Entrepreneurs working with friends: is it better to be the boss or the buddy?

Start-ups and friendship 

Start-ups refer to early-stage entrepreneurial ventures adopting an innovative business model which often have been operating for less than three years and have a staff of fewer than 20 people. They are recognised as technological innovators that foster employment opportunities, and will be all the more necessary to revitalise economies world-wide after the coronavirus pandemic.  

When recruiting staff for new entrepreneurial ventures, start-up founders often look to their own network first. Considering the trustworthiness of friendship, the recognition of professional capabilities, and the scarcity of recruitment resources available for the new-born firm, friends are a natural first port of call.  

However, many entrepreneurs have concerns about working with pre-existing friends, wondering how working with friends might affect both the business and the relationship. The situation can impose managerial and socio-emotional burdens on entrepreneurs.  

Being a ‘serial entrepreneur’ myself, when designing this doctoral research, I wanted to help by utilising scientific methods to look at how friendships affected start-up entrepreneurs’ identities – did they see themselves as the ‘boss’ (being the leader) and/or the ‘buddy’ (being the friend) when they worked with their friends? What effect did that have on both their relationships and the business?  

Two waves of data collection were conducted before and during the worsening of the pandemic comprising 76 interviews and 76 drawings of the interpersonal relationship in 17 entrepreneurial ventures established in the UK and China. In the first wave, all 59 participants were interviewed. In the second wave, 17 entrepreneurs were interviewed again. The data were collected from four types of participants: 

• Founding and managing partners at entrepreneurial ventures (17 start-up leaders)  

• Employees who were friends with the leader before joining (18 friend-followers)  

• Employees who were friends with the leader before joining but had left (8 friend-leavers)  

• Employees who were not known to their leaders before working together (16 non-friend-followers).  

Boss or buddy – does it matter? 

The short answer is ‘Yes’. One of the key findings of this research is that direct and open two-way communication helps resolve misunderstandings and mispositioning of identities in the start-up organisation. Diverse strategies adopted by start-up leaders when facing their pre-existing friends were identified. For example, some leaders in our study held the perception that it is unnecessary to exchange viewpoints on the identity issue, while others were concerned about consequences if the conversation is initiated.  

However, it is identified that avoiding the interaction is not helpful for resolving the confusion, at least not for everyone and not all the time. Drawing from the interview data, many friend-followers felt that it was the leader’s responsibility to initiate the conversation. Moreover, during the process of exchanging perceptions, an effective two-way communication is key to reach the mutual agreement which satisfies both parties and promotes engagement. This communication could take place both at the workplace and in off-work scenarios depending on the availability and preferences of both parties. 

Tip for entrepreneurs: Don’t be reserved for initiating the talk - Speak out and keep your ears open.  

Boss and buddy - can I be both? 

Again, the short answer is ‘Yes’. This largely depends on the mutual agreement made between the entrepreneur and their pre-existing friends as well as the collective endorsement from all employees. But, as entrepreneurs, watch out for potential backfire (e.g., being exploited by friend-followers) and burnout (e.g., being overwhelmed by responsibilities). Some start-up leaders reported feeling overwhelmed by responsibilities coming from being both the boss and the buddy, especially from the data collected in the second wave during the worsening of the covid-19 pandemic. 

We identified a cyclical process model, drawing from data collected in both waves, where entrepreneurs could identify and change their role as buddy or boss, depending on the situation. This allowed entrepreneurs to renegotiate their role with their friend-followers when needed. The renegotiation is often carried out during critical business events. For example, some start-up leaders reported feeling overwhelmed navigating the start-up business while being the ‘buddy’ during the pandemic. As a result, they renegotiated with their friend-followers and prioritised the ‘boss’ identity upon mutual agreement during this external shock. 

Tip for entrepreneurs: Don’t be (too) optimistic about taking on both - Watch out for backfire and burnout and keep the conversation going. 

What happened during the pandemic?  

The pandemic-imposed pressure on people and businesses globally. Some of the sample organisations in this study closed their businesses during this critical period due to the challenges caused by the pandemic.  

But from the aspect of relationship development, the pandemic was identified as an opportunity to strengthen and tighten interpersonal bonds in the start-up organisation. According to the analysis of drawings collected in both waves, the pattern of the interpersonal structure of each entrepreneurial venture became more united and more interpersonal linkages were established. Of course, time plays a role in shaping a more cohesive organisation, but the external shock did add a strong push.  

Besides interpersonal relationship drawings, the entrepreneurs in our second wave of interviews identified the exchange of instrumental (e.g., workload sharing) and socio-emotional support (e.g., venting and consultation) during this critical period. These exchanges further shape their self-positionings and lead to the (re)negotiation with their pre-existing friends juggling the dual identities, the result of which is reflected in the findings.  

Entrepreneurs also recognised the emotional and practical support provided by employees who were not known to them before working together (non-friend-followers). The unexpected contribution from non-friend-followers and the recognition of their dedication during the external shock from the entrepreneur resulted in some new friendship ties being established in the start-up. This helps to secure the survival and development of the entrepreneurial venture in the long term.  

Tip for Entrepreneurs: Don’t be disheartened by challenges– Look out for the entire team, ask for help when needed and keep a positive mindset towards external shocks.  

For detailed findings from this research that could help your start-up survive and thrive, please contact Mingchu Wang (research.lubs@leeds.ac.uk) for more information. 

Relevant reading 

• Unsworth, K., Kragt, D. & Johnston-Billings, A. (2018). Am I A Leader or A Friend? How Leaders Deal with Pre-Existing Friendships. The Leadership Quarterly, 29(6), pp.674- 685. 
• Pillemer, J. & Rothbard, N. (2018). Friends Without Benefits: Understanding the Dark Sides of Workplace Friendship. Academy of Management Review, 43(4), pp.635-660.