TORONTO, CANADA. I delivered a talk here a few days ago and was asked a valid question by a worried business owner participant on the impact of family member entitlement to the business, and my answer was frank and candid.
I said, “There is absolutely no doubt the business will suffer. It is just a matter of time!”
Let me expound on my answer:
1. No Value.The entitled family member employee does not bring any value to the business.
2. A likely liability.The entitled family member employee is likely to be a liability. He or she may cause divisiveness.
3. Two types of Employees. Non-family employees frown upon entitled family members.
4. Professionals are Averse. Non-family employees have little or no respect for family member-employees whose only claim to fame and passport to employment is his or her last name.
Then I was asked with a follow-up question…”Professor, who is to be blamed for creating entitled family member-employees? My answer was equally swift and straightforward, “Of course the founder-parent-business owner!”
I then articulated why founders commit this grievous mistake:
1. The natural instinct of parents or founders of businesses to “shelter” their children from the hardships that they went through during the startup years.
2. A form of guilt for being an absentee parent.These visionaries who where rarely present during the child’s formative years will try to make up for lost time by showering their children with material wealth
3. Nine out of ten business owners make the mistake of repeatedly assuring their children that “someday this business that I built will be yours” or “everything I do and own will eventually be passed on to you”
4. Employing Children without any work experience will translate to the child-successor emulating the autocratic style of his or her visionary parent
Business Owners Continue to Struggle
When business owners commit any of the behaviors mentioned, we can naturally expect the twin evils (entitlement and “owner mentality”) to manifest when the children crosses over from being family members to family member-employees.
Everyday the business owner will continue to struggle, hold on to the business out of fear, resist initiating a succession plan and try to understand why their children never display the work ethic or exhibit the same commitment as they do.
How Do We Deal With Entitlement
To conclude my Q&A portion, I was asked a question by a 65 year old founder that many business owners in the audience were very interested to know.
”Prof, I must admit that I belong to the nine out of ten business owners/patriarch you mentioned. Moving forward, what should we all do to address this “sense of entitlement? Can this problem be reversed?”
I replied with an emphatic yes but the process can be daunting as it entails firm leadership that must be exhibited by the patriarch or senior generation leaders and a strong commitment to pursue governance by the next generation family members.
Working for the Family Business is Not a Gift
The first step is to educate the family members on the need to embrace governance. Initiating Governance and best practices will require the removal of the sense of entitlement. One effective way to impose accountability is to create a family charter/constitution which clearly outlines how and when a family member will progress within the business.
It also incorporates a powerful family code of conduct that outlines a set of policies that will address predictable problems that are currently happening and may likely occur in the future.
In the end, next generation family member-employees must understand and realize that their way into and through the business should always be based on merit and never through their birthright.