Q: Our company, like many these days, is experiencing lower earnings and the termination of many good employees. How do we build morale and give employees some sense of confidence in the face of poor financial results? Name Withheld, Maryville, Tennessee

A: Our first piece of advice might be the hardest for you to follow, if you’re a normal human being with feelings and emotions, a career of your own and a mortgage to worry about. It concerns not something you should do right now, but the one thing you must not. And that is act scared. Yes, these times are uncertain, and you yourself may be wondering if the bottom is here or still months away and how that will affect everything you’ve worked and planned for. But as a leader, the minute fear shows on your face, you’ve lost your people’s positive energy, which, as you surely know, you need more than ever right now to get to the other side.

Don’t get us wrong. The last thing we would ever tell a manager to do is fake it. To employees in a state of heightened awareness, phony smiles instantly give themselves away and assurances that “everything is going to be all right” sound ridiculous. So when we say don’t act scared, what we mean is, don’t be scared. With your top team, put together a plan that positions you for the future and protects you for the downside. Figure out the right size of your company for the worst-case scenario. Determine which programs cannot be eliminated, because they will help you compete when the economy recovers, and which programs don’t pass that test and need to go. Bottom line: Get your house in order so you’re not improvising or hanging on hope. You’re leading with vision and a firm sense of reality.

At that point, and only then, can you start to build morale and instill confidence. How? By relentlessly applying two fundamental managerial principles that matter all the time but are absolutely essential in times of turmoil: transparency and differentiation.

Now, we realize we don’t need to tell anyone why transparency—in general—makes sense. Most managers know from experience that employees get more pumped when they understand where the company is going and why, and how they play a role in getting there. But an awful thing tends to happen to such robust information-letting in an economic downturn. Managers choke; it’s almost as if they can’t bring themselves to deliver hard news without leaving out pieces and fuzzing the lines. In the worst example of this kind of cowering, CEOs who are spooked by market pressures announce that there will be 10,000 layoffs but neglect to mention where, when or who will be effected, leaving their employees to twist in the wind for weeks or even months before the ax finally falls. How enervating. Similarly, some executives clamp down so tightly on information flow during economic crises that their people find out about layoffs or other company changes only through the media or the industry rumor mill. Talk about killing trust! Your only antidote is being out there first, all the time, with all the facts, complete and accurate.

And you’ve got to put the same vigor into differentiation. Don’t panic. We’re not going to (once again) make the case that 20-70-10—ranking employees into performance categories of the top 20 percent, the middle 70 percent and the bottom 10 percent—boosts performance and makes sense in every business environment, good or bad, and you need to take care of your best no matter what. Let’s assume that’s a given and instead talk about the piece of differentiation that often gets ignored in downturns, which is how it applies to expenditures and investments. Too often, when the going gets tough, managers start spreading limited money around rather than making tough choices about which programs should be generously funded in order to get the company prepared for the future and which need to be sacrificed for the greater good. They’d rather keep every program on a form of minimal life support—perhaps because such “equal opportunity suffering” offends less people. But as a result of this approach, employees struggle to get along, in even your best, most promising programs, and it illuminates nothing about what the future will look like. So much for building morale and confidence.

None of this is easy. Downturns make people edgy, leaders included. But downturns are also when leaders get to test their mettle. Replace your own fear with knowledge, redouble your transparency, and commit to differentiation, as it applies to both people and expenditures. You still won’t be able to tell your team when the turnaround will arrive, but this approach is the best chance you have of keeping them pumped until the day it does.

******

Jack and Suzy Welch are the authors of the international bestseller Winning (Collins). Their latest book is Winning: The Answers: Confronting 74 of the Toughest Questions in Business Today (Collins). They are eager to hear about your career dilemmas and challenges at work and look forward to answering your questions in future columns. You can e-mail them questions at winning@nytimes.com. Please include your name, occupation, city and country.

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Q: Our company, like many these days, is experiencing lower earnings and the termination of many good employees. How do we build morale and give employees some sense of confidence in the face of poor financial results? Name Withheld, Maryville, Tennessee

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