Bureau of Labor Statistics Identifying Business Functions and

Bureau of Labor Statistics Identifying Business Functions and Business Processes Involved in Mass Layoffs in the United States Sharon P. Brown Bureau of Labor Statistics 2008 World Congress on National Accounts and Economic Performance Measures for Nations Washington, DC May 15, 2008

Bureau of Labor Statistics 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. MLS focuses on – large establishments—those employing 50 or more workers. – “mass” layoffs—identified by the filing of 50 claims in a 5 -week period. – permanent layoffs--those lasting at least 31 days—as determined in the employer interview. The employer interview provides important information on the nature of the layoff not available from administrative data. – As examples, economic reason for layoff, movement of work questions in 2004, and, since 2007, Business Function. ► MLS measures relatively large layoffs in relatively large firms when there is more permanent dislocation of affected workers. The employer interview provides a ready vehicle for obtaining timely information on labor market developments affecting firms and workers.

Bureau of Labor Statistics 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. – 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.

Bureau of Labor Statistics MLS Business Function and Process timeline • 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. – 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? Findings: – The new question on Business Function seemed to work well. – Knowledgeable respondents were found. • • In January 2007, nationwide collection of Business Function began. • Categorization of Business Functions into higher-level Business Processes was introduced in April. – “Business Processes” describe the full range of firm activities. • Qualitative analysis of the Business Function collection and coding of Business Process is ongoing.

Bureau of Labor Statistics 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.

Bureau of Labor Statistics Business Processes in a Firm Core Processes Strategic management 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

Bureau of Labor Statistics Core Processes of the firm • Strategic management: activities that support the setting of strategy, investments and acquisitions, business sales. • 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

Bureau of Labor Statistics 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

Bureau of Labor Statistics 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

Bureau of Labor Statistics Selected MLS employer interview questions QUESTION PURPOSE 1. Based on our unemployment insurance claims records, we believe that you may have had a (layoff/reduction in staff) during (month). Is that true? 1. Yes 2. Valid No (Probe: Do you know why these unemployment claims were filed against your company? ) Enter explanation. End interview. ) 3. Don’t know (Ask for another contact) -- Refusal 1. To determine whether a layoff occurred. 2. When did that layoff begin? _____When did you stop laying off workers? ______ 2. For data editing purposes. 3. Were workers laid off for more than 30 days? Yes 3. 4. 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 4. To establish the permanent criteria. . To obtain the total number of workers affected. 5. What was the primary reason for the job cutbacks? Don’t Know/INA Primary: ________ Secondary: ___________ 5. To obtain the economic reasons for layoff. 6. 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 6. To verify the industry code. 7. 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: __________________ 7. To obtain Business Functions involved in the layoff. No □

Bureau of Labor Statistics 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. Mass layoff events by selected measures, first through third quarters 2007 Action 1 st Q 2 nd Q 3 rd Q Total potential mass layoff events 3, 139 3, 289 3, 025 Total private nonfarm extended layoff events 1, 111 1, 421 931 Events with Business Function responses 974 1, 297 824 “Does not know” Business Function 13 20 24 Refused (entire event) 49 37 32 Unable to contact 75 67 51

Bureau of Labor Statistics Total, Main, and Secondary Business Processes involved in extended mass layoffs, first through third quarters 2007 Business Processes in MLS layoff events Total Main Secondary 4, 518 3, 095 1, 423 3, 589 3, 023 566 324 57 267 2, 923 2, 895 28 Product development 40 14 26 Marketing, sales, account management 150 33 117 Customer and after-sales service 152 24 128 929 72 857 General management and firm infrastructure 676 60 616 HR management 160 6 154 Technology and process development 93 6 87 Total Business Processes identified Core Processes Procurement, logistics, distribution Operations Support Processes • • 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.

Bureau of Labor Statistics Brief analysis of Business Functions and Processes involved in layoff events • 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: the largest number of affected jobs. • Secondary Business Processes are particularly important in the case of closures. • 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 case of closures. One process may reflect multiple Functions--producing good and managing that Function.

Bureau of Labor Statistics Brief analysis of Business Functions and Processes involved in layoff events--continued • 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 cited. • 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. – Business ownership changes were less likely to involve Operations as the main Process and more likely to involve a secondary Support Process such as General management and Human resource management. • When work was sent out of the US, Operations was cited slightly more than for domestic relocations.

Bureau of Labor Statistics Business Functions reported in extended layoff events, third quarter 2007: Total 1, 546 • • • 145 Manufacturing 170 Construction activities 85 Producing goods • • • • 52 49 34 34 21 20 18 14 14 10 10 5 4 8 • • • 81 Transporting 37 Warehousing 19 Shipping Facility maintenance services Real estate services Educational services Food services Accounting services Entertainment services Engineering services Financial services Social services Conference services Contracted services Housekeeping services Cafeteria services Providing services • • • 74 50 49 30 9 • 42 Human resources • • 39 Customer service 3 Call center • • 33 14 6 12 • 12 Supervision—first line or direct • Residual: – 320 Business Functions – 23 Business Process responses Clerical support General management Administrative support Management Business management Selling Sales Retail sales Marketing

Bureau of Labor Statistics Brief analysis of Business Functions and Processes involved in layoff events--continued • • • Looking at 3 rd 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, more difficult to categorize Functions also appeared: Mortgage banking services Mortgage brokering Mortgage lending service Mortgage processing Mortgaging • Loan adjusting Loan authorizing Bank services Banking Loan counseling Loan interviewing Home mortgage loans Processing loans Mortgage Banking Lending 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.

Bureau of Labor Statistics Summary Remarks • Estimates of employment at the establishment or industry level reflect the industry classification of the main Business Function of the unit, and reflect the net impact of job gains and losses. Such estimates may not reflect the dynamic nature of change. • The identification and collection of Business Functions involved in layoffs provides new information on job losses in establishments and industries. • The Business Function/Business Process classification scheme and its successful use in the MLS program implies that it can be equally applied to other employment measures, and can provide a basis for further understanding of such phenomena as technology change and globalization on a larger scale. • More work on “establishment” as it is used in the MLS program is needed. Linking the MLS establishment to higher corporate entities will allow for greater insights into firm decisions. BEA data may provide an opportunity for such work. • Consideration must be given to the alternative analytical approaches. – Is Business Function the better unit of analysis, and what does that mean for the MLS program? • Qualitative and quantitative analysis of the Business Function collection and the coding to Business Process continues, leading to publication.