I have a few friends like that. Male, although some naked ladies join us sometimes as well. We usually swim naked at night or sit in my jacuzzi. It's really relaxing.
It took a while for one of my friends to go all the way though. He was embarrassed about his flaccid size, especially after seeing mine. One night, while we were drinking and other people were doing their thing, I decided to go hot tubbing and said he was welcome to join me in whatever state he wanted. I said it felt great to be in water nude, and I guess it was enough for him to loosen up and lose his underwear. Honestly, it was kinda small, maybe two inches, but the guy was fun and I knew it was kinda hard for him, so I acted nonchalant and even complimented him. He was within average range or close to it.
That said, it usually takes some amount of alcohol for my friends to be naked near each other for extended periods of time. It's unfortunate that they feel so goddamn self-conscious.