In the down economy, with layoffs all over the place, its critical for management to take steps to maintain and improve morale of their existing employees. After all, you need your existing employees to do more now that there are fewer people to do the work.
How do you increase morale when budgets are so tight?
The key is constant, frequent, and candid communication with employees. They deserve to know what's going on and what you're doing about this frightening economy.
An excellent summation (including, thankfully, the call for transparency and communication) is found in this Wall Street Journal post about a case study at a company in Boston - Greenough Communications.