When its orders dropped in late 1990, instrument manufacturer YSI found itself with too little work -- only about 30 hours a week -- for its full-time employees. Many companies would have laid off workers. Instead, YSI took the opportunity to train them.

The $30-million company, based in Yellow Springs, Ohio, has long followed a policy of no layoffs. "The practice was begun by my predecessors," CEO Malte von Matthiessen says, "but I embraced it for a different reason." Whereas his forebears traded lifetime job security for their employees' loyalty, he's trading for their knowledge. Over the years, YSI has invested heavily in training. "Do we lay off that investment?" Matthiessen asks. "That makes no sense."

He and his workers agreed to cut the overall working week to 36 hours and to fill the resulting downtime with classes in math, reading, and composition. By mandating the classes, Matthiessen made it easier for workers to acknowledge illiteracy and other educational deficiencies.

Staff from a local college assessed 204 YSI employees' educational needs. Of those, 116 received training in information gathering and communication; 60 received training in math. Eight others took classes in basic English and math skills, led by teachers from the local career center.

YSI paid the college $13,000 to assess workers and develop and lead the training program. The career-center classes cost another $1,520. Including workers' pay for time spent in class, program costs edged into the six figures, Matthiessen says. (A state grant contributed $800.) He sees the payoff in the performance of YSI's self-directed production teams, which apply their new skills to daily problems. -- Michael P. Cronin