The news is full of stories about the impact of the recession on our economy. In the past few weeks Contact Energy has announced a significant profit warning, NZIER says 32 percent of employers expect to lay off staff in the next quarter (the lowest since 1991) and the Prime Minister has called for a freeze on MPs' pay rises.

We've also seen many companies laying off staff - according to Statistics New Zealand, 10,000 Kiwis lost their job in the December quarter.

The challenge for many companies in this environment is cutting costs without damaging their reputation. 

Cost cutting, such as redundancies, does not necessarily damage reputation. How it’s managed is what makes the difference.

Below are two examples of companies that I think are strengthening their reputation despite the tough times:Solid Energy: in announcing it was having to lay off some staff as a result of falling demand for coal, Solid Energy’s Chief Executive noted that the company was investing in a plant that would see the creation of 80 more jobs. 

International construction firm Caterpillar: it’s experienced falling orders worldwide and has had to lay off thousands of staff. But it’s clear they view redundancies as the last option.

In their Leicestershire plant, they are closing the factory for two weeks in February and again in March. All staff will attend training courses and take part in charitable and community projects, all on full-pay.

The beauty of this approach is that everyone benefits – staff, the community and Caterpillar.

The reason both situations work is because it’s authentic and smart. Caterpillar had to respond to falling orders. And they chose an approach that ensured they retained their highly skilled workforce while at the same time benefitting the company, their staff and the community.

Solid Energy also had to lay off staff. But they’re actively looking for opportunities where they can grow their business – and that will benefit them and their community. (I acknowledge that in this case the proof will be in the pudding.)

Authenticity must be the test of any company thinking about these initiatives. Why are we doing it? Is it sustainable? How will it be viewed? If the answers come anywhere close to just ‘doing it because it looks good’ then don’t do it. The risk to longer term reputation is too great.

But taking a more sustainable and authentic approach to business in a downturn can have a huge long term upside.  Afterall, we won’t be in a recession forever (we hope) and it will be the companies who have adapted and improved their businesses who will be well positioned for the future.