It is what you hate to do, and it has to be done: delivering bad news! Here’s how to make it easier for both the sender and the receiver.

Be respectful. Remember the person receiving it is human and needs to be treated with dignity. It might be easier to send an e-mail, but doing it in person will show that you care and will increase morale and reduce the pain. You can follow it up in writing so that there is a record.
Justify! Let people know why this is happening. The more information that people have, the easier it is for them to accept the news. Be as honest, specific and as concrete as possible.
Don’t delay. Don’t hope that things will improve by themselves. If people need to change or make a course correction, the sooner they hear it from you, the better. This also reduces gossip and rumors, which are often worse than the bad news itself.
Find and relate any positives. If you can, emphasize any optimistic and/or temporary aspects of the news. This will increase morale and motivation, particularly during bad times, like budget cuts or layoffs. If there are positive solutions being considered, share those as well.
Follow up and follow through. Keep people updated on the situation and inform them of any progress. Feedback on improvement is critical. Let them know if the crisis is past. Thank people for anything that they did to help the situation.

Follow these guidelines, and the bad news won’t be as bad!