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A growing body of academic research suggests that firms incur big costs when they cut workers. Beyond the obvious costs of severance and outplacement, there’s also a morale and productivity toll on remaining employees.

Consider following the lead of companies that have avoided layoffs:

1. Wegmans, a 94-year-old family-owned supermarket chain, avoids layoffs by cross-training workers for different jobs, ultimately making them flexible to the changing needs.

Says one employee: “Our thought process is that we’ll never have a layoff. Everything is planned on the basis that our people come first.”

2. Mercedes-Benz USA didn’t buckle under the force of the recession the way the Big Three did. Instead, it cut costs by eliminating nonessential travel, reducing temporary staff and placing controls on overtime.

When leadership saw that further cost reductions were unavoidable, the CEO and executive team (28 people total) accepted cuts in compensation. It paid off. The company saw a 10% total reduction in labor costs from mid-2009 to year-end.

— Adapted from “No layoffs—ever!” Christopher Tkaczyk, CNN Money. 

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