I like the way the ISV puts this same verse:
Proverbs 20:30 (ISV)
Blows that wound clean away evil; such beatings cleanse the innermost being.
Put that side by side with this scripture:
Proverbs 27:6 (BBE)
The wounds of a friend are given in good faith, but the kisses of a hater are false
Sometimes God uses those who are close to us to make us better and to correct us from going further into error.
We must be bold enough to speak the truth in love to those who are friends and loved ones of ours.
We should not say we cannot tell them the truth because we love them and don't want them to get hurt. Also, we should not step out of love because we claim we're saying the truth.
We can maintain a healthy balance of both as we do what needs to be done.
RE: Proverbs 20:30 - We grow and change for the better