Imagine. You are CEO and your company grows very quickly, becomes market leader and moves to new premises. As part of the deal, a long-standing board member and old mate of yours gets a cushty flat right by the business's new HQ. The flat needs a bit of work, so what does your pal do? He spends more than half a million quid of shareholders' money doing the place up. And when (predictably) there's a massive outcry, how does he react? Does he resign? Does he offer a grovelling apology?
No, he rather loftily explains that it was necessary to spend this sum because he likes Victorian tat, as opposed to the MFI kind.
Oh dear. As our prime minister knows, employing your mates can be a real pain. Friends can become liabilities. Indeed, many would argue that you ought to keep your work and social lives entirely separate - after all, the qualities that make someone a laugh to drink and watch football with don't necessarily make a good finance director.
But then again, that's all a bit uptight, a bit American, and not much fun; surely it's possible to work with those you know socially. Besides which, if you're running a smaller business, you may not have the time or resources to pursue a big recruitment campaign, subject candidates to a battery of psychometric tests, take up references, and so on. You want someone you can trust, someone you know - and for that your friends are the obvious place to look.
'I employ three people here whom I knew before in a strictly social capacity,' says Johnnie Boden, CEO of the eponymous and highly successful clothing catalogue company, 'and each has been a success. My MD (Julian Granville) was a friend and that has been great. It can work very well.'
Ultimately, he says, what makes a good employee is a mixture of skill and character. And, with a friend, you know one side of it already - although, he continues, it can be a high-risk strategy. 'With that in mind, you shouldn't do it unless you're absolutely sure from the word go. And, as a general employment rule, you need to enforce a three-month probation period. If you have doubts in the first three months, you'll have many more subsequently.'
The need to have safeguards is echoed by Craig Smith, associate professor of marketing and ethics at London Business School. 'The obvious problem is the potential for a conflict of interest. You need checks and balances. Having some other party to ensure that your friend performs to the right standard is very appropriate.'
Like Boden, Smith says that there can be a very positive side to all this. 'What's good is that, with a friend, you're bringing in a person you know and like and trust, and in some senses that's much safer than bringing in a stranger. Also, it's nice to work with people whose company you enjoy.'
But, he cautions, 'we like to use the term 'psychological contracts' - the idea that an employee has a contract that goes beyond the formal written thing, taking in intangibles like loyalty, trust, expectations, and so on.' When your right-hand man is also your best mate, argues Smith, 'the psychological contract can be very different and expectations can get distorted and misaligned; there's real scope for problems.'
And problems can arise when mates work together: Sinclair Beecham and Julian Metcalfe, the Pret a Manger duo, are rarely seen out on the town together; and relations between Richard Branson and those with whom he co-founded Virgin are less chummy these days. Chris Evans and Weel (and quite a few other people he's worked with) just aren't the drinking buddies they once were. The list of friendships broken over a business is a long one.
Yet it can work, and very well. Not only did Richard Reed, marketing and HR director of virtuous drinks maker Innocenti, set up in business with two good friends, the trio also went on to employ numerous other mates on their staff, which now numbers 17. 'When the three of us started out,' recalls Reed, 'a lot of people said: 'Ooh ... do you want to do that?' But we'd known each other for such a long time that it's only ever been an asset, because we know each other's strengths and weaknesses and we've got complete trust. Things can be pretty stressful, particularly in the start-up period, but our friendship was very strong. Also, as friends you can be brutally honest with each other. You can have a massive blazing row and be mates again 10 minutes later.'
As for the growth of their staff, he continues: 'In terms of bringing mates on board, it's by design and by default. You're looking for people and you look towards your network of friends from college. Pretty much everyone who's started here has been friends or friends of friends. It makes for a great atmosphere and we're all in it together.'
Even so, there are informal appraisals every three months and formal ones every six months. And this kind of set-up can only work well with total transparency and honesty. Besides, Reed adds, 'there are people we know who we wouldn't employ'.
Simon Woodruffe of Yo! Sushi has a rather different take. 'In one sense, I do work with my friends and I think the companies that work are those that have a team of people who are very close on a business level of friendship.' But take on a non-business buddy and things are rather different. 'Where I think it gets muddled and difficult is where you employ someone from outside who you were previously mates with. I think it's a bit like going through a divorce. I got divorced about 10 years ago, and we get on well now, but as joint parents. But it went through a dive.'
What you can't do, he argues, is have two relationships with people: one outside work and one at work. 'If you're doing that, you're being an actor.'
One of Woodruffe's oldest childhood friends, Matthew Gibb, invested in Yo! Sushi at the beginning and still owns a percentage of the company. Woodruffe says of Gibb: 'He's still a close friend but we have a business relationship. The relationship has to change.'
And that can often be difficult. You cannot be seen to favour your friend over other employees, so those who employ pals will often go too far the other way, over-compensating and ruling their erstwhile chums with a rod of iron, just to prove there's no cronyism going on. This can strain the friendship, working relationship or both.
Woodruffe offers a cautionary tale. 'In Yo! Sushi, I had a very close friend who was a lawyer, and we could separate the two (business and friendship). At some emotional level, he or I felt hurt. We parted company. And today we're friends, but it's not close and, to be honest, I miss that. I'm not sure there's any real upside, unless your friend really is the best person for the job.'
But that's good friends, the kind of people you've known for years. In terms of character, at least, they're probably pretty safe. What about the 'acquaintance' kind of friend? In this case you'd be well advised to get a second opinion. It's obvious that someone you meet from time to time at social events is going to be pleasant to you, but they hardly know you and you hardly know them. Boden had just such a problem with an acquaintance he employed. 'The danger is when you meet people at parties and the first impression is very strong and you don't follow it through with rigorous interviews and references. I didn't with this chap and he really wasn't suited to the job. Now I wouldn't dream of employing a friend without them meeting other people so I could get other opinions on them.
And the stakes get higher and higher as the business gets bigger and bigger.' And friends aren't infallible. Smith knew a family member who went into business with a trusted friend - who turned out to be completely untrustworthy and was quietly squirreling away the business's cash.
Ultimately, says Smith, it's a very 'situationally driven decision'. If you're setting up in business, for example, you might have no choice, as no-one else will jump into your risky venture. But if you do have the option, you need to weigh things carefully: if the person you are thinking of employing has an honest, grown-up relationship with you and is the best person for the job, then it may be worth considering. Otherwise, don't bother. It may be pointing out the obvious, but if you have to sack a mate, you'll not only lose an employee but a friend as well.
HOW TO EMPLOY YOUR MATE DAVE SUCCESSFULLY
- Ask yourself if you're sure about this. The fact that Dave is a laugh to watch the footie with doesn't make him an effective marketing director. Talk to his previous colleagues and bosses and, if you're uncertain, don't.
- Make the ground rules clear from the start. The relationship that you and Dave have at work cannot be like the one you had at the college bar. Defining the boundaries at the start will avoid problems.
- Ensure Dave's performance is monitored properly. There should be a three-month probationary period and regular appraisals. To ensure objectivity, consider getting someone else to conduct these.
- Appearances are important. Not only must you ensure there is no favouritism, you must ensure there is no perceived favouritism. You don't want other employees to regard Dave as the teacher's pet, but don't over-compensate and give him a really hard time.
- How well do you really know Dave? Is he your old mucker from school, or is he a friend of a friend you've met at a few parties? If he's the latter, you must take up personal references. Of course people seem nice when you first meet them: they're on their best behaviour.
- And never, ever employ Dave because he's cheap. If you're paying less than he's worth, then you're taking advantage of him. And if he's actually worth less than other candidates, well, there's probably a good reason.