostensibly run that division. This worked until the business became too large and complex and the paradigm changed.

Unlike a smaller operation in which family control is an asset, there comes a time in an organization that not only are there not enough family memebrs who are competent, there may not even be enough family members with the interest in the business. Just because someone was related, or had the name, or married into the Steinberg family, did not make them good for the business, particularly when the business grew into dozens and dozens of retail outlets. Overtime, the idea of succession needed to be based more on the idea of someone who understood and could continue the success of the business as opposed to third and fourth generation family members.

Unfortunately, another sociological issue comes into play in this case. In 1917 the business world was quite different for a wide variety of reasons. Ida opened a shop that had the characteristics of:

Small, catering to a small, integrated community within a unique geographic area

Transportation was at a premium, local-local was the idea

The initial model was full service; order, pick, deliver

2-3 locations could easily be managed by family

All this changed with the advent of post-War suburbia and rapid growth in population, customer base, level of sophistication and technology. When Ida and the family opened the stores, they had to make the business work or they would starve. Throughout the early years (1920s and 1930s) the same paradigm existed -- Sam had to make the business work, it was a matter of survival. The next few generations of Steinbergs and extended family, however, never knew privation and, while better educated, never had the same issues surrounding the need to work. This engendered a different kind of psychology, one that isn't negative, but simply does not have the same business drive.

In addition, the business world of the 1960s, 70s, and 80s was vastly different than that of the previous three decades. Global production and distribution changed the focus of purchasing; suburban consumerism changed the way people shopped, and the competitive nature of large and multinational chain stores also impacted the buinsess. Instead of dealing with 20-30 stores and 250 people, the business could conceivably be triple that with no possible way of being involved in everyone's life.

Part 5 -- Criteria for succession? If Sam picks Mel, how should he articulate the decision? The criteria for….....

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