I was hired at a company and my co-worker had been hired one year previously; she trained me when I first joined the company. We've both been working in the same group, doing the same job for the past three years and we've made it clear to Management that we're interested in advancement and other opportunities in the company. We became friends during these three years, often getting together outside of work. I was recently offered the job as manager of our group, meaning that I would now be my friend's boss. I know she's going to be disappointed because I know she'll think that she should have been offered the position since she has more seniority. How do I maintain our friendship but also a good working relationship?
Do not assume automatically that she'd hate you because you got the promotion. She may be happy for you. Maintain friendly disposition and don't act superior to her. Find a way to mention how much you appreciate her help when she trained you. In a small way she helped you get where you are today.
Do something nice for her, invite her to lunch, give her credit for work she did well, etc. If you believe she deserve a promotion, with your new position you could be instrumental in helping her get ahead.
Be transparent, professional, and sympathetic. Have an honest conversation where you share your concerns (that she will be disappointed, that it will affect your relationship), and leave it at that for now.
It will take time to see exactly how this affects your relationship -- really depends on what your role is. Will you simply guide/monitor her tasks, or will you be responsible for performance reviews and raises?
Friendships can exist between a boss and a report, but they are more complex and take more communication and work. You must also work to avoid the perception that you are treating members of the group differently because some are "friends." Communication with all of your group again is key.
Know that the title of "boss" doesn't confer any magic powers. To be an effective boss you must have the ability to maintain those good relationships, to listen to what members of your group are telling you, and to communicate clearly (when appropriate) the reasons you make the choices you do.