When you start a business, you are more embarking on an adventure than running a business. It’s hard to put my finger on it, even though this idea is stated a lot in literature, but the traditional business principles and even the way you look at business are not applicable to startups. A startup is more like a movement or a clan than it is an organization. Good entrepreneurs are usually effective at putting together the first two or three people who get the business off the ground. In his book, Accidental Empires, Robert Cringely refers to these initial employees as “first wavers,” and he goes on to describe the personality and dynamics of these people very well. To put it in a rough picture, a startup feels a lot more like a family than it does a business.
For this reason, entrepreneurs get very close with the first few people who join the company, and they tend to start to model their management style off of the way that they started out with these initial employees. Plainly, these initial employees become friends and family. However, the truth is that these people are not family members or friends, they are employees. This leads to a confusing dynamic as the business grows and the employees and entrepreneur have to continually rotate roles, going from a family to an employee-employer relationship. The entrepreneur must shift from telling people what to do to trying to be friends with employees. I’ve been in this position many times, and it is basically untenable. It’s very confusing and difficult to navigate. Family are people you are stuck with (and who are stuck with you), whether you like it or not. Friends are people that you choose to spend time with outside of work. Employees are neither of these; they are people that you need to manage and push in order to drive the success of the company.
Everything said so far is logical and can be understood at least in theory, but there are a couple of other things to consider. If starting and running a business were not stressful and there were no constraints, these issues would not be a problem. If someone paid you money to go on vacation and not do any work with a bunch of people, not many issues would arise. Issues arise because, while you don’t have a direct and continuous conflict of interest with an employee, there are necessary points of friction. For example: if you pay someone a dollar, and that person wants to be paid $1.25, that is 25 cents more for them and less for you. If you need for someone to work an extra hour to get out an order, you benefit by an hour and the employee loses by that hour. We can pretend that all of our relationships in business are a win-win, but this is simply not the case. If you’re on vacation with someone and where to go to lunch is the issue at hand, this would be a minor point of friction for most normal people. In business, the points of friction are more numerous. This is specifically why you cannot be friends with the people you employ.
So what to do?
I need to stipulate between two types of employees: the first people who join a company and those employees who join afterwards when the business is running. It is an extraordinary lift to start a company. As such, your demands of the first people that you hire are going to be tremendous. Therefore, your bond with them has to be very high as well. The purpose of this article is to explain the pitfalls of befriending the second group of employees- those who are necessary to run the company after the business has been successfully started. Therefore, there is a kind of a double standard that was not apparent to me until I started this article.
In the beginning, in order to be successful, you need a family type of atmosphere and a tight bond between people. In a startup, the relationships must be intense, because the challenges will be immense, and the bonds must be very tight. Over a longer period of time, you have to change your methodology close to 180 degrees. You will become more of an employer and less of a family member. Interestingly, with the people whom you started out with, your relationship will probably continue to be more familial. A lot of entrepreneurs tend to apply the same type of leadership style uniformly as the company grows, and as a result they tend to experience a lot of difficulty. I know that I have made this mistake on many occasions, and at the end of it, you don’t have an employee or a friend.
By the way, for this reason, I recommend never hiring friends for your startup unless you plan on giving up the friendship. It’s psychologically almost impossible for people to toggle between a professional relationship and a personal relationship. I lost one of my best friends by bringing him in early as our Chief Technology Officer at Sageworks, which is a mistake I regret to this day.