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CONTRACTS AND COMMUNICATION

Doing business with friends requires the same care as doing business with anyone

Diane Barth
By Diane Barth

In a recent op-ed for Fortune Magazine, Mallun Yen, Co-founder, COO, and operating partner of a business-to-business software company, wrote, “doing business with your buddies is a time-honored way to build your book of business.” Yet, she says, many women don’t like to do business with friends, and this holds them back in their careers.

I was fascinated by this idea. Although for many years it has been believed that men and women do business differently, a study reported by the Wall Street Journal suggests that the issue might be more that women and men are perceived differently at work, which impacts every facet of their business lives—from how they present themselves to how easily they are promoted. There is no question that women continue to have difficulties moving up in the business world, but making broad generalizations about what all women in business do or don’t do, the study suggests, is a mistake. As a successful woman entrepreneur put it to me recently: “Some women are great business collaborators, and others are terrible. And the same is true with men.”

In a small, nonscientific survey, I spoke to about 25 women and men between the ages of thirty and sixty-five who work in a variety of professions across the United States (they were all people I knew in some capacity or another). I asked, “Do you do business with friends?” and followed up with the questions, “If so, why?” and “If not, why not?” The sample is too small and limited to be statistically useful, but the responses were still interesting.

One group of respondents to my informal survey on doing business with friends were psychotherapists, publicists, agents, lawyers, and other professionals who represent clients in business transactions. Both men and women told me that they refer to and take referrals from friends, but they generally do not take friends as clients. “It just crosses too many boundaries,” was a common explanation. “It muddies the water of the friendship and can mess up the work,” one person said.

A variety of entrepreneurs also responded to my small sample. One woman said she did not do business with friends because it got too complicated. Everyone else felt, to some degree or another, like a female senior executive who responded, “Yes, I do business with friends. In fact, I prefer it! The scarcest element in my life is time. Doing business with friends has the benefit of combining a trusting connection, a chance to socialize, and getting results at work.”

What I heard, from both men and women, was that doing business with friends can be both pleasant and beneficial, but that it can also sometimes be thorny. Avoiding complications, for both the men and women who I interviewed, involved three simple factors that are crucial when doing business with anyone.

Communication and mutual respect

Many of my interviewees agreed that having clear communication about expectations is a key to working with friends. Other important factors they named were mutual respect for each other’s skills, knowledge, and talent, understanding each other’s styles, and not taking advantage of a friendship—for example, not expecting special treatment because you are friends.

A lawyer told me that she had once hired a friend’s daughter as a summer intern. “It was a disaster,” the lawyer said. “She showed up late for work every day and got nothing done even when she was there. In normal circumstances I would have spelled out clearly that I expected her to arrive on time and do certain tasks everyday without being asked, and if she continued to perform so poorly, I’d have put her on probation and then let her go. But because she was my friend’s kid, I was worried about damaging my relationship with her mother, so I let it go on far too long. In the end, it still destroyed our friendship, because I refused to hire her for the winter break, and my friend was really upset.”

Writing in the Business Ethics Quarterly, Jonathan Schonsheck notes that one definition of friendship is having “goodwill” toward one another. When business friends, whether they are male or female, trick or cheat one another, both goodwill and friendship is destroyed.

A written agreement

An owner of a small business said that one of the worst disasters early in her career had occurred when she hired a friend to do some of the carpentry in her new office building. “It was my fault,” she said. “I didn’t want to hurt his feelings by asking for a detailed contract. I thought it would be like saying that I didn’t trust him.” She accepted the initial fee that he requested, but was blindsided when, halfway through the project, he told her that he needed significantly more in order to finish the work. “I’ve learned since then that projects like that can—in fact usually do—cost more than expected. But I’ve also learned that you start out with a contract, so that additional expenses can be understood and recognized for what they are.” She said that her friendship with this man was destroyed. “I stopped feeling like I could trust him after that. And I learned that contracts actually protect the friendship.”

Stories like this one led attorney and CPA Mark J. Kohler to say that he advises his clients never to do business with friends without a written contract.

Clear expectations

Another important component is taking responsibility for your own actions. A sales representative said, “I’ve found that the thing that protects both parts of a relationship is to make sure that everything is spelled out very clearly, in writing, ahead of time. They know exactly what they’re going to get. If there’s a problem, we can go back and look at the written agreement, and we can see if my product or I didn’t come through on a promise. If that’s what happens, I take responsibility. But if they had expectations that were different from what we agreed, that’s something else. A good customer and a good friend, I try to make it better for them, even if the error wasn’t on my company’s side. But having a written agreement makes everything go smoother.”

A risk, but often worthwhile

Despite the popular belief that men prioritize work over relationships, a number of men and women agreed that sometimes friendship has to take precedence over business. One businessman whose friends make up a large part of his practice put it this way: “Sometimes it seems like a buddy isn’t pulling his weight on a project, but I know that usually, if you work with someone often enough, the difference balances out. He thinks he’s working harder on one project and you think you’re working harder on a different one. But if the balance is always in his favor, or if he doesn’t pull his weight in a particular kind of job, I might talk about it with him, just ask if he’d rather not do this kind of work again. Or I might just eat it, and then not do this specific kind of job with him going forward. The job needs to be done well, so I’ll do what I need to make sure it is as good as I can make it; but I don’t want to always be the one doing the majority of the work. But I’m always going to protect the friendship if I possibly can.”

Doing business with friends does involve some risks. But many of the successful entrepreneurs who I spoke with said that risks are part of doing business.

As the female senior executive who told me that she prefers doing business with friends put it, “I love the connection it creates. I have in a few cases had awkward situations where things go sideways, but this has not happened often. In most cases, I end up with a great business result and a deeper friendship.”

 Diane Barth is a psychotherapist in NYC and author of the book I Know How You Feel: The Joy and Heartbreak of Friendship in Women’s Lives.