Chaos at the ‘House of Gucci’

(Second of a series)

Gucci remains iconic today, but because of fatal mistakes by the family and the business, the third generation lost control of the enterprise (begun in the 1920s in Florence by founder Guccio Gucci). The fashion brand is now a subsidiary of a French conglomerate.

How did things go horribly wrong?

“The company was the family and the family was the company,” said third-generation Roberto Gucci in fashion editor Sara Gay Forden’s book “House of Gucci,” from which much of the information in this series was taken.

Last week we looked at Gucci in its heyday, due to Guccio’s son Aldo, who made the company a global brand.

Craftsmanship was part of the company DNA. William Flanz, a banker who tried to help the third-generation Maurizio Gucci make better business decisions in the 1990s, loved watching the employees work. Flanz says:

“I had spent so much of my career with intangible financial services that I loved watching a craftsman put a handbag together, the way he would roll the different layers of leather over a wooden form and place a few sheets of newspaper between the [layers of] soft leather to [pad them] slightly—nowadays there are synthetic materials that are probably far better—but the workers explained to me that they still used the newspaper because of tradition and nostalgia. They still had all these old stacks of Italian newspapers from which they would carefully cut out a few sheets to slip in the bags.”

Suppliers were also treated with respect. Whenever Aldo’s son Paolo would send back goods that were ordered but had arrived late, the father would say, “We have been working with these suppliers for years, you cannot treat them like that!”

Like his founder-father Guccio, Aldo was extremely thrifty. He took lunch at the employee cafeteria and scrimped on personal expenses.

He also expected his children to perform well. He did not give his children big salaries, but once in a while, he gave them a bonus “to make them smile.”

His son Roberto said, “My father was much tougher on his own sons than on his employees.”

In the late 1990s, when the company was fighting for its life, fending off hostile acquisitions by other corporations, CEO Domenico De Sole knew that freeloaders were not acceptable.

The Rome-based accessories house Fendi offered to bail them out and do a merger, but Fendi wanted jobs to be guaranteed for younger family members and their spouses.

“I can treat people well, but I cannot promise anybody a job,” De Sole said. “It isn’t about family anymore. You have to perform.”

Aldo was larger-than-life and had his faults. But even if the first generation found some of his ideas outlandish, Aldo respected family decisions.

“Aldo always wanted to do things with the agreement of the entire family,” a longtime employee said. “He may have brought the ideas, but the decisions were always taken by the family board. That said, they usually let him have his way because he always had the right instincts, especially about where to open stores.”

In 1973, the world was an oyster for the Gucci family and business. Aldo attributed this to the fact Gucci was entirely family-owned. “We are like an Italian trattoria. The whole family is in the kitchen.”

But the idyll would not last. In the 1980s till the 2000s, Gucci was dubbed the Italian “Dynasty” (after the American soap opera).

“G isn’t for Gucci, but for ‘guerra,’ (war)” said a major daily. In Gucci, “more chaos reigns than in a Roman pizzeria, [with] the kind of fighting where you go in as pigs and come out sausage,” said another paper.

“Since the time of Cain and Abel, family disputes have been marked by irrational and impulsive decisions, the fierce battles which ensue, and the senseless destruction they cause,” said a judge who tried to end decadeslong family feuds, and noted that the Gucci family had legal issues worldwide “at enormous cost to members of the family and the businesses they control.”

Next week, we look at the Gucci wars.

(To be continued)