What should advisors do if one of their PhD students has to withdraw? Unfortunately, there are circumstances when not everything goes right in a student's PhD career, or there can be personal circumstances that require doctoral candidates to withdraw from a PhD program before they have completed the requirements.

However, what is not clear to me is how to handle this situation from the advisor's perspective. What should an advisor do to:


Help the candidate, should she wish to apply elsewhere?
Discuss the situation with the group, to maintain morale?
Handle the "transition" process (during which the student is still officially on the payroll)?
Without additional details, it will be impossible to provide very detailed answers so from a general point, each case has its own solutions. The first question I would ask is, what is my part in this and how can I best help out (best may be = nothing). In general I would try to help out as much as I can unless the problem lies in the realm of a conflict or personal problems. Then there is not much you can do except suggest professional help. If the candidate is a good student then I would certainly support with any letter of recommendation I could. Since you mention morale issues in the group, it suggests some form of non-trivial problem. In some cases too much help makes people fall into a false sense of security so to be shaken can be useful as long as the reasons are very clear. 

So without trying to read too much into what is between the lines, I think the degree of help depends on to what extent help can or should be given (seen from an objective point).

Probably not the most satisfactory answer but being responsible for the research education at my dept., I have seen how difficult these matters can be. In our case, I would also be a resource to help out, if nothing else just to discuss the matter. (This does not mean I run a research group completely without problems myself!)