Your Money: What would P. Diddy do? Don’t do that

05/24/2014 4:36 PM

05/24/2014 4:37 PM

When I read the headlines, “P. Diddy buys $360,000 car for son’s 16th birthday,” I could not help but think, “What a way to mess up a kid, but I guess it’s none of my business.”

But if applied in the world of family businesses, I would have thought, “Well, there goes that business.”

After all, a sense of entitlement in a child may be the No. 1 killer of a family business.

Entitlement is really an attitude or behavior that you are deserving of respect and privilege beyond your skills, knowledge and experience. We have all met these kinds of people along the course of our lives. Most times we avoid them if we can, and if not, we simply go along for the ride. Wouldn’t we all like to drive P. Diddy’s son’s car?

But believing you have the skills to run a business when you don’t, or thinking you can run the business just because your dad did, are guaranteed ways to drive your family business into the ground. Your customers do not care what your name is or how much money you have. They want the best product and service for the best price. And if you can do this profitably, then you win.

Entitled family business members also tend to be poor listeners. One business owner’s son with a company out West decided to bring all production in-house contrary to the advice of both the production manager and the CFO. This resulted in slightly higher quality, but there was not enough volume to cover the increased debt. Today they are out of business.

Here are some pieces of advice to guard against entitlement:

Become knowledgeable. Get some education on business and your specific industry.

Realize you have to understand others. Daniel Goleman’s hallmark book, “Emotional Intelligence,” sites a study that tracked valedictorians from Illinois high schools and a Harvard graduating class over the next 10-15 years. Goleman found that the ability to understand and get along with people made the difference in who became successful.

Bottom-up experience is essential. When it comes to working full-time in the family business, the best place to start is at the bottom. This way you will understand how things operate at the lowest level, and as you rise through the ranks you will gain the respect and support of the employees.

Work outside the business. The highest correlation to a successful family business succession is for the heir to have worked for some time in another business; you gain experience and knowledge that is different from the family business and you can discover your true merits without any outside influence or assistance. In a nutshell, you find out who you really are.

Entitlement starts – and stops – at home. Much of entitlement comes from parents. In the family business this comes from putting your kids in positions they are not qualified for, paying them too much, letting them avoid the dirty jobs, and telling them one day this business will be theirs. Just because someone shares your DNA does not make them a qualified employee. It merely gets them an interview. From there, is it up to them. Having your child earn their stripes from the bottom to the top of the company is the best way to squash entitlement, ensure a successful business and raise a well-balanced child.

Raising a child with the appropriate balance of confidence and humbleness is certainly a challenge. So next time you are faced with a decision on this, just ask yourself, “What would P. Diddy do?” And then do the opposite.

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