Anthony Cheng understood something that many dot-com managers didn't when he fired a third of his work force at renren.com: the human toll of layoffs.

A former manager at multinational consulting firm McKinsey & Co., Mr. Cheng knew that if he helped people find new jobs, renren would stand out from other Internet companies. And by assuring remaining employees that there were no more cuts to come, he knew he would help the company move forward.

As the global economy slows and last year's challenge of how to retain talent becomes this year's question of how to dismiss staff, Old Economy managers may have a lesson to learn from the New Economy. Many start-ups have discovered, as did Mr. Cheng, that "soft firings" -- offering outplacement counseling and other benefits to laid-off employees -- can offset the negative impression of downsizing.

In Asia, where the practice is still new, soft firings gained some companies favorable news coverage. These companies were seen as good places to work, despite the cuts, making future recruitment easier for them. And dismissed staff members didn't leave in anger, bad-mouthing their former employers in Internet chat rooms.

But many Asian companies will need to enhance their human-resources departments if soft firings are to become more common. In the past, many companies saw the function of human resources as "reactive," says management consultant Sue Knox of human-resources firm Drake Beam Morin.

Opening a dialogue between employers and employees may draw resistance from managers who are used to doing business their own way, and suspicion from employees who worry about jeopardizing their jobs if they speak up. If you cut away the layers between management and staff and "allow employees to point the company in the right direction, it will be better for the company," says Anand Shankar, who heads Hewitt Associates' business development in Asia. "But that's going to be culturally difficult to implement."

It is, however, possible, as renren's Mr. Cheng knew. Providing support to all employees -- both remaining and departing -- was a priority at renren. "We decided we're doing this once, and we're going to get this over with," he said. "Other companies did multiple rounds. That was just too brutal."

Mr. Cheng and his top managers adopted a layoff practice designed to help employees get through the change. On the day of the staff cuts, Mr. Cheng and his senior managers arranged interviews at other companies for departing employees. They offered some senior staff members -- depending on how long they had been with the company and their performance records -- more compensation than was required under Chinese law, which mandates one month's pay for every year worked.

In the week following the layoff, renren managers rearranged the office, so employees wouldn't have to stare at empty desks. Managers have encouraged employees to start new projects to keep energy levels up and move the company forward rather than dwell in the past.

Other Internet start-ups, however, approached layoffs with a business-as-usual attitude. For example, Charles Zhang, chairman and chief executive officer of Sohu.com, says the company needed to keep its promise to shareholders to reach profitability in 2003.

A leading Chinese Internet portal, Sohu.com fired 126 people -- more than a sixth of the company -- over two weeks in December. Most of them worked in the content and administrative departments where Sohu saw redundancies after last October's acquisition of ChinaRen.com.

Sohu gave employees the minimum legal severance. "There were so many people in the company, many people I don't know very well so I couldn't help much, but Sohu is such a big brand in China and (that) helps them," with their job hunt Mr. Zhang says.

For some unemployed IT professionals, the job search is easy. Many traditional companies such as HSBC Holdings PLC need these workers' Internet expertise to help develop electronic commerce strategies such as online banking, says Vincent Gauthier, Greater China business development manager for human-resources firm Hewitt Associates. Others with skills less in demand test new career paths or return to Old Economy jobs.

And Sohu learned another lesson in the December staff cuts: The company is changing its compensation plan so incentives and pay are linked directly to performance. Mr. Zhang says he found his employees working harder on projects as a result.

Layoffs "are a new thing for China," Mr. Zhang says. "Moving forward, Sohu will as a routine business let nonperformers go. It will be important to have a strong HR department if we want to hire talent that we really need."