I maintained that I always worked best when I felt that closeness that comes when your direct reports are also close friends with you. Conventional wisdom would have you believe that you should try to maintain a certain closeness with your people, but that you always need to have some separation. The thinking goes that if you have a problem with someone, your personal relationship would "get in the way" of doing what needed to be done. Or if it didn't outright prevent it, it would at least delay the taking of proper action. That has definitely not been my experience, and I've tried it both ways.
Friendships are important to me, particularly in the stress of the work environment. There are some people that you run into that are engaging, interesting and low friction individuals, and I always found this kind of person hard NOT to befriend. Over the years, I've had numerous friendships with folks that fall into this category. I've had to give them tough reviews at times, and even fire some of them. While this was always difficult, I found that if we understood each other well, the pain of a separation was more easily managed. I've even been able to maintain friendships with some people I had to let go.
I did get badly burned once -- an employee that I personally liked was in over his head in a critical position, and I decided to reduce his responsibilities and bring someone more senior in over him. I wasn't going to fire him, and I wasn't going to reduce his pay or anything, but a change was needed. A few days after I talked to him, he had a lawyer send me a letter telling me that he was being constructively discharged, and that I had created a hostile work environment for him. That led to a long hassle with attorneys and human resources. This entire episode soured me on work friendships for a while. After some time, however, I ended up back where I was most comfortable -- friends with a number of my direct reports.
Interestingly, the biggest criticism I ever took for not acting fast to resolve a 'problem employee', happened with a direct report I wasn't particularly friends with. That was more of a disagreement with my boss about how to view the man's performance. I still think I was right --that the guy was a strong asset -- but as soon as I left my job, he was out the door. Ultimately I felt like I failed in that situation.
My retired friend agreed with me -- and pointed out that he mostly worked for bosses that he considered to be personal friends. He said that the experience kept him better motivated, better in synch with what was needed by the company, and generally made work more pleasant.
I wonder if my experience with bosses (I can only think of one that I would call a friend) has just been bad luck???