The Decision
One night shortly after Kalinsky's phone call with his ex-brother-in-law, he drove to Bruce's house and laid out the facts as he saw them: David's open criticism of him and seeming inability to retain a key client were jeopardizing Empyrean's future. Bruce told Kalinsky that the decision was up to him. "I asked Mike whether this was a personal or business decision," Bruce says. "When he told me it was all about business, I said he needed to do what he thought was best."
Kalinsky put off calling Kenworthy for a few days. When he finally dialed David's number, Kalinsky was surprised by his terse tone. Bruce had alerted his son to the fact that he was about to be fired. Kalinsky was caught off guard but stood by his decision. Not surprisingly, the conversation was heated and ended badly. "It was quite obvious that Dave wasn't very happy with me," Kalinsky says. "I understand why Bruce did it, but in hindsight it would have gone better if I had talked to Dave first."
Kalinsky felt drained but relieved. He had fired Kenworthy and regained control of his company. He also received a hopeful sign from Capital One, which agreed to keep a few Empyrean recruiters on-site while the bank mulled over its next step. But the euphoria quickly deteriorated. With emotions running high and no buyout provisions in place, Kalinsky and Kenworthy disagreed on how to cash out Kenworthy's shares. That August, Kenworthy sued Kalinsky and Empyrean, seeking a cash settlement equal to his stock holdings, in addition to damages for wrongful termination. To Kalinsky's surprise, Bruce was also listed as a plaintiff and wanted to cash out his stake. "Though I didn't think about it at the time, once Mike let Dave go, I needed to leave the company as well," Bruce says. "It would have been a prickly situation any other way."
That December, Kalinsky sat down with his ex-in-laws and their lawyers for the first of many mediation sessions. Both sides hired appraisers to value the company and they reached a settlement three months later. Empyrean agreed to pay the Kenworthys for their shares of the business, in addition to the $100,000 loan from Bruce, within two years. The wrongful termination charge was dropped.
These days, Bruce is still a bank officer. His son, meanwhile, now runs his own recruiting company in Richmond. His first big client? Capital One. "I guess Dave had better connections to management than I originally thought," Kalinsky says. Some family ties remain. Kalinsky's son sees his grandfather and uncle often, and Kalinsky and Bruce check in with each other occasionally. The former brothers-in-law, however, have not spoken to each other since the mediation. "I know that Dave and Mike will never get along again, which is sad for me," Bruce says. "It would have been nice if the family and the business had been able to stay together."
Empyrean generated $3.3 million in revenue last year and ranked No. 385 on the 2005 Inc. 500. For Kalinsky, the success is bittersweet. He regrets the way things ended with his former in-laws. "The thing that makes me really sad is that if Bruce was still an investor, I would have been able to give a great return on his investment rather than just paying him back," he says.
The Experts Weigh In
Neutral party needed
Kalinsky made the best decision he could for his business, but he was crazy to assume that his father-in-law would side with him versus his own son. At the very least, Kalinsky should have taken down minutes during the meeting with Bruce to prove that he was not acting alone. Even before that, he should have brought in a neutral third party--perhaps a board member--to suggest alternatives to firing Kenworthy, like spinning off a division for him to run.
The wrong move
I'm not sure Kalinsky should have fired Kenworthy. In hindsight, it seems like he acted on bad information. He should have made sure that he had the story right before he took such a drastic step. Then he should have approached his brother-in-law directly. My sister and I run a company together and we confront each other all the time. We also keep everything transparent--the fact that we sit next to each other helps.
A hasty decision
Kalinsky may have acted too rashly. His big mistake was not documenting his problems with Kenworthy's insubordination and performance from the beginning. Then when he made the decision to fire his brother-in-law, there would have been no surprises. Kalinsky also should have had a partnership agreement that detailed how he and his in-laws could dissolve their partnership without having to bring attorneys into a crisis situation. It's amazing how many family businesses fall into this trap.
