Recession is when your neighbor loses his job, depression is when you lose yours, the saying goes. Although the manufacturing and services neighbors of IS departments are losing jobs in growing numbers?U.S. companies announced a whopping 652,510 layoffs in the spring, according to Chicago-based outplacement company Challenger, Gray and Christmas?IT workers aren’t depressed. The Information Technology Association of America (ITAA) reported this spring that demand for workers remains robust, with companies hoping to fill 900,000 IT jobs this year (versus 1.6 million last year). Nearly half of those positions will go unfilled because of a lack of qualified candidates, the ITAA predicts.

So then layoffs are a nonissue for CIOs? Not quite. While IT workers aren’t worried about their jobs, the days of wine and roses are over. Managers can no longer keep star employees happy with hefty bonuses and option grants, eternally new equipment purchases, and ever-flowing Mountain Dew. "Obviously, things are not the same with the stock down," laments Judy Harris, CIO and vice president of beleaguered e-business software maker Commerce One in Pleasanton, Calif. Many CIOs are reducing contractors to cut costs, putting a strain on staffers; others are squeezing budgets for perks and training.

Rohn Jay Miller, senior vice president of products and technology for San Jose, Calif.-based Knight Ridder Digital, faces a situation fairly typical for CIOs. He’s not ending performance bonuses, slashing training or killing important projects?but he is watching every dime. Not long ago, he received an astronomical bill from a Japanese restaurant for an IT staff meeting. "I nearly went through the roof," he says. Sushi is out, he told the team, sandwiches are in.

So what’s in store for CIOs as you manage IT staffs? Less spending and more managing, for one thing. Promote from within and use noncash incentives such as extra days off and flexible schedules. Make sure employees are learning new skills, even if they won’t use them soon. Finally, forget the things you can’t control. "If someone gets a call from Microsoft to be the grand poobah of something, there’s not much I can do," Miller says. His advice: Write off the loss and celebrate the dedicated workers who remain.

Walk the Talk

The most important action a leader can take in times of cutbacks is to foster trust among employees, says Alan Wolfson, a senior consultant for Hay Insight, a division of Philadelphia-based HR consultancy Hay Group. Wolfson likes to tell the story of the CEO who issued a mandate to kill the coffee budget?from the comfort of his private plane. Not only must senior leaders share in the pain of cost-cutting, they must tell it straight, Wolfson says. "Be truthful."