The latest reading on employer reactions to the recession brings more mixed results.

While most organizations are maintaining or increasing their workplace flexibility, creative cost-cutting efforts that can preserve morale—and ultimately profits—appear to have gotten short shrift, according to a new report from the Families and Work Institute.

The study of 400 U.S. employers finds that 81 percent of organizations have maintained their workplace flexibility options, and an additional 13 percent have increased them. Only 6 percent have reduced such programs.

In addition, 26 percent of employers say they have used flexible workplace options to minimize the need to lay off employees.

Still, layoffs have been common, according to the report, which involved surveying organizations with 50 or more employees in May. Just over three-quarters of employers have taken at least one step to cut labor and operational costs in the past year, and of them 64 percent reported layoffs.

Layoffs may be necessary and smart in some situations. But they also risk hurting a company’s esprit de corps. Polling firm Gallup has found that organizations with a layoff or downsizing saw the level of “actively disengaged” employees rise by 3 percentage points, to 24 percent.
 
Given the connection between engagement and business success, it’s disconcerting that companies haven’t worked harder to hold on to workers. Just 19 percent of organizations cutting costs in the past 12 months tried increasing telecommuting to save on occupancy costs, for example. Twenty-two percent increased their use of compressed workweeks, which also can limit occupancy expenses. And just 27 percent reduced pay.

Pay cuts can depress workers, for sure. But in the context of saving jobs, they can tap into a broader mood of shared sacrifice.

The same goes for reduced hours. It’s hard to get a sense for how widely companies have been trimming hours from the Families and Work Institute report. It finds that among employers cutting costs in the past 12 months, 29 percent have tapped voluntary reductions in hours, and 28 percent have used involuntary cutbacks. But the categories weren’t mutually exclusive. And the institute doesn’t provide a figure for the total percentage of firms using some form of reduced hours as a cost-cutting strategy.

Overall, the new report adds to a muddy picture of employer actions and employee engagement during the recession. Further complicating the situation, morale isn’t just a function of company practices. It is shaped also by broader trends around opportunity, security and risk for workers in America—meaning health care reform and the overall economic health of the country and world play a role.

Still, there’s a consistent message for employers: Those organizations that treat workers well in these tough times likely will be among the leaders as the economy picks up.

Last week I flew Virgin America for the first time. I was wowed by the hipness but found the customer service bumpy—which I suspect is a function of a young operation pushing the boundaries of employee independence.

Stepping onto the plane, Virgin immediately impressed me with the mood lighting, sleek black-and-white seats and interactive entertainment system. The flight attendants on my trip to Las Vegas were fun. At one point, the head of the team advised us not to listen to one of his colleagues.

My trip back to San Francisco that evening also featured an engaging Virgin employee. The gate agent kept telling us that Virgin was the “greatest airline—ever,” with just enough irony in his voice to make the phrase amusing rather than arrogant.

But aboard the plane, Virgin’s service took a nose dive. The lead flight attendant spoke in a cardboard monotone, sounding like someone reading a script for the first time. What’s more, the officer speaking from the cockpit deck flubbed his introductory remarks.

He said there would be some bumps on the way out of Las Vegas owing to heat from the desert rocks, but it should be a “safe” flight the rest of the way. Obviously he meant to say “smooth”; we wouldn’t be taking off if conditions were unsafe.

But for the substantial portion of the populace with some fear of flying—including me, I’ll admit—it was an annoying slip-up. Not the sort of thing that puts one in a relaxed mood.

This uneven performance from Virgin employees isn’t surprising when you consider the airline’s history and its vision. This division of Richard Branson’s Virgin Group is just 2 years old, which is a short time to work out the kinks of a complex service business even when you have a sister airline company. That’s especially true given that Virgin America intends to “bring great service back to the skies” in an unconventional way.

Traditional airlines such as United and American have relied largely on formulas for interacting with passengers. Such systems may limit the damage a low-performing employee can do, but the consistency and tight parameters can be maddeningly inhuman. Remember comedian David Spade’s “BUH-bye” skit?

Virgin America appears to be taking the opposite approach. In keeping with Virgin Group’s philosophy of empowering employees, the upstart airline seems to be giving its people great latitude to do their jobs.

