Identifying Business Functions and Business Processes Involved in Mass Layoffs in the United States

1. Identifying Business Functions and Business Processes Involved in Mass Layoffs in the United States Sharon P. Brown Bureau of Labor Statistics WORKS Expert Workshop Leuven, Belgium March 13, 2008

2. Identifying Business Functions and Business Processes involved in Mass Layoffs • The BLS Mass Layoff Statistics program • BLS focus on Business Function and Process • Classification of Business Functions and Business Processes • MLS experiences in collecting Business Functions and coding Business Processes • Summary remarks

3. The BLS Mass Layoff Statistics (MLS) program • MLS identifies plant closings and mass layoffs in establishments with 50 or more workers where at least 50 initial claims for unemployment insurance (UI) were filed in a 5-week period. • Administrative data on firms and on people filing for unemployment benefits define the economic event. • MLS focuses on large establishments—those employing 50 or more workers. • Private nonfarm firms of 50 or more and covered for UI are in scope. • Covered employment accounts for about 98 percent of all wage and salary employment. • Establishments of 50 or more: less than 5 percent of establishments but more than 50 percent of employment. • MLS focuses on “mass” layoffs—identified by the filing of 50 claims in a 5-week period. • MLS focuses on permanent layoffs--those lasting at least 31 days—as determined in the employer interview. • Less than 40 percent of MLS layoffs identified solely by UI claims filing in the 5-week period involve layoffs of 31 or more days.

4. The MLS program--continued • The employer interview provides important information on the nature of the layoff not available from administrative data. • Length of layoff--more than 30 days determines an extended mass layoff. • Other basic information includes economic reason for layoff, total number of separated workers, open/close status. • The employer interview provides BLS with the ability to add questions that can shed light on current events in the labor market. • Movement of work questions and, since 2007, Business Function. ►MLS measures relatively large layoffs in relatively large firms when there is more permanent dislocation of affected workers. ►The program issues monthly and quarterly news releases with timely and detailed information to assist dislocated worker professionals in determining the need for employment and training services and to provide public and private researchers who study trends in labor markets and industries.

5. MLS survey approach and reliability • Establishments: all UI-covered establishments are subject to MLS specifications. • MLS employer interview survey: all private nonfarm establishments meeting MLS specifications on size and claims filings. • Participation in the MLS employer interview is voluntary. • BLS pledges confidentiality of the responses. • MLS employer interview is conducted by trained State analysts, who code or enter responses provided by the employer. • Telephone interviewing is used. • The interview is structured, but certain flexibility is allowed. • Employers are not given a questionnaire with response options in advance of the telephone interview. • The typical respondent is in the personnel area, although for the movement of work and Business Function questions, analysts have been referred to higher management. • Although the employer interview component is subject to nonsampling error, outright refusals to participate in the interview have stayed well below 5.0 percent of all events. • Item nonresponse is not a significant issue.

6. BLS focus on Business Function and Process • In 2004, interest in identifying the effects of offshoring led to the introduction of movement of work questions in MLS that measure job loss associated with geographic shifts (domestic and overseas relocations) and contractual actions (outsourcing). This then led to the concept of Business Function involved in the layoff. • Offshoring studies and newspaper articles focused primarily on activities that were neither occupations nor industry groups. These activities could/did operate within any establishment, regardless of industry, and often involved multiple occupations. • Outsourcing of ICT and related services in the EU, Huws/Dahlmann • Examples of activities: call centers, customer services, data processing, financial functions, human resources • Ongoing research brought BLS to Business Functions and the activities of the firm as a more viable data element for collection and a more relevant item of interest for the MLS program. ►Business decisions are often based on a consideration of the firm’s Business Functions and are reflected in employment actions such as layoffs.

7. BLS focus on Business Function and Process: Feasibility Study • In June 2006, a proposal was developed to collect information on Business Function involved in the layoff. • “Business Function” is defined as an activity that a firm performs in order to produce its product or achieve its objective. • A feasibility study was conducted in September and October 2006 in which 11 States tested the collection of business function. • Goals of feasibility test: • Are we finding the right person to answer the question? • Is the person understanding the question? • Is the response provided a business function? • A structured interview approach was used, with the Business Function response obtained through an open-ended question. • Employers were not given the questionnaire with response options in advance of the interview. • During the interview, employers were not provided with Business Function responses beyond those imbedded in the question.

8. BLS focus on Business Function and Process: Feasibility Study • Findings: • The new question on Business Function seemed to work well. • Knowledgeable respondents were found. • Relatively few respondents had difficulty answering the question. • In January 2007, the collection of Business Function involved in mass layoffs and plant closings was implemented nationwide. • Categorization of Business Functions into higher-level Business Processes was introduced in April. • “Business Processes” describe the full range of activities a firm engages in to conduct its business. • Qualitative analysis of the Business Function collection and coding of Business Process is ongoing.

