As leaders and entrepreneurs, we make hard decisions about our organization — sometimes on a daily basis. Many of those decisions involve the people in our companies, whether we’re promoting them or letting them go. We’re accountable to make those decisions, and we’re typically comfortable in that role.

The discomfort comes when the decisions we’re making are about relationships that have become (or have always been) personal.

Given the bonds that can develop in the trenches of an early startup, it’s not uncommon for business relationships to veer into true friendship.

What happens when a company grows beyond a person that helped start it? And what do you do when you’re the one faced with that dilemma — do you choose the business or your friend? Or is there some way to choose both?

See: Building a Business with Partners: the Good, the Bad, and the Ugly

Assessing the situation

Tom and Brian are next door neighbors, and they’ve been fishing buddies for years. They have a great time together and decide to start a fishing ecommerce company.

Brilliant idea. Brian has good fishing skills. Tom’s a business whiz. What could go wrong?

The company takes off and becomes really successful. As the company grows, it becomes clear that Tom’s the stronger leader overall. He takes the CEO role and becomes a true thought leader in their industry.

Brian flounders (hehe 🤣). He was good at pitching fishing rods to his neighbors, but that doesn’t seem to have extended to managing a sales team. Coaching hasn’t been effective (or he’s refused it) and he doesn’t seem motivated to become better at his role.

The company has outgrown him.

Now what?

Maybe you can relate to the scenario of having your friend in the business. Or perhaps another common scenario of becoming friends with an early or long-time employee, when the business environment might have been more personal and intimate.

There are a few questions you can ask if you find yourself in this situation:

Who are the stakeholders impacted by the current situation? If you have investors, the calculus may be different than if you’re a small, closely-held company. You may feel a greater sense of urgency if the person’s direct reports are complaining about their poor leadership on a daily basis.

What is the strength of your bond with the person in question? Your college roommate, or next-door neighbor? Maybe a family member? For some, the bond they have with that person will always trump their responsibility to the business. They’re not going to demote their husband or fire their very best friend. For others, such a bond doesn’t necessarily outweigh business interests. I know of an entrepreneur who let his father go during a company downsizing, a move completely severed their relationship.

What are your current responsibilities and accountabilities? How are they being impacted? You have fiscal accountability to keep the business healthy. You have visionary accountability, team-building responsibility, and you’re the outside face and voice of the company. You need to be in a position to be successful at all of those. If anyone on your team is holding you back from being successful at one of those, you have to consider how you’re setting yourself up to succeed (or not).

See: How to Run a Successful Family Business

The “VP of Special Projects”

What if you can’t or are unwilling to choose one or the other?

Let’s revisit Tom and Brian, our fishing entrepreneurs.

Brian’s not performing the way he needs to. Tom knows that, and now investors are starting to know it too. They’ve brought in outside executives with experience, and it’s magnifying the gap of where Brian is and where he should be.

At the same time, Brian is Tom’s next-door neighbor. Their families are close. He knows firing Brian would be the end of their friendship and lead to a very tense neighbor situation.

So Tom talks to Brian about some new opportunities they’re looking into (but not putting much money or resources behind) and asks Brian to head them up.

One way to preserve the personal relationship is to build the organization around a person. This plan isn’t without its difficulties. People who get “parked” in this way may feel that they’re being diminished.

At the same time, it may end up being a mutually beneficial plan. And it allows them to save face. We all know how important that is.

How to minimize the damage

Sometimes there are just these shitty situations. You’re running a business, not building a family. These things will happen.

What can you do to make the whole situation as painless as possible?

Be authentic

It’s a hard message for your friend to hear. Don’t pretend it’s not.

We’ve tried a few things, and you’re still not able to do the job the company needs now. The company has outgrown you. Ouch. That can be as devastating as when your kids say they don’t need you anymore — maybe more so.

It’s even harder to take if this news is a big surprise. You should be talking with your team members regularly and honestly about their performance and their place in the company. Have those difficult conversations. They may allow you to avoid having to let someone go. And if they don’t, at least they’ll make it less painful.

Be clear about metrics

When everyone has measurable objectives and goals they can track, it’s not a surprise when you say they’re not succeeding. They know because they’ve been following the numbers.

See: Coaching Your Team: How to Give Feedback

Don’t wait too long

I knew someone who hired a sales person in the very early days of their business who grew with the company for nearly a decade to become the head of sales, and they became good friends.

As the business grew, the sales lead’s performance declined. They didn’t fit in with the culture of the company anymore. Even so, the founder didn’t want to let them go. The founder tried hiring a coach for the sales leader, but they weren’t open to coaching.

This went on for more than two years. Eventually team members started yelling and screaming about how the founder needed to do something about it. The whole team was being impacted by that person’s poor performance and poor behavior.

Eventually the founder fired that long-term colleague, who didn’t receive it very well. Dragging it out didn’t change the end result. Perhaps it even made it worse.

Plan ahead

Can you anticipate everything that could go wrong between business partners, co-founders, or a boss and employee that also happen to be friends? No. It’s too difficult.

That doesn’t mean it’s not useful to be clear about expectations and obligations right up front. When you’re starting a business with someone, or hiring a friend, it’s a terrible time to decide to just wing it. You think, We’ll draft the contract later. We’re obviously going to be fair with each other.

Five years later, you’re in court battling over stock shares. Or (for a slightly less dramatic example), you’re arguing over whether one of you “owes” the other for the company’s success.

Knowing what you’re each responsible for and what risk you’re each taking on doesn’t mean you won’t have conflict or even an eventual falling out. It does help ensure that any conflict isn’t the result of being on a different page from the beginning. It also reduces the chance that you’ll end up in a legal battle.

Final thoughts

You’re building a business, not a family. That doesn’t mean you can’t be a feeling, caring leader. It does mean that you’re going to have to deal with some really unpleasant — possibly even painful — things.

Choosing between your role as a business leader and a personal relationship with someone in your business may be one of the toughest challenges you’ll face.

Ignoring it won’t make it any better.

If you feel a funny lump in your shoulder, you have two choices. You can go see a doctor. Or you can wait to see how big it gets. I’d like to think you’re someone who will get it checked out by a medical professional.

Be as proactive and preventative as possible. Have an authentic relationship with this person, and when you first see the seeds of a problem, start the conversation then.

This is one of those areas where it’s absolutely crucial to have someone offering that outside-in, unemotional perspective. A coach or an advisor can help you see the reality of the situation if it’s been blurred by your emotional and personal connection. They can also hold you accountable for doing the incredibly hard thing.

Contact Trajectify to find out how we can help you become a more successful leader.