Soriano: When blood becomes a birthright

“My father told me that someday I will take over his business.” How often do we hear this statement from children of wealthy parents? When children brag about inheriting their parent’s business minus any modicum of performance, meritocracy and accountability, what kind of behavior should we expect when it’s their time to assume leadership? Specialists often refer to this fixed state of mind as a next generation “owner mentality.” And admittedly it is causing a lot of sleepless nights for parents-founders and business owners.

Why? Consultant Rick Johnson stated it correctly that “an attitude of entitlement that is displayed openly can create major challenges for even the most successful family business. He further expounds that “these children often manage with an autocratic style with little empathy for employees and leaving the impression that they can do whatever they want because they will run the company someday.”

What Johnson highlighted is a very common sight among family members working in successful family businesses in Asia. And the parents’ fear and paranoia are real as the sense of entitlement feeds into their child’s last name as a birthright then degenerates into a mindset of an owner mentality.

According to research, children develop a sense of entitlement in large part because of how they are parented, especially if they are not given enough responsibility or not taught how to deal with failures.

For the new year, it is appropriate and timely to reinforce to one and all that raising non-entitled children (and grandchildren) is important and non-negotiable. The stakes are high in sustaining a business under a complex environment (the very disruptive Covid-19 pandemic is one good example) and having entitled children as successors is a recipe for failure.

We can expect more business closures to hold sway with a gloomy gross domestic product forecast in first quarter and second quarter.

But what causes children to act in a privileged manner? There are certain parental actions that contribute to the development of an entitled child. In our research and regular collaboration with clinical psychologists, we have identified red flags that parents/owners need to know and reflect on. One apparent mistake is the tendency to over-parent. According to Amy McCready, founder of Positive Parenting Solutions, “When children receive everything they want, we feed into their sense of entitlement and feelings of gratitude fail by the wayside. The entitlement epidemic usually begins with over-parenting, over-indulging, over-protecting, over-pampering, over-praising and jumping through hoops to meet the kid’s endless demands. Today’s generation of parents are overly invested in their child’s happiness, comfort, and success.”

Behaviorally, humans let alone children can be manipulative in their actions and the parent’s natural instinct to always say “Yes” to their child’s request can create that sense of entitlement. This starts at a young age and escalates as the children get older. As I mentioned in my previous article, when parents try to make up for lost time or to assuage their feelings of guilt for not being around during parent-teacher meetings, recitals and graduations because of work, they try to buy their children’s love by way of superficial, material things.

When these actions by the children continue into adulthood, an entitled mindset mixed with unclear entry and exit rules in the family business can cause harm not just to the enterprise but untold misery to the family. And when parents make another mistake of rewarding bad behavior with share ownership to avoid the dreaded tax liability, a ticking time bomb ensues. By default and unless the family embarks on a governance journey, 2023 onwards will not be a good year for business owners.