9. Business Functions and Business Processes: Models of firm activities • Once the feasibility study corroborated that employers can provide Business Functions involved in their layoff decisions, efforts turned to developing a higher-level categorization for Business Functions that would accommodate the multitude of functions collected and also support economic analysis. • There is no current acknowledged standard for defining Business Processes or the Business Functions within these processes. However, there are models of firm activities such as those of Tim Sturgeon and Gary Gereffi (Global Value Chain Initiative) and Michael Porter. • For the MLS program, BLS identified a set of Business Processes that is • consistent with the academic studies and current literature, • reflects comments on the BLS business function proposal and the results of the feasibility study, and • appears to fit the actual data collection.

10. Business Processes in a Firm Core Processes Procurement, logistics, distribution Operations Product and/or service development Marketing, sales, customer accounts Customer and after-sales service Support Processes General management and firm infrastructure Human resource management Technology and process development

11. Core Processes of the firm • Procurement, logistics, distribution: activities associated with obtaining and storing inputs, and storing and transporting finished products to customers. • Business Function examples: Buying, distributing, loading, shipping, warehousing • Operations: those activities that transform inputs into final outputs, either goods or services. (In most cases, the function under operations correspond to the production process that is the basis for the establishment’s NAICS classification or the activity most directly associated with it.) • Business Function examples: Producing goods, providing services, assembling products, fabricating components, conducting QA/QC, direct managing

12. Core Processes of the firm--continued • Product and/or service development: activities associated with bringing a new, redesigned, or improved product or service to market. • Business Function examples: Analyzing markets, researching, designing or developing the product/service, testing • Marketing, sales, customer accounts: activities to inform existing or potential buyers including promotion, advertising, telemarketing, selling, retail management. • Other Business Function examples: Billing, conducting market research, coordinating media relations, branding, merchandizing • Customer and after-sales service: support services to customers after purchase of a good or service, including training, help desks, call centers, and customer support for guarantees and warranties. • Other Business Function examples: Installing products, customer relations, maintaining and repairing products

13. Support Processes of the firm • General management and firm infrastructure: activities related to corporate governance (which includes legal, finance, planning, public affairs, and government relations), accounting, building maintenance and services, general management, and administrative support. • Other Business Function examples: Cafeteria services, clerical support, security • Human resource management: activities associated with recruiting, hiring, training, compensating, and dismissing personnel. • Technology and process development: activities related to maintenance, automation, design/redesign of equipment, hardware, software, procedures, and technical knowledge. • Other Business Function examples: Computer systems development, computer systems maintenance and repair, managing data, data processing, providing Internet web services, development and testing software, providing software and IT services, designing processes

14. MLS experiences in collecting Business Function • Business Function collection began with all layoff events for the 1st quarter of 2007. Analysts were provided with the Business Process classification, examples of Business Functions that could be reported under each (except for Operations), and actual Business Functions collected in the Feasibility Test. • Business Process categorization did not begin until the 2nd Quarter, to keep the initial focus on Business Function. • Once the Business Function collection was adequately established, the analysts were directed to categorize the Business Functions they collected into Business Processes. • Guidance on Business Process classification was developed to assist analysts in understanding Operations. • Key categorization—Operations—hinges on the relationship of the Business Function to the industry. • A Business Function that is Operations for one establishment can be correctly classified as a different Business Process for another. • All collection was done manually.

15. QUESTION Based on our unemployment insurance claims records, we believe that you may have had a (layoff/reduction in staff) during (month). Is that true? Yes Valid No (Probe: Do you know why these unemployment claims were filed against your company?) Enter explanation. End interview.) Don’t know (Ask for another contact) -- Refusal When did that layoff begin? _____When did you stop laying off workers? ___________ Were workers laid off for more than 30 days? Yes No □ About how many workers were laid off for more than 30 days? (Probe: If big gap between number of initial claims and number of separations) Number: __________________  Don’t Know/INA What was the primary reason for the job cutbacks? Don’t Know/INAPrimary:_______________ Secondary:______________________ What kind of business is conducted at the worksite that experienced the layoffs? (Probe: What product do you manufacture or what service do you provide at that location?)Industry: ________________  Don’t Know/INA Regarding the workers who were laid off, what was their main role or function within the company?For example, were they in manufacturing, sales, personnel, computer support, or something else? (Probe: In addition to {function mentioned}, were any of the employees affected by the layoff involved in other activities of the firm such as clerical support, warehousing, or sales?)Main:____________________________________ Other: ___________________________________ PURPOSE To determine whether a layoff occurred. For data editing purposes. To establish the permanent criteria. . To obtain the total number of workers affected. To obtain the economic reasons for layoff. To verify the industry code. To obtain Business Functions involved in the layoff. Selected MLS employer interview questions

16. Experiences in collecting Business Function • The employer interview was not adversely affected by the Business Function question. • “Refusals” were 4.4 percent, 2.6 percent, and 3.4 percent respectively. • Responses of “does not know” Business Function were quite low, indicating that the right person was being interviewed. • “Unable to contact” reports were relatively high and likely reflects the program requirement to wait 31 days before attempting contact. • These may be closures.

