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March 2022 < Back

Understanding Entitlement in Family Business

In family run companies, “Entitlement” often refers to a sense of being “owed” to benefits such as: wealth; employment; and status without having to become qualified or work hard to achieve these benefits. Entitlement can lead to family members who do not display the work ethic or exhibit the commitment to other employees. Family members who have a sense of entitlement often expect non-family employees to “live to work” — while family executives can take lots of time off. A sense of entitlement can also lead to a family member managing in an autocratic style — feeling that they can do whatever they want in the business and yet non-family employees need to do exactly as they are told.

Usually it is the “Next Generation” (NxG) members who get labelled as the “entitled”. However, the senior generation and parents play an important role in encouraging or preventing an entitled Next Generation.

What role do the parents play?

It is quite common for parents to make life easier for the children so that they don’t have to suffer as the parents may have. By making life easier for the children, the parents may not realize they are taking away their children’s drive, hence contributing to the sense of entitlement. For instance, the parent’s general inability to say “No” to their child’s request. This starts at a young age and escalates as the children get older. Another way to create entitled children happens when the parents try to make up for lost time or their feelings of guilt about having money by trying to buy their children’s love. Furthermore, when parents allowed their child or other next-gen family member to see themselves as the “heir apparent” without grooming them for the role. It is important for the parents / senior generation to have the difficult conversations around the required skills and capabilities.

Some ways to nurture NxG with a sense of good work ethics and stewardship mindset include:

Help children assume responsibility for financial matters early – highlight the importance of earning and managing money. Allowances related to chores done that benefit the family household, saving for a goal and allowing children to experience the consequences of their spending decisions will prove as vital to developing skills for good money management.

Family gatherings are important opportunities to involve children in conversation about what it takes to keep the business running. Letting them hear positively about the work, their pride in accomplishment and the fun or satisfaction in learning something new. Help them join the conversation by giving attention and praise to their own experiences of working to achieve, make or complete something important to them.

As the Next Generation enter into the business, it is important to establish from the beginning a principle of compensation based on market value for the job. Paying at a higher level because of personal need or as an expression of love creates an unrealistic perception of the value of work done. It also creates dependency on the business that may make it harder for a daughter or son to leave if they discover they would be happier working elsewhere. Over time, pay that is significantly above market rate also leads to problems in financial management of the business.

Ensure that family members who enter the business have regular ways to get feedback about their performance from someone besides a family member. The feedback that is most useful for developing good work skills includes setting goals and working for measurable results. Performance reviews provided by a non-family manager, close adviser or business coach can be especially helpful.

Help the Next Generation to recognize sources of pride in the business beyond profit making. Purposes like improving quality of life for customers, making a better product or giving back to the community are all expressions of the values that make working, even sacrificing for the sake of the business, a worthwhile endeavor.

Involving family members in writing a statement of purpose and values that foster continuing ownership is a good way to bring this kind of conversation into a more conscious and therefore more powerful motivation for shared responsibility and stewardship.

How does your family business prevent and address entitlement? Please share your views and thoughts with us.

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