Hiring and Firing Friends at Your Start-up

When you start a new company, getting your first couple hires in place is one of the most important decisions you have to make.  A great hire can accelerate your growth, and a poor hire absolutely can cripple your venture.  This process is compounded when personal relationships are co-mingled into this effort.  While hiring a friend or family member may seem like a great idea because you know the person and are familiar with him personally, it also opens up big issues if it doesn’t work out.

With this in mind, we interviewed some entrepreneurs who have had to go through this situation:

Kevin Burton, CEO,  Burton Asset Management, Inc.

One of my first employees is still a great friend but no longer works for me.  As the company grew and the demands of our entrepreneurial firm pressed, he “felt like he was working for the Man.”

In a strange twist, I, the guy who was the best man at my friend’s wedding and had been friends for over 15 years had to let him go.

1.  His salary demands were outrageous.
2.  His work standards suffered because of our relationship.
3.  We didn’t see eye-to-eye on growth.

I remember a long talk we had as I was letting him go.  I said, “Look, I’d rather have a friend than an employee.”

I didn’t want it to get to the point where business resentment impacted our friendship.

In an interesting twist, we’ve had massive growth in the past six months and are exploding in a space he loves.  He and I were talking yesterday and he said, “I hate that you are finally in the position to take the company to the next level, and I can’t see myself there.”  It was strange because the work he could be doing for us is the work he
loves- but I guess I’m still the Man.

Question and Answer:

Q: How did you eventually separate business from the personal relationship?
A: I fired him.  It was one of the hardest things I’ve done as the Founder of our company.  I mean, this guy is really, really good at what he does.  But in the end, what did I need?  What did he need?  We both needed to be ourselves and remain friends.  “Look, I can hire a guy to do what you do,” I said. “But I can’t hire a friend.”  So there it was.  He wanted to work on computers and systems without constraints.  My business model needed to be more constrained so that we could sustain our rapid growth.  There wasn’t a trade-off to be had there.  Nothing to negotiate.  Staying friends, that’s what was important.

Q:  Was there any point where you thought the friendship would go down in flames?
A: Big time.  He embarrassed me in front of a client once and on several occasions was late or put me in a position where I was unsettled because we’re doing the OJ thing to an important meeting.  It was how he was wired- the last minute guy.  I’m the ten minute early type.  I had to think about how I wanted to approach that with him because as a friend, there was a lot I could have said that would just be nasty.  As a boss, there were things I could have said that were nasty, too.

This is the main problem with hiring friends, you have the potential to have personal stuff you might say or do get mixed with the professional stuff.

Carlos Chiossone, sprout.net

I unfortunately had to do this twice. Both times, fortunately, both people understood why, and we are still good friends. You just need to make it clear from the start, business is business, and I can be a jerk of a boss.

Question and Answer:

Q: For what kind of role did you hire your first friend that didn’t work out?
A: He was hired as Director of New Business.

Q: How early on did you know it wasn’t going to work?
A: About 3-4 months after he was hired

Q: Did you stop being friends with the person that didn’t work out?
A: No, they understood exactly that business was business. I do remember we did not go out for beers probably for the first 3 months or so after I had to let him go, but we were good friends prior to hiring him, we remain good friends.

Q: Would you hire friends again?  If so, with what caveats would you do that?
A: It’s a touchy subject, but while they understand that doing business does not last forever and that I have to make decisions to keep our business growing, then I will consider it.

He was hired as our 12th employee. I never believed in having sales people as all of our business came from word of mouth. But since we had a new web product to promote I decided to hire him. He did a great job in gathering possible buyers, showing the product and getting response. Unfortunately sales did not come in. In 1999 we introduced some of the first easy to use e-commerce sites at super low price, it was an amazing product but the small stores still had little understanding on how to use the internet for sales. Readysites.com grew 3 years later.

Q: For what kind of role did you hire your first friend that didn’t work out?
A: Senior art Director

Q: How early on did you know it wasn’t going to work?
A: It did work but she was the first of 4 art directors to have to go due to slow downs.

Q: Did you stop being friends with the person that didn’t workout?
A: I sat her down and explained that business was business as we discussed years earlier when I hired her. I gave her 3 months to find work but unfortunately she did not. We remained good friends.

She was and is a great art director. She had no web experience when I hired her and learned on the job. She became very good, but her style was not what we needed at the moment, the client she handled was moving their work to India. Of course, letting her go did not go well at first, the stress from it overwhelms everyone. But from the beginning we cared about each other and understood the fact of business. We remain good friends.

Vince Collura, Team5 and Gotham Photo Company

I have hired my share of friends for both www.team5.com and www.gothamphotocompany.com.  3 turned out to be disasters.  2 turned out to be excellent moves for both of us.  There are a lot of grey areas.

Question and Answer:

Q: What kind of role did you hire your friends that didn’t work out?
A: Developers and designers

Q: For the two that did work out, what made their situations works?
A: Being extremely mature.  More so than thier ages would warrant.  Even though they were employees, they took ownership of their work, as if they were partners.

Q: Did you stop being friends with the people that didn’t work out?
A: At first, yes.  Time heals all wounds, and we are now on good terms.

Q: Would you hire friends again?  If so, with what caveats would you do that?
A: Yes.  They have to understand the difference between work and hanging out.  I am not their friend at the office, and friendship puts thier jobs at risk more than helping them.