17. Experiences in collecting Business Function • Literal reporting of the employer responses to the Business Function question was required, resulting in many variations of a given function. Also, in a number of situations, overly detailed functions were collected. In some cases, this reflected attempts to address responses that were occupations. • Guidance was provided to analysts in an attempt to standardize terms and the degree of detail collected. • In the second and third quarters, about 75 percent of all Business Functions collected were associated with terms used 10 or more times.

18. Experiences in collecting Business Function • Variations of a Business Function • Clerical,Answer phones, Clerical staff, Clerical support, and Front-office clerical: all are encompassed by Clerical support. • Overly detailed Business Functions • Dining room service, bussing tables, dish washing, hosting/hostessing, waiting tables/serving: all are encompassed by Food Service. • Building maintenance, Facility services, Grounds keeping, Janitorial services, Landscaping, Repairing: all are covered by Facility maintenance services. • Problematic industry activities: some issues related to responses of occupations, while some were related to the industry itself. • Construction: detailed activities represented by Construction activities. • (Any industry) manufacturing, processing, producing: use Producing goods

19. Experiences in coding Business Process • The key categorization for Business Processes—determining whether the Function is Operations for the establishment—hinges on the relationship of the Function to the industry of the establishment. In MLS, the industry identified for the firm may not relate to the work being done at the layoff worksite. This relates to how the firm reports for Unemployment Insurance purposes. • Main Business Process is determined based on the largest number of jobs affected by the layoff. • Secondary Business Processes are particularly important in the case of closures.

20. Total, Main, and Secondary Business Processes involved in extended mass layoffs, first through third quarters 2007 • Core Business Processes dominated in the reporting of layoff activity, and Operations accounted for the majority of Main Processes. • Once the Main Process was identified, there was a greater likelihood that Support Processes would be involved.

21. Brief analysis of Business Functions and Processes involved in layoff events • For the first three quarters of 2007, the MLS program reported 3,463 extended layoff events involving the separation of 640,990 workers. • During this period, employers in 3,463 layoff events provided a total of 5,769 Business Functions involved. • A single Process was identified in 64 percent of the events. This may reflect early collection issues in the event of closures. One process may reflect multiple Functions, e.g., producing good and the management of that Function. • Core Business Processes dominated and accounted for 98 percent of the Main Process involved in the layoff. • Secondary Business Processes were typically Support Processes although Procurement, logistics, distribution, Customer and after-sales service, and Marketing, sales, account management were also important. • More Processes were reported involved in layoffs when the economic reason was organizational changes and financial reasons. The highest proportions of Technology and process development and Human resource management as secondary Processes were associated with these reasons for layoff. • When work was sent out of the US, Operations was cited slightly more than for domestic relocations.

22. 145 Manufacturing 170 Construction activities 85 Producing goods 52 Facility maintenance services 49 Real estate services 34 Educational services 34 Food services 21 Accounting services 20 Entertainment services 18 Engineering services 14 Financial services 14 Social services 10 Conference services 10 Contracted services 5 Housekeeping services 4 Cafeteria services 8 Providing services 81 Transporting 37 Warehousing 19 Shipping 74 Clerical support 50 General management 49 Administrative support 30 Management 9 Business management 42 Human resources 39 Customer service 3 Call center 33 Selling 14 Sales 6 Retail sales 12 Marketing 12 Supervision—first line or direct Residual: 320 Business Functions 23 Business Process responses Business Functions reported in extended layoff events, third quarter 2007

23. Brief analysis of Business Functions and Processes involved in layoff events • Looking at 3rd quarter data on Business Functions reported by employers, Functions associated with producing goods and providing services dominated. • By this time, Functions associated with real estate appeared in response to the real estate/mortgage industry issues. • Other Functions more difficult to categorize also appeared: Mortgage banking Loan adjusting Bank services Mortgage banking services Loan authorizing Banking services Mortgage brokering Loan counseling Mortgage Mortgage lending service Loan interviewing Banking Mortgage processing Home mortgage loans Lending Mortgaging Processing loans • Business Functions and Business Processes each offer a different perspective on the job loss associated with a closure or layoff. • Looking at the Business Functions, one sees the activity that is the focus of change. However, “new” Functions must be addressed. • Looking at the Business Processes, one sees actions more from the perspective of the company and the decisions it makes. However, in order to accurately “see” the corporate decisions, one must have the full picture of corporate association.

24. Summary Remarks • The MLS program collection of Business Function benefits by having the layoff event as the anchor. • The collection also benefits by having the establishment respondent typically located in Human Resources or in a management capacity, and not in payroll. • The open-ended question on Business Function works. • Further automation of the collection is very important. • Further standardizing of Business Function terms is essential, but this must be done without compromising the collection. • More work on “establishment” is needed. • Is Business Function the better unit of analysis, and what does that mean for the program? • Additional qualitative analysis of the Business Function collection and the coding to Business Process continues, leading to publication. • Send comments on Business Functions and Business Processes to Brown_Sharon@BLS.gov