How do I manage a friend who works for me?

One of your reports is also a friend, and you cannot bring yourself to hold them to the same standard as everyone else. You let things slide that you would address in anyone, and the rest of the team has started to notice. That double standard is quietly costing you the thing you most need as a leader: their trust that you are fair. The friendship makes accountability feel like betrayal, but it is the opposite. Letting your friend underperform is not kindness — it lets them slip while everyone watches, and it puts your fairness in question. A real friend, and a real leader, would want them to do their best work and be respected for it. Protecting them from honest feedback protects your comfort, not their good. So have the conversation you would have with anyone. Be clear that the friendship is real and the standard is also real, and that the second does not bend for the first. It will be awkward. Do it anyway. A friendship that cannot survive honesty was fragile already, and a team that sees you hold your friend fairly will trust you with everything else.