NCPA - National Center for Policy Analysis

Why Some Companies Follow a "No Layoffs" Policy

October 5, 2001

Southwest Airlines has never in its 30 years downsized a single employee. Companies such as S.C. Johnson and Pella have long traditions that date back to the Depression of never laying off an employee, no matter how bad the economy.

Usually, companies that can avoid layoffs are those with pristine balance sheets. They cope by reining in travel and expense accounts, and clamping down on executive perks, bonuses and pay.

Keeping workers when times are tough has distinct operational advantages.

  • Among them are fierce employee loyalty and a more productive workforce.
  • Such companies are ready to snap back quickly when the economy turns around.
  • They avoid severance and rehiring costs -- as well as the need to compete for talent as labor markets tighten.
  • And they avoid potential lawsuits from aggrieved workers -- as well as avoiding discouraging innovation among frightened employees.

Source: Michelle Conlin, "Where Layoffs Are a Last Resort," Forbes, October 5, 2001.


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