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Friends as Business Partners

When is the advice "never go into business with friends" wrong?

Bands are often bands of brothers, if not literally (like The Kinks, Radiohead, AC/DC, Oasis, or Kings of Leon), then figuratively. They work, play, sweat, eat, and sleep together, often undergoing intense hardships on the road and sharing moments of intimacy, exuberance, and desperation. With some bands, like the Red Hot Chili Peppers and U2, friendship came first and playing in a band came later. In other bands, members chosen for their musical compatibility become close friends.

The closeness of these friendships is crucial for sustaining bands throughout their lifestyle, especially in the early, lean years. Tough living and touring conditions, grueling performance schedules, money shortages, unscrupulous business service providers, crazy girlfriends, destructive substance abuse habits – all of these things can derail a band. So they need to be each other’s family. They need to provide emotional support so that each person feels cared for and supported, informational support, like advice when things get rough, and tangible support, like taking care of each other when they are sick.

Getting the right people on the bus

So what happens when one of the awesome close friends you have in the band turns out to be a liability? What to do then? Of course we all have to tolerate our friends’ and family members’ shortcomings. But what to do if these shortcomings threaten to compromise the future of the enterprise?

This dilemma is at the heart of the question, prevalent in studies of small business, of whether it is better to go into business with friends or with relative strangers. Most entrepreneurs try to reduce the intense uncertainty already involved with starting a new company by at least pairing up with partners they know and trust. One large-scale study found that more than 90% of entrepreneurs partner up with people they knew well, including friends, spouses, and family members. Sure, someone close to you is less likely to screw you over. But are they the best person for the job? Often not. Hence the problem of nepotism and the all-pervasive advice “Never go into business with friends.”

Really good managers know that sometimes the best thing to do for the organization is to fire someone. Even if that someone is a member of the family or an old friend. As Jim Collins wrote in Good to Great, George Cain, former CEO of Abbott Laboratories, fired his own kin in his quest to improve the company’s performance. The company succeeded immensely under his leadership, but as Collins pointed out, family gatherings had to have been awkward: “Sorry I had to fire you. Want another slice of turkey?”

The question is what do you value more: the relationship or the band/team/organization? When the answer is the latter, that means you face the tough task of firing your friend. Sometimes, hurting the relationship isn’t worth it and you’d rather disband the band.

Lots of bands have been in this boat. And awkward as it always is, some are able to fire their friends graciously, even welcoming the member back once they’ve cleaned up (see Kiss). Or the rest of the band realizes it made a mistake.

"You're fired!"

A dramatic example of the latter, the folly of being too trigger-happy, comes from Bruce Springsteen. In 1989 he decided that he was creatively suffocated, so he fired all members of his E Street Band. He went on to release two albums without them that were commercially and critically ill received. In 1999 he called them up, tail between his guitar strings, and asked to work with them again. Thank goodness they said yes.

More from Ruth Blatt Ph.D.
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