It happens all the time.
Let's face ti we are human and unless you're a total something o path you will connect with the people you work with.
That said don't let our clients confuse the two relationships .... especially when things are going bad but probably always.
Don't for example let our clients confuse friendship at a time of having to let people go. The simplest thing to do, and the best thing you can do for your friend if that's what they are is cutting the cord as soon as possible and letting them go.
Also remembering that when you are trying to coach and lead your staff you need to remember that doing that within the context of your business is important rather than totally life coaching. By that I mean it's nice to know their kids names etc, where they want to go on holidays but really it's about helping them figure out how to improve their work and their value in a professional sense that's the most important thing. This is not only feedback about their performance but also trying to see how they would improve the business and where they want to see it go.... obviously all this dramatically improves engagement but in the right directoin for the business.