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Layoffs are short-term fixes intended to save a company money. Companies feeling the financial squeeze want action and quick results. Layoffs offer a fast solution with immediate bottom-line results. But could they ultimately work against a company’s best interest by costing more in the long run?

This is a classic layoff problem. Layoffs provide companies with instant, but short-lived relief. Layoffs increase pressures on remaining employees that affect productivity, create an atmosphere of uncertainty and low morale leading to more defections than intended, and leave companies vulnerable and ill equipped to take full advantage of opportunities when the economy picks up again.

Hiring talented employees, including lawyers, is a very expensive proposition for companies and law firms alike. The cost of recruiting and/or replacing an employee making over $100,000 per year typically costs companies more than $60,000. Law firms typically spend an average of $75,000 to recruit a single summer associate — which includes hiring costs, overhead, salary, entertainment, and training. The cost of replacing an experienced mid-level associate jumps dramatically to $200,000 - $500,000.

Smart companies don’t want to lose the people they have worked so hard to recruit and train. Not to mention the expense. So, what are some the alternatives?

• Compensation Cuts Across the Board. This is a “We Are In It Together" approach that Caterpillar has decided to take this past December. What is particularly important about the cuts at CAT is that they are even bigger for executives. According to Caterpillar's arrangement, for 2009, executive compensation will decrease up to 50%, compensation for senior managers will be reduced 5% to 35% and other management and support staff will see a reduction of 0% to 15%. CAT is not alone in this process, other companies have followed suit. In December, FedEx Corp. also slashed the pay of more than 35,000 employees, including a 20% base pay cut for its chairman and chief executive, Frederick W. Smith.

• Reduced Hours & Unpaid Holidays. According to the New York Times, a growing number of employers, hoping to avoid or limit layoffs, are introducing four-day workweeks, unpaid vacations, and flexible work schedules. In November of this year, Dell Inc. offered nearly all of its employees up to a week of unpaid leave as part of an effort to cut costs in the last quarter of 2008. Although Dell reduced its global workforce by 10 percent over the last year, it hoped to save the company further layoffs by offering this voluntary leave program. The New York Times also reported that Cisco offered a four-day year-end shutdown, Nevada casinos implemented a four-day workweek, and Honda offered voluntary unpaid vacation time.

• “Sabbaticals” and Other “Flex Plans.” During the last downturn of 2001, Accenture announced a voluntary sabbatical program known as "Flexleave." Offered to about 1,400 consultants mostly in the United States, the program gave them 20% of their salaries and continues benefits over a six- to 12-month period. Stock options remained in place for those who took the offer. The only caveat: while employees could take another job during their leave, they could not work for a competitor.

There are a number of other alternatives, more or less palatable for employees but less noxious than layoffs, such as: hiring freezes, voluntary severance packages, offering early retirement to those close to the retirement age, reducing travel expenditures, delaying capital projects, and eliminating non-staff positions filled by temporary workers and independent contractors.

Bottom Line: Human capital is the most important element of any company’s success, and when that capital is being reduced, it ends up being a more costly proposition than its short-term savings.

What is your company doing to avoid layoffs? What alternatives would you propose?