Affluenza isn’t a clinical disease, though it is a relatively common issue that can arise in the second and third generation family members of very successful family businesses. 

Affluenza refers to a sense of entitlement that can develop when success in a family business leads to subsequent generations growing used to, and even taking for granted, the enriched changes to their lifestyles.

The problem with affluenza is that it may contribute to unrealistic demands and expectations placing further strain on relationships both in and outside the family.  In more extreme situations it can lead to depression.

The degree of severity can vary, but it’s an issue that should be dealt with before it develops into something more serious where it can end up potentially harming family relationships and the business.

How Affluenza Can Manifest

This leads us to our story about Dave, a financial advisor and Jim a successful founder of a family run technology business.  They were out on one of their lunch time group runs when Dave asked Jim how the discussions surrounding his Family Mission Statement and Family Constitution were progressing.

While Jim was pleased with the progress he and his family were making, he did reveal to Dave that he was a little surprised with some comments made by his young adult children who worked in the business.

He thought that some of the things they were saying and asking for seemed excessive and selfish. Jim sometimes felt that his children only saw the benefits of a successful business, and he was concerned that they didn’t seem to value the hard work that had gone into providing the fruits of their parents labour.

He admitted that he and his wife may have spoiled the children a little more than they should have as the business’s success grew. This was probably a bit out of guilt because in the beginning they were unable to do so when the kids were young.  Everything had to be put back into the business, so Jim and his wife could not always give their kids what they wanted.

Dave revealed that there was a name for this sense of entitlement: affluenza.  The term was popularized during a court case where a wealthy teenager was charged with driving under the influence leading to the death of four pedestrians and used “affluenza” as a defense. During the trial, testimony from a psychologist argued that the teenager suffered from “affluenza” and as a result he didn’t understand boundaries because his parents were wealthy and hadn’t imposed any.

While Jim’s children had high moral values and were not anywhere close to the same type of behaviour, he did hope that they would better appreciate the value and hard work that went into being part of a successful family-owned business.

The issue of affluenza was raised again the following week at a business meeting with Alan, another running friend and Jim’s governance lawyer. Alan provided an example of affluenza he had experienced with Carl, the son of a family business client. The young man showed up at Alan’s home one evening demanding $50,000 so that he could buy a car the following morning for a road trip he was planning with his friends.

Carl was a minority shareholder in the family business as well as an employee and felt he was entitled to this request.  Alan had to explain to him that he was a lawyer, not a banker and sent him on his way.

What Can You Do About Affluenza?

Dave asked Alan what advice he’d given Carl’s family on dealing with affluenza. Though Jim’s situation wasn’t nearly as serious, Dave was certain the advice Alan offered could be adapted to Jim.

Alan revealed that his first bit of advice was to review the Family Mission Statement. Carl’s father had to make sure that it referenced regular and honest communication, but also appreciation for the opportunities provided by the business and a sense of responsibility.

He also offered to go over the Family Constitution again to check for applicable policies that could reduce this sense of entitlement and dysfunction that was happening.

Alan also suggested that encouraging children to take part in philanthropic initiatives could be a way of nurturing responsible stewardship. It has proven to be an effective way of teaching younger generations to better appreciate what they have.

After discussing specifics on how this could work for his situation, Jim resolved to bring it up at the next family meeting. He was excited because he believed his children would be interested in helping charities of interest to them. They could learn the advantages of wealth as well as becoming accountable for their choices.

What If Affluenza Is a Little More Subtle?

While Dave lauded Jim’s ideas, he did ask about older family members who exhibited only subtle affluenza. For example, family members who would take as much vacation time as they wanted because they were family, or who held the idea that they would run the company someday without the need to prove themselves to anyone.

He explained that it was important to deal with these situations too because the risk is great of subtle affluenza developing into something far more serious.

Dave said that one way to deal with this was through a Family Council. The latter could help to ward off affluenza in a number of ways, such as:

• Establishing that compensation will be made at market value for a job when the children enter the company
• Ensuring all family members who are part of the business receive performance feedback from people who aren’t part of the family, like a close adviser or a business coach
• Being responsible for reeling in anyone who displays serious behaviour issues, such as the example of Carl.

Affluenza might not seem like such an important issue, especially in the beginning when it’s subtle. However, if not dealt with, it can lead to larger issues including putting personal and professional strains on relationships, and even harm the family business in the long run.