When I launched my first business, I hired a lot of friends. I’m not sure I could have gotten the business going if I hadn’t.


A business that’s just launching will have some trouble attracting employees because no one is sure of the company’s staying power or financial strength. Your friends are more likely to come and work for you because they know you and they feel comfortable with your style and how you handle business.


That’s why a lot of startup CEOs will surround themselves with friends. In the beginning it feels both necessary and comfortable, not to mention the fact that it can be fun working with people you already know and like.


The problem comes down the road. For the vast majority of companies that employ friends of the CEO, the arrangement only works for the first year or two. After that, someone – if not everyone – inevitably ends up disappointed.


Part of the problem is with the CEO’s perception of the friends. You might have someone on the team who is capable of Superman-caliber work and can make that much of an impact on the company. When someone is that talented and that effective, he or she rightly expects to be treated like a high-level performer.


But the CEO has known that person a long time and doesn’t see Superman. The CEO sees Clark Kent. No matter what the Superman-caliber employee does, the CEO will always know the personal details of this person’s life that makes it impossible to really see the tights and cape. (And would you really want to see your personal friends in tights?)


This is an advantage a non-friend employee has. If that employee performs like gangbusters on a daily basis, he or she could live in a messy apartment with Taco Bell bags thrown around and laundry piling up for weeks. The CEO doesn’t know any of this. The CEO only knows that the employee is raking.


But if it’s one of your friends, you know all that person’s flaws, and that makes it harder for you to focus solely on the performance.


The arrangement presents challenges for the CEO, as well, when the business starts to grow. More people will join the company and the CEO will have to manage the whole team using policies and principles that apply equally to everyone. But the employees who joined the company, after the initial wave of friends, are going to recognize pretty quickly that a certain group hangs out socially with the CEO. In some cases, there may be an effort to include the new people. But when you join a bunch of people who’ve been friends for years, you’re not on the same level with them. And you’re going to recognize that.


Needless to say, that can become an issue when you have to make decisions that involve managing people and holding them accountable for their performances. When it was just you and some of your friends in the early days of the company, you could probably get away with a pretty loose approach to management. You all knew each other. You all had personal relationships. You could deal with each other on that level.


Now that the company has grown, you have new employees you can’t deal with in that way. How do you play that? Do you have one group you handle with professional policies and procedures, while you deal with the other group – your old friends – in a light and informal manner?


Or do you make everyone follow professional policies and procedures? And if you do that, how will your old friends feel about the fact that the company doesn’t have the warm, informal feeling it did at the start?


This is why hiring friends almost never works over the long term. And all this seems so obvious, yet business owners do it all the time. Why? Because people can always convince themselves they will be the exceptions to the rule. And that’s not a completely bad thing. We would have no pioneers and no trailblazers if no one believed that.


If you are convinced you’re the rare exception who can make it work, I’m not telling you not to. But I would plead with you to think through the issues I’ve outlined here, and possibly talk with your friends about them before they come on board. At least that way, when things change over the course of time, they won’t be able to say you didn’t warn them.


Working with friends is a very appealing idea. That’s why so many people try it. If not for all the things that can – and usually do – go wrong, it would be an amazing experience.


At least now you know what to expect, and can make a clearheaded decision about whether it’s really worth it.


Written by: Wade Wyant

Red Wagon Advisors