Hunt tells of another company that got rid of a team of five people, only to discover that another, revenue-generating department critically relied on them. After firing the five employees and giving them severance, the company decided its best option was to rehire them into the other department.

Of course, it can also be damaging for a company to cut too few employees, resulting in the dreaded "downsizing of the month" scenario: numerous small layoffs, with everyone thinking the ax will fall next on them. Ironically, some experts say, that can do as much damage to morale and survivor productivity as cutting too deeply.

Clearly, then, layoffs, like so many other business decisions, cannot be based solely on the coming year's budget spreadsheet. And that's particularly true in the current environment, when normal forecasting is nearly impossible. Even companies that are normally excellent at forecasting their results "don't have a clue where [the economy is] going," says Keith Hall, former CFO of LendingTree. Now a board member at several companies, Hall says that unless the company's survival is at stake, it's tricky to know with any confidence whether layoffs are actually the right move.

"You're playing with people's lives and trying to do the right thing," says Hall. "Corporations ought to go out of their way to do what's right for workers, but they also have to do what's right for the company. It's just too bad that in an environment like this so many are doing the latter."

Clearly, says Hall, if a company's access to cash is insufficient to fund operations and other obligations, layoffs are necessary. That's true even if it's just that the cash cushion is too thin — if a miss in sales projections would result in the company flirting with insolvency. But he has no patience for executives who make layoffs for selfish reasons. "If it's for the sake of hitting an artificial number so management can get a bonus, that's a different matter altogether. I've known a few guys like that, who say 'to hell with the people, I'm gonna do whatever it takes to get the bonus.' "

Executives at companies that recently laid off employees were understandably not eager to share their thought processes with CFO.com. But companies were willing to talk about how hard they were working to avoid head count cuts.

Take, for example, American Electric Power. Utilities are a business that is more recession-proof than most, but AEP is already seeing a rise in uncollectible bills and a drop-off in energy consumption, the company's CFO, Holly Keller Koeppel, tells CFO.com. The company plans to reduce capital spending by $750 million in 2009. But instead of trimming its work force, AEP has tightened its belt on the human capital front by instituting a hiring freeze and holding off on salary increases.

"Philosophically, our employees would be the last thing we would cut, if at all possible," Koeppel said. "We went first to things around which we have discretion that won't impact the work force or the quality of our service. The cuts we made were projects that would have gone to third-party vendors, and then we looked at discretionary operating and maintenance expenses."

But even the hiring freeze is a bold policy for AEP. Like most utilities, much of its growth took place in the 1960s and 1970s, and there was relatively little hiring over the ensuing decades. Its work force is quite mature, and it faces the very Baby Boom danger that human capital experts have warned about, with a large number of key AEP employees reaching retirement age over the next few years.

"We're taking a risk by not expanding our work force," Koeppel admits. "We're counting on folks staying around longer than they would have, and plans we had hoped to implement around bringing in and training new folks have been delayed."

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