Andrew Keyt is president of the US chapter of FBN International and executive director of the Loyola University Chicago Family Business Center.
The next generation need to be given appropriate guidelines and limits to allow them to build a sense of self, self control and responsibility. Andrew Keyt looks at how business owners can avoid their children falling into a sense of 'negative entitlement', or a right to wealth
"My kids think the world owes them a living," the founder of a major US company complained to me the other day. And he is not alone: more and more family business owners are expressing concerns about a cancerous sense of entitlement in their next generation.
Their concerns are understandable. They had to work extremely long hours, and often did not have financial resources available to them. They are perturbed by their children and grandchildren, who seem to lack drive and respect because, as they see it, these younger generation family members grew up with wealth. They are concerned about how hard they work, how they spend their money and the images this sends about the family and the business.
Another businessman expressed his misgivings this way: "I'm concerned for the future of our company, because I don't see anyone who is willing to sacrifice the time and energy that our generation did." The word that many of these business owners use to describe their concern is 'entitlement'.
It is important to recognise that the word entitlement is a loaded one; it has many negative connotations and often means someone is considered arrogant and obnoxious. However, if we take a step back, entitlement can be positive as well. Entitlement can also refer to rights earned or inherited, though in both cases, those giving the rights must agree with the source of the credibility of those rights.
The negative images abound: "I deserve to be CEO because I'm the oldest son"; "I should be able to come in late because I'm an owner"; or "I should be paid more because I'm family". What we are talking about in these instances is what I term 'negative entitlement'. Negative entitlement is a sense of rights or privilege that is not based on a source of credibility acceptable to those who must confer rights. For example, rather than merit it is based on irrelevant criteria like years on the job.
What we don't often look at is appropriate arenas for feeling entitled, or what I call 'positive entitlement'. Positive entitlement is a sense of right or privilege that is based on actual rights given by merit, contract or some other means acceptable to those who confer the rights. Examples include the actual legal rights of shareholders, the right to expect fair compensation for one's labour, or the right to expect respect from friends and family.
The point to note here is that an individual is asserting rights from a positive sense of entitlement, meaning they have justification because it is coming from true rights granted or earned, a position of strength. This is positive for a system and encourages performance.
Far more pernicious is negative entitlement, which is based on a distorted sense of reality. Individuals asserting a negative sense of entitlement are asserting rights that have no connection to the current situation or a distorted sense of who they are as individuals.
Sources and solutions
To effectively combat negative entitlement we need to explore the concept called the 'ideal self'. In our early years, we all develop a sense of who we are in this world. Our 'ideal self' (what we think we are) can be heavily biased, driving us to view ourselves more positively than we actually are (it is one way to feel good). In reality, no one can live up to these idealised images of who we are. Thus, we end up with a gap between our 'ideal self' and our 'actual self'.
The gap between our ideal self and our actual self is a large cause of sense of negative entitlement. If an individual's perception of themselves as a hard working and caring boss (idealised self) is highly congruent with their actions and with the perceptions of those who work for them (their actual self in the world), there is a greater likelihood they will exhibit positive or appropriate expressions of entitlement around issues of being a boss.
Negative entitlement comes when there is a gap between one's ideal self and actual self. For example, rather than seeing that authority as coming from respect earned by superior performance, an individual's ideal self might be based on a relative of the founder. Employees who are unlikely to agree with blood lineage as a sufficient source of entitlement will consequently label the family member as arrogant and even unworthy.
Contending with this is not easy. The first step is 'self assessment': we have to better understand ourselves and the messages our parents have sent us about money and entitlement. In essence, we need to get our house in order before we start to focus on the larger picture.
The next step is to look at opportunities to prevent negative senses of entitlement from developing, and promoting the development of positive senses of entitlement. This is about building a strong sense of self. Individuals with a strong sense of self are better able to receive negative feedback (which helps to bring the ideal and actual self closer together), less likely to be defensive or overly emotional, better able to deal with conflict, and more likely to exhibit self-confidence and independence.
So how do we create an environment that builds this sense of self and provides our children with accurate feedback about who they are in this world? First, we need to be present in the lives of our children. Often in the family business, the demands of the business draw one or both parents away from the children in their formative years. Further, even when present, we need to set our expectations aside and help our children pursue their interests. They need to achieve and this is more likely if they are internally motivated rather than bending to the pressures (explicit or tacit) of parents. Not only can physical and psychological absence build a sense of resentment between parent and child, it deprives the parent of the information and relationship with their child to help them do their job as a parent. Parents sometimes compensate for absence by being indulgent which further fosters negative entitlement (the children believe they can receive benefits as long as the parents are acting irresponsibly).
Another common problem is that parents are quick to criticise when children make a mistake. Again, parents should not impose their vision of what the child's idealised self should be, that is the responsibility of the children alone. It is important to provide support and understanding when mistakes are made and allow children to have access to the most powerful teacher available: experience. This does not mean protection from the consequences of those mistakes, but it does mean support in dealing with the consequences. Only when a mistake will cause life-long physical damage should a parent step-in.
Next, parents need to set appropriate limits for their children. These limits range from setting times and limits around curfew, school work, communication and relationships. Most importantly parents need to set limits around money management. This starts with setting an example for how to manage money for our children. It continues with teaching budgeting, and making children earn money to purchase the items that they want or need.
Finally, it is important to give children struggles that they can manage. By giving our kids manageable struggles, we give them the opportunity to gradually build that sense of self, self control and responsibility. Further, we teach them that it is acceptable to make mistakes as long as we learn from them and use them to better ourselves and others.
But, what do we do with our adult children, siblings or cousins who are exhibiting negative entitlement? Unfortunately, the older an individual gets, the more difficult it is to address their sense of entitlement, because they have more to lose. Yet, there is still the possibility of addressing this sense of entitlement. It starts with making sure that the family business environment has a clear sense of the expectations of family members and is providing accurate feedback to all family members about their performance, even if that feedback is negative.
Governance is another key to dealing with entitled adult children. Through the use of strong communication and conflict resolution with family governance and effective use of outside directors, families can avoid situations becoming distorted or overly emotional. Governance can help articulate the separation of what is owed by family and by business. For example: "as a family member I love and support you, but as a business person I am going to hold you accountable for achieving expectations".
Building positive entitlement and protecting against grandiose ideas and expectations is fundamental to family business survival. One cannot invest enough time and effort into this task. Being successful will also yield greater achievement, greater responsibility, greater cooperative behaviour and, importantly, the sense that as family members we are all contributing to things larger than ourselves. Weeding out selfishness and building unity will pay enormous benefits to this and future generations.