They say
“I thought we were friends.”
Your response
“Our friendship matters to me. So does my responsibility in this role. I want to explain the decision clearly and hear why it feels like I’ve let you down, but I can’t change it because we’re friends.”
First, check this
Would you make the same decision if this employee were not your friend, and did you clearly reset expectations when your role changed?
Why this works
Pretending the friendship is irrelevant would make the manager sound cold and evasive. Letting the friendship determine the decision would create a different problem. The response acknowledges the personal effect while keeping the role obligation clear. It also gives the employee room to name what feels different now. This page concerns friendship and a changed relationship; the next page concerns whether the manager has legitimate authority to decide.
Don’t say
“At work, I’m your manager, not your friend.”