As a business owner, it's tempting to hire a friend. Ask yourself these five questions first to ensure that it's the right move for your business.

Anyone who has ever started a business knows the undeniable and understandable temptation of hiring a friend or family member. A startup is a leap into a great unknown, and it is comforting for a founder to have trusted people watching his or her back. Friends and family, who have known a founder for years, might be more ready to take on the risk of a new venture based on their belief in him or her.

There are plenty of examples of this working out well. Bill Gates hired his college pal Steve Ballmer as his assistant in the early days of Microsoft, which helped propel the company to stratospheric success. Later, Gates hired his father to serve as the co-chairman of the multi-billion-dollar Bill and Melinda Gates Foundation.

However, this can be a tricky situation that requires just as much diligence – if not more – than hiring a stranger. To avoid any potential pitfalls from hiring a friend or family member, ask yourself five important questions:

What is the basis of the friendship?

Hiring a friend works most successfully if their friendship started as a working relationship. In the same way, a friend that a founder met at MBA school, where they worked side-by-on projects, has more potential to transition into a good working relationship than a friend the founder has only interacted with at social events and parties. If the existing relationship has already caused an entrepreneur to respect the friend’s work ethic, judgment, and problem-solving skills, that can be a great indication the working together may pay off.

Can you speak openly about tough topics?

Even the most harmonious working relationships are going to have some tough moments. Layering on the emotions that come with working with a friend or family member can be an additional complication. As with any successful relationship, the important thing is to be open and honest from the start.

During the interview process, the entrepreneur should tell his family member or friend she wants to discuss some delicate situations that could come up. It is important for the business owner to stress she wants to bring this up now not because she anticipates issues, but to limit the possibility of misunderstandings. Here are some topics to bring up in a non-confrontational way:

  • If you disagree with one of my decisions, how would you react in public? How will you feel if I disagree with you publically?
  • How will you feel if I give someone else a promotion or assignment that you really want?
  • How would you feel if I give you a poor performance review?
  • If this does not work out, it may affect or even end our friendship. How do you feel about that?

While this might initially be a difficult conversation, it should lead to a fruitful discussion that helps both sides decide if working together makes sense.

Does everyone have realistic expectations?

It is natural that people who come to a job interview with a friend or family member might have different expectations than a stranger who is interviewing for the job. This goes both ways, though. An entrepreneur should check that he is not expecting more than is reasonable from an employee based on their outside relationship.

Todd Belveal, founder, and CEO of Washlava, has made this mistake. “The friends I’ve worked with at different ventures didn’t view the opportunity the same way I did,” he says. “It was speculative for them. They saw it as something they could walk away from if they wanted to.”

Initially, Belveal says that surprised him. However, once an entrepreneur sees his friend as an employee first at work, those kinds of misunderstandings can be avoided.

Will a friend be treated fairly at work?

At times, an entrepreneur might hire a friend or family member, thinking that is a favor to them. However, this is the wrong way to enter into the relationship.

In fact, a study published in the Journal of Experimental Social Psychology found people are more likely to pass over their friends and reward employees with whom they don’t have a personal relationship because they don’t want to create a perception of favoritism in the office. The result is that less deserving workers are promoted, while the friend becomes frustrated.

For this reason, if a founder does hire friends and family, their performance should be evaluated based on well-defined metrics that everyone understands. Keep things friendly – but businesslike at work – and everyone will benefit.

How will hiring a friend impact the next key hire?

PayScale, a Seattle-based company that tracks compensation, found that companies which rely on employee recommendations to fill jobs end up with less diverse workforces. This is a significant danger from hiring friends and family members.

If everyone comes from the same background, they might resort to “group think” that misses opportunities and creates pitfalls. A friend who has a history of challenging an entrepreneur at appropriate times might be a better hire than someone who always goes along. Also, if the first hire is a friend or family member, the next hire should come outside the founder’s immediate circle. Create an environment that encourages openness and new ideas.

In that spirit, an entrepreneur should be open to the new when hiring employees. If a friend or family member is the right fit for what the company needs now, they can make a great member of the team. At the same time, don’t be afraid of hiring a stranger. Remember, at one time, every pair of best friends was strangers to each other as well.

This article was written by Marissa Peretz from Forbes and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to

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