As Bart Cleveland talks to employees of his ad agency, he sees the strain.

``We're really keenly aware of what the economy is doing to people's morale,'' said Cleveland, a partner at McKee Wallwork Cleveland in Albuquerque, NM. ``They're stressed in a way that I've never seen people stressed.''

Economic reports of the last week point to plenty of reasons for low morale at small companies. A survey by the National Federation of Independent Business of its members found that employment in small companies over the past three months fell on average by almost one worker per business. That's an improvement over the spring, but it still means businesses are struggling and that they're cutting employees rather than hiring new ones.

That inevitably is going to affect morale, but even at companies that are faring better, workers are uneasy. So small business owners need to help keep employees' spirits from sagging.

Cleveland does what many human resources consultants suggest, talking with staffers and letting them know how the business is doing.

``We're communicating much more frequently with our employees about things they may not have been concerned about'' in the past, said Cleveland. He walks around the office to talk with employees each day.

Cleveland added these walks to his routine four or five months ago, well into the recession. He said it was ``something I intended to do, but I'm a worker bee and I can get very focused on what I'm doing.'' But he recently recognized employees' need for more face time with the boss.

``When I realized it had to be more of a priority, I made it a priority,'' he said.

Rick Gibbs, a senior human resources specialist with Administaff, a Houston-based company that provides HR outsourcing, supports the idea of owners being up-front with staffers about the business.

``It may not make them happy and glowing necessarily, but it provides something to think about even in a tough time and it also creates a tie between the company and the employee,'' Gibbs said.

There is often a direct cause-and-effect relationship between how workers feel and how well they work. Uneasy and uncertain workers may find it harder to concentrate. That in turn is going to affect performance, and it's not too long before the company feels the impact.

A boss being open with employees about the business can help focus their efforts on what the company needs to thrive. That can give them a sense of power that may alleviate some of feelings of being at the mercy of the economy. Allowing them to vent a little frustration is probably a good idea as well.

Gibbs suggests including staffers in a dialogue about making the business stronger, asking them: ``What are your ideas? What do you think is most effective with customers?''

He acknowledged, though, that many owners may have never been this open with staffers.

``It may be a difficult thing to do and it requires the leader to really take a look at how to best help their businesses,'' he said.

Another approach for keeping employees' morale up is through incentives and rewards, such as performance bonuses.

DeAnne Merey, president of D M Public Relations in New York, developed an incentive pay program and calls it ``a huge morale booster.''

``We're gaining clients but not at the rate we would have if the economy was robust,'' she said. The incentive pay, which is awarded on a project-by-project basis, gives employees something to work toward.

Gibbs noted that there are also incentives that don't cost anything, such as allowing a staffer who has done something outstanding to leave early on a Friday. But he recommended that owners not give incentives that appear ``programmed'' or automatic because ``they lose some of their effectiveness.''

Cleveland's company also works to keep morale high by celebrating its achievements. When several big projects became successful, employees were treated to a party where brownies and fruit were served.

``I could feel the energy of the place. People were laughing and talking,'' he said. ``It really made a difference.''

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