How to Deal with Hiring Your Best Friend

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In many ways, it sounds like a dream come true: all your best buddies working together on a project that could be the next big thing. Working with and even hiring your friends can definitely help a new business along (it does always help to get along with your coworkers). But if you've seen The Social Network or any number of startup dramas, you know that what makes your bond strong can also majorly get in the way.

Researchers in London and Philadelphia have just published a study on how entrepreneurs who are also close friends make business decisions when their company starts to falter. The news isn't great. In short, entrepreneurs with tight friend bonds are more likely to stick with a failing venture than to cut their losses — put another way, "hope trumps fear." It's the same optimism that British economists identified last year as keeping failing business afloat past the point of reason.

Even if your venture is doing well, hiring your friends can have other detrimental effects. Imagine you're bringing on your BFF because they're brilliant, unstoppable, and dedicated. That makes your pal something wonderful and terrible: a star employee. Researchers in Washington and Texas have issued some guidelines for keeping high-powered innovators in check.

Above all else, agree to and establish strong boundaries from the get-go. "We found that the presence of both the star employee and the founder within a company has a positive effect on the firm's performance," said lead author Amrita Lahiri, "but when you have both of them together on a team, the outcomes can become diminished."