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 establishmentsthose
  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 layoffsidentified by the
  filing of 50 claims in a 5-week period.
• MLS focuses on permanent layoffs--those lasting
  at least 31 daysas 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 firms 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 establishments 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 categorizationOperationshinges 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
Selected MLS employer interview questions

• 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.)
• Dont 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 __________________ ? Dont Know/INA
• What was the primary reason for the job cutbacks?
  ? Dont Know/INA Primary_______________
  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 ________________ ? Dont Know/INA

• 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.

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
  Processesdetermining whether the Function is
  Operations for the establishmenthinges 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
Business Functions reported in extended layoff
events, third quarter 2007

• 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 Supervisionfirst line or
• direct

• 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

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 Banki
  ng
• 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_at_BLS.gov