Consider the message on Virgin America’s careers page: “If you have got guts, passion and that independent spirit, then you might be the kind of person we’re looking for,” it reads. “If you have the thirst and creativity to make this the most-loved airline in the sky, then we promise to make this a company where inspired people like you will always love to work.”

Virgin America’s focus on independence and creativity in its workforce amounts to a social experiment in the skies. And there’s evidence it’s working. For two years running, the airline has taken the top honor in the domestic airline category of Travel + Leisure magazine’s World’s Best Awards.

“Are you Virgin enough for Virgin America?” the career page asks provocatively. There’s bound to be some awkwardness as employees figure out their own ways to service customers well. But I wouldn’t be surprised if Virgin’s approach to people makes it an ever-smoother operator.

Growing attention to furloughs in recent months suggests some companies are getting back to basics about how to treat their employees.

Reducing workers’ scheduled hours can help businesses cut costs amid the recession. But furloughs also preserve ties with employees in an old-fashioned way that may pay off today.

An April survey of U.S. companies by consulting firm Watson Wyatt Worldwide found that 17 percent had used mandatory furloughs, up from 11 percent in February. Another 4 percent expected to implement a mandatory furlough sometime in the following 12 months.

Framed as an alternative to layoffs, furloughs can play a big role in bolstering morale. That’s a point I make in a paper that will be available later this month as part of a webcast on furloughs. In the course of writing that paper, I learned that door and window manufacturer Pella has utilized mandatory and voluntary furloughs this year.

In some cases, noble intentions motivated employees. “People are saying, ‘I can afford to take some time off, because I’ve got a co-worker with young kids to feed,’ ” company spokeswoman Kathy Krafka Harkema told me. “It’s really brought out the best in people.”

In a way, furloughs are from an earlier era. They’ve been used for decades in manufacturing and in the airline industry to deal with slumping demand. But furloughs—and the ways they keep employees and firms connected through hard times—fit today’s growing recognition of the power of relationships.

Furloughs are of a piece with new corporate social networks designed to strengthen ties among co-workers and forge them with alumni, as well as with the rise of LinkedIn and Facebook as recruiting and business development tools.

I recently heard interesting comments on the significance of social networking and employer-employee bonds from Allen Stone, an HR professional with 40 years in the field. Stone said he sees the explosive growth of Twitter and the like as a consequence of younger people seeking out secure relationships. He says they often didn’t have them in their families, and now struggle to find them with employers.

“The younger generation will move around every two to three years just looking for that stability because they didn’t have it in their homes,” he says. “That’s what they’re looking for—those connections. We all look for that.”

Stone, who was laid off from a mining company this year and is looking for work, says a major challenge for companies coming out of the recession will be to restore a sense of loyalty. Companies “can’t afford the continued chaos of people leaving,” he says. “We need to get back to the basics.”

The furlough is a form of those basics. So is providing a degree of employment stability for workers, so they feel secure enough to focus on their work and inspired to put in extra effort for the firm.

Is your organization getting back to people management basics?

Little by little, we are figuring out how best to run companies for sustainable success.

That may sound like a Pollyanna-ish claim to make amid a recession full of bankruptcies and millions of job cuts.

But signs of growing smarts about management are there, and it seems to me they add up to a formula that’s part science, part art and part heart.

Among the science pieces, New York Times columnist David Brooks recently cited intriguing evidence that CEOs who perform highest have a certain personality type.

“The CEOs that are most likely to succeed are humble, diffident, relentless and a bit unidimensional,” Brooks writes. “They are often not the most exciting people to be around.”

More than ever, it’s possible for such efficiency hounds to chew on human resource data in their quest. I recently met with Brian Kelly, president of HR analytics specialist Infohrm. Kelly’s firm is at the leading edge of the push to scrutinize people management information in the same rigorous way finance professionals assess corporate money matters and marketing experts analyze sales.

Here’s a peek into the kind of HR science Infohrm can bring to an organization. Say an insurance firm wants to trim its staff of $100,000-per-year underwriters to save costs, without threatening future growth. By examining data on the performance and career paths of existing underwriters, Kelly says, an organization might learn that its best, most loyal underwriters tend to come up from the ranks of its own call center managers, who make $50,000. Such internal promotions also save tens of thousands of dollars per underwriter in recruiting fees.

An optimal choice, then, might be to cut underwriters now but load up on call center managers and actively shepherd them into the underwriting role over time.

