INSIDER: The Effects of Friendship on Business Relationships

November 1, 2008

By Bryan Gregory, M.B.A. Candidate December 2008

How do you manage friendship in your business? If the answer is "I don't," then this study may change how you do business. The effects of friendship on business and how best to manage it are studied in detail by Kent Grayson in Friendship Versus Business in Marketing Relationships (Journal of Marketing, 2007). Grayson analyzed survey data from 685 direct-selling agents, and discovered some surprising results regarding role conflict and friendship in the work place. Please note, the industry studied here was not real estate, though the core findings will still be relevant to your field. The results of this research should not be applied blindly, but with serious thought as to how they might be relevant in your particular market. Specific types of marketing media, measures of time, and percentages should be altered to fit your industry. 1. "Friendships...have a positive effect on business outcomes, but only for friendships with relatively low instrumentality." THINK: Are your friendships at work genuine? This study continues to support the theory that friendship has positive effects on the business environment, however it emphasizes that this effect only occurs in friendships which exist for the sake of friendship and not for the sake of making use of another. Therefore if you wish to make your business more successful, you should seek out honest and true friendships with your clients. It also needs to be clearly communicated to them that you value the friendship for reasons other than the commissions or referrals that they can bring. 2. "The conflict between friendship and instrumentality is more influential for relationships that began as friendships than for those that began as business relationships." THINK: Relationships which began as friendships first are "more sensitive to conflict." In the real estate industry, where friends and family networks often generate business leads, this is particularly relevant. One should closely monitor and take extra care with those relationships which were friendships first in order to avoid potential conflict which could result in the loss of both a friend and a client. 3. "Incentivizing customers to refer their friends may attract new business but may also dampen future customer commitment and negatively affect customers' relationships with members of their social network." THINK: Offering incentives to clients for referrals is common practice in the real estate industry, however this is the first time its potentially negative effects have been identified. While this practice may have short-term benefits for your business by increasing leads, it may create conflict over the long term. By offering incentives for referrals, you are introducing instrumentality into that clients' relationships with the friends they refer to you, creating potential for conflict between them and a lack of commitment to you. Care should be taken when offering incentives for referral of friends, and creating non-monetary incentives may be a way to avoid these negative consequences. 4. "The role of friendship appears to be more complex than merely helping or hurting business. Depending on how it is managed, it may simultaneously facilitate and hinder exchange." THINK: Do you currently manage friendship in your business? Careful management is key in harnessing the power of friendship for your business. There are two effective friendship management tactics. The first is explicitly separating business and friendship by "fostering some, but not all, of the relational attributes that define friendship." The second is "drawing attention away from the extrinsic benefits that exchange partners are getting" by "reframing instrumental activities as being primarily intrinsically motivated." For example, "[Companies] frequently reframe selling as 'sharing' good products and ideas with friends." 5. "Ultimately, whether friendship and business conflict in a relationship depends in great part on how the individual exchange partners decide to define the terms of exchange." THINK: The way in which you communicate is also key. Care must be taken to word certain aspects of the business relationships in such a way as to reduce the emphasis on instrumentality. For example, asking for leads from a friend or family member can be communicated as the desire to help and offer a solution to their problem. Removing the "what do I get out of it" from the communication process is crucial in avoiding conflict between friendship and business.

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About the Author:

Bryan Gregory, M.B.A. Candidate, Dec 2008, Baylor University
Graduate Assistant, Keller Center for Research

Bryan is a second year graduate student from Phoenix, AZ. His undergraduate degree is in Management Information Systems from Texas A&M University.