There is no clear line that separates an employee from being a friend. This is one area of management that is fraught with uncertainty and danger.
A manager can either get this really right or just as easily get it really wrong.
It is important to ensure that a clear distinction is kept between the two to stop problems arising.
When you are managing someone you essentially are there to ensure that they do their job to the best of their ability and to coach them on to higher things.
This works in both positive matters as well as negative. If the manager and employee are unable to distinguish between friendship and work responsibilities - DANGER!