Relax and don't take all advice and catch sayings a gospel. I have risen thru the ranks to the CTO position several times in my career and I brought my friends along with me. If he is a good worker, he will remain a good worker most likely. In my career I have only had to fire one of my friends and it was literally because he developed a drug problem so bad he was showing up to work totally out of it. I counseled him, tried to get him into rehab and did what any friend would do but the drugs had taken hold. I was friends with him for years before that and did not know he had a drug problem before we met. He relapsed and just could not shake it this time.
That being said, there is no doubt the dynamic changes but that does not mean you have to give up your friends. It means you have to be more transparent with them, it means an absolute commitment to honesty so that you remove the feeling that you may be "managing" behind their back.
Jumping back to my friend, I was candid with him that he would leave me no choice, that it was completely unacceptable and that most of all I was concerned about him as a friend. He understood and understood my actions and that it was he who left me no choice.
I had another friend who battled depression, she was a rock star for years and then just hit a wall, due to a life event. I took off my CTO hat, put on my friend hat and worked with her thru it. Helped her build a path to put her life together and helped her get her career back on track. She had some extremely self destructive behavior in the throws of depression and I resisted outside pressure to fire her, due to knowing the sensitive nature of her medical condition, that knowledge came from being her friend not her manager. In the end what I gained was a loyal employee and a rockstar again. What I also gained is a group of people that any time I have an endeavor, I can pick up the phone, make a call and they will quit their job on the spot to join me. Have an unwavering commitment to your people and they will have an unwavering commitment to you, when they know that you are honest to them.
Point being take conventional wisdom with a grain of salt. Don't be jerk and don't manage behind peoples back and you will be fine. But the original point of the article is spot on, never, ever, even jokingly, joke about someones employment if you have a position of power or a decision in that continued employment. It's off limits, but if they are not meeting a standard be honest with them and be honest with them in the short run. Be a friend and put a plan together to get them back on track. Help them be successful, part of being a good manager is being a people builder.