But Kelly isn’t only about numbers. As important, he says, is the art of helping HR departments and corporate leaders develop new evidence-based habits. Infohrm typically begins work with clients with an emphasis on getting basic metrics straight.

“They do need to focus on some quick wins like headcount, turnover, etc. to build credibility and trust before moving on to more sophisticated stuff,” Kelly says.

So we’re learning the science (the best CEO are relentless and anal, people data ought to be crunched) and the art (we must deal with the human side of change). But I suspect they’re not enough if we’re talking about long-term success in an era of increased transparency and growing concern about corporate citizenship. That’s where the heart part fits in. Maybe the CEO is a grind, but he or she needs values like caring about employees and the environment.

Need evidence for this? Check out the above-average performance and the longevity of firms on the Fortune Best Companies to Work For list.

So it may be gloomy. But rays of insight are around us. If we’re wise, we’ll emerge from the recession ready to build better, lasting companies.

A recent essay in the liberal-left magazine The Nation makes a bold proposal: The federal government should create a grand strategy to get nearly every American a job. Does such a full-employment policy deserve the backing of businesses?

This idea merits at least some consideration from the corporate world. After all, one of its authors is a former captain of industry—Leo Hindery Jr., who served as CEO of AT&T Broadband.

Hindery’s co-author is Donald Riegle Jr., a former U.S. senator from Michigan.

(Riegle was one of the Keating Five, faulted for his interference in a probe of failed thrift Lincoln Savings and Loan Association. He has since joined Hindery at the Smart Globalization Initiative, part of the New America Foundation think tank.)

Hindery and Riegle say the nation’s economic priority ought to be creating 24 million jobs so virtually every American interested in working can find employment and the economy can reverse course.

“The right way to earn our way back to long-term prosperity is through stimulus efforts that will help develop, broadly deploy, fairly compensate and, especially, fully employ our human capital, which will always be our greatest source of national wealth,” they write.

Part of their argument is that the official unemployment rate dramatically understates the extent of a job shortage in the U.S. While the official unemployment rate was 8.5 percent in March, a broader Department of Labor measurement of labor “underutilization” indicates the situation is nearly twice as bad. The so-called “U-6” figure adds in people who want full-time work but had to settle for a part-time schedule and “marginally attached workers,” who aren’t working or looking for work but who want and are available for a job and have looked for work in the recent past. The U-6 rate was 15.6 percent in March. 

Pointing to the country’s still-skimpy safety net and Hooverville-like tent cities emerging around the nation, Hindery and Riegle say the billions being funneled into the financial sector bailout and first stimulus package aren’t up to the task of getting Americans back to work.

A second stimulus package should focus on employment, they argue. Among their specific proposals are several that business leaders—especially the leaders of multinational firms—are unlikely to like. These include passing the Employee Free Choice Act designed to make unionization easier and a strong “Buy American” requirement for federal government purchases.

On the other hand, business leaders probably can appreciate the authors’ call for tax incentives for business investments in such things as new laboratories, innovative products and manufacturing equipment. Also appealing to the business crowd should be Hindery and Riegle’s push for more public investment in infrastructure, improved trade adjustment assistance, additional aid to state and local governments and expanded job training for young people in skills such as advanced welding and computerized machine tool operation.

They also say the government ought to help create millions of jobs for American adults, in part through a new program that emulates the best of New Deal initiatives—the Works Progress Administration and Tennessee Valley Authority.

“None of the actions we call for will be easy to accomplish, nor will they come cheap. Yet we need all of them so that American workers can be fully employed in jobs that pay fair wages. We need them to rebuild, and sustain, the great commercial engines that fostered the broad American middle class of the past century and underpinned the global prosperity of the past quarter-century. We need them to bring an end to America’s sorry status as the world’s largest debtor nation. And we need them for our national and economic security.”

Yes, Hindery and Riegle’s “Jobs Solution” runs the risk of bureaucratic waste and higher corporate taxes in the long term. And companies historically have feared full employment for the bargaining clout it gives workers. But businesses rely on healthy consumers, who ultimately are just workers wearing a different hat. Given the dead-end nature of growth fueled by consumer debt, decent jobs for average Americans is the way forward for both workers and firms. A full-employment economy, in other words, may be the best solution out there for employers.

Any more Leo Hinderys in the house?