Family Founders Forum 2024: Change Will Power the Future

July 26, 2024

Family businesses play a vital role in the economy. The 500 largest family enterprises generate $8 trillion in revenue and employ 24.5 million people globally.*

How can these operations not only survive, but thrive, for generations?

At our inaugural Family Founders Forum in Chicago, family business owners, industry thought leaders, and Goldman Sachs specialists shared strategies and insights on building innovative, resilient companies and discussed top-of-mind topics, such as family business culture, succession planning, and investment opportunities in sports and artificial intelligence.

Here are a few key takeaways.

Develop a culture of entrepreneurship

Innovation is a key ingredient for business longevity and growth. Dan Walsh, co-chairman of The Walsh Group, a fourth-generation family business, has a method for championing it within a company: treat your employees like entrepreneurs.

“You can develop employees into entrepreneurs by consistently giving them opportunities to contribute to and improve various aspects of the business,” he says. “There’s probably nothing more important than that to business growth.”

Challenging employees to evolve the business can also be a rewarding, engaging way for them to contribute. Plus, when associates actively participate in expanding a company, it can fuel deeper bonds and commitment.

President of Lettuce Entertain You Enterprises, RJ Melman, echoed this spirit of ingenuity, particularly in the context of next-generation leadership.

“The mistake I see people making is thinking about what their predecessor would do in a certain situation, but being someone’s facsimile is not a recipe for success,” he says. “You are not going to see the world the same way they did, so you need to find your own leadership style. You can do that and still preserve the culture of your business.”

Being an entrepreneur, after all, means trying something new.

Create long-term succession plans that tap skilled leaders

Some aspects of the family business will undoubtedly change over time. These could be shifts in leadership, culture, or even the products and services you offer. Families may be eager to preserve the legacy of their business by entrusting responsibilities with relatives. While some family members will be a great fit, several speakers said it’s important to avoid forcing people into roles or even into the business.

“Allow people to choose positions based on their skill set and interests, and hope somebody will be interested and entrepreneurial enough to want to sustain the family business,” Walsh says. “Or as my father said to us, ‘if you don't like it, sell it.’”

And when there is interest in the family business, transparency is key. Keating Crown, managing principal of Sterling Bay, says Henry Crown & Co. has introduced more openness around participating in the 105-year-old family business started by his great-grandfather. This approach is meant to help gauge interest and level-set expectations.

“An open dialogue wasn’t happening before, unless you were fortunate enough to be in a household where a parent was in the business,” he says. “So, we have initiated more formalized conversations between family and non-family members and enhanced channels of communication.”

Partnerships: be ready for uncertainty and excitement

Harvest Partners, a private equity firm, was one of several to contact Mark Kaufman about a partnership with his physical therapy franchise, Athletico, which he founded in 1991. He was so impressed with their personnel, approach to the potential investment, and philosophy, he agreed to bring them on as a majority stake institutional partner in 2014 (he stayed on as CEO).

“They knew a lot about the industry, knew all the players and their similarities and differences, and they asked fair, yet challenging questions about what we wanted to do with the business over time,” Kaufman says.

If you’re thinking about a partnership, Kaufman recommends lots of due diligence, reference checks, and thoroughly understanding how and what they will contribute and who you will be closely working with over the next several years.

“I had an idea of what intangibles they would bring to the business, because for us to scale like that, I knew I would need things I had either never done or had no experience with,” he says.

Kaufman says the biggest change for both the business and his family after the private equity partnership was the sheer scale.

“We were a small family business, a mom-and-pop shop,” he says. “Then, it became a much bigger game for us. More excitement, more fun, but more risk.”

The growth of the business following the institutional partnership was rapid and remarkable. By the end of 2014, Athletico expanded to 90 locations and acquired Accelerated Rehabilitation Centers, bringing their locations to more than 300.

“It was a very energizing time, but there were a lot of nights staring up at the ceiling wondering what I had gotten us into,” Kaufman says.

What’s the antidote to that uncertainty? Surround yourself with a personal board of directors with whom you can vet information and ask questions, so you become comfortable and confident with your vision and decision. “You do not have to do it alone,” Kaufman says.

“Go into it with a wholehearted yes,” he adds. “If you’re not, it’s not fair to your partners, your employees, your family, or your business.”

Explore new paths for sports business expansion

In a session on sports as a family business, Danny Wirtz, CEO of the Wirtz Corporation and Chicago Blackhawks owner, described how his trajectory into the family sports business that goes back four generations was non-linear.

Gaining work experience outside the family business armed him with the skills he needed to take on a more defining role when the time came. Wirtz purchased the Chicago Steel, a junior hockey team, to continue the family tradition and fulfill the growing demand in junior teams.

“It was both strategic and a little bit of passion. Obviously, we are a hockey family. We’re connected to the National Hockey League and passionate about building the sport. We saw a real opportunity to participate on different levels,” he says.

Wirtz continued exploring other, less obvious ways to maximize his family’s impact in sports. To diversify and complement the family’s main business, he launched a video production and content hub.

“We also invested in a practice facility and community ice rink that offers programs for youth hockey. The sport is continuing to grow, but there’s still a lot of room for more growth,” he says.

Michael Reinsdorf, whose family owns two iconic franchises, the White Sox and the Chicago Bulls, wanted to make his own impact on the businesses. He’s currently surveying new and impactful ways the teams can engage with their growing fan bases, which currently include 45 million social media followers, 70% of which are outside of the United States.

“We’re just starting to scratch the surface on how we can stay connected and monetize all the followers we have, given than 99% of them don’t come to games,” he says.

He pointed to the organization’s continued focus to cultivate their fan base through international corporate partnerships with Motorola, Plus500, and Coinbase, creating engaging social content, and launching a new sports network that will show Bulls and Blackhawks games this fall and White Sox games next spring.

Discover how AI and geopolitics intersect

In addition to discussions about leadership, business growth, and expansion opportunities, we wrapped the day with a session on a topic that is top of mind for many family business leaders: artificial intelligence. AI isn’t just transforming how we communicate and work – it may have a profound impact on global power dynamics, resources, and relationships between people, corporations, and governments, says Dan Keyserling, managing director with the Goldman Sachs Global Institute.

How will that play out on a global scale? George Lee, co-head of the Goldman Sachs Global Institute, says over the next two to five years, countries will be figuring out how they want to use AI, which could spur new relationships and conflicts between them as the technology impacts economic productivity, growth, and national defense.

Building and scaling AI will also involve a lot of scarcity – of power, resources, data centers, and more – which can impact which countries dominate certain supply chains and technological specialties, adds Keyserling.

AI has already been deployed in numerous global industries and has played a role in some innovations, including the development of new antibiotics, novel manufacturing processes, and pioneering battery technologies that can be used in the energy transition.

As the technology continues to evolve and mature, it will be important to continue to identify and address key risks and challenges, such as hallucinations, nefarious behavior, and deciding how AI should be designed and used.

“This is still a novel, immature technology,” says Lee. “The balance of driving innovation, harnessing the technology to project strength while managing and regulating it, it’s going to be a very hard thing to get right.”

For more information on any of these topics, please reach out to your private wealth advisor.

*Ernst & Young, ey.com, January 2023, How the largest family enterprises are outstripping global economic growth

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