Mass Layoffs Jan 2010

1 03 2010

Sorry I have been a little short on blogs the last few weeks…

The US Department of Labor – Bureau of Statistics released the January Mass Layoff Events data for January.  I have been watching the Mass Layoff events for a while now for a couple of reasons, but primarily as a leading indicator of the economy.  I spoke last year a great deal how the number had exceeded 2000 events for 12 straight months and how this was most likely a sign of a protracted recovery period.   The January number was 1,761 which was roughly the same for the last three months.  While the move under 2,000 was at least a step in the right direction it appears as if we continue at an elevated rate.

Job creation is one of the primary keys to economic recovery and it seems as if we are still shedding above normal levels of jobs.   Continuing at 1,700+ events (which in Jan actually meant 180,000 claimants – or an annualized number of over 2 mil initial claimants.  The point is that I feel the economic climate is still contracting, though perhaps at now slower rates.

From a street level assessment I am starting to hear of more projects starting, consulting firms seems to be a little more optimistic outlook for the year, and less people concerned about their current state.





Mass Layoffs Nov 2009

23 12 2009

Yesterday, the Department of Labor Bureau of Labor Statistics released the November Mass Layoff Report.  The news was upbeat in that the trend continues to get better (meaning fewer mass layoff events) with only 1,797 events.  We have spoken about 2,000 events as being extremely high and November was the first time in the last 14 months that the number dropped below 2,000.  The bad news is this is still higher than 80% of the monthly numbers since 1999 so the numbers are again not positive, just less negative.

One bit of interesting news is that the number of layoffs (officially claimants) per event was at one of its lowest levels since the beginning of 1999.  This means that while the number of layoff events is still high, there were fewer claimants per event (fewer people laid off or more found something else), or that instead of 200,000 claimants, we saw only 165,346.  This number is a healthier indicator than the number of events (see the dotted red lines in the chart below and compare the crimson line and the blue line from the chart above).





Danger of Leading Indicators

22 12 2009

UPDATED 12-23, 2009:  Boston.com story about home sales – seems like we have stories with divergent viewpoints.  Good example of how a single version of the truth depends upon the story teller…

CNN Opening Paragraph: NEW YORK (CNNMoney.com) — After surging 10% in October, sales of existing homes jumped again in November, growing 7.4% compared with October to an annualized rate of 6.54 million units, according to the National Association of Realtors. (full article)

Boston Globe Opening Paragraph: WASHINGTON—Sales of new homes plunged unexpectedly last month to the lowest level since April, a sign the housing market recovery will be rocky and heavily dependent on the generosity of Uncle Sam. (full article)

Read each…Ahh, the politics of spin, or is it the spin of politics of spin.

November saw a healthy jump in home sales.  The good news is that home sales and housing starts are usually very good leading indicators about the health of the economy.  Yet the bad news, in this case we have a potentially baked number.   The market is being artificially inflated with both lower interest rates and a government subsidy for first time home buyers.  What makes this worse is we have created a situation where we know less – we know a number improved, but we have no understanding if the economy is better.

CNN Story on November Home Sales

This is one of the fears about designing the right KPIs.  We want to find the perfect KPI, or create a list that tries to include everything.  What we need are a few KEY indicators to trigger the right conversations about what actions (business levers to pull) to take or not take.   We also need to discuss performance and action in a holistic manner and not get caught in panic mode because one indicator seems to be below expectation.  We also do not want to trigger an action to artificially improve a number.

For example…Days Sales Outstanding (DSO) can be used as a measure of customer satisfaction.  The interpretation is that people pay the bills of the people they like first.  If you are able to shrink the number, then you at least have an indication that customers are generally happier than they were last month.  If the Marketing VP were compensated on Customer Satisfaction and we used DSO, the VP might change the payment terms.  While we might see improvement in DSO, we are probably not seeing an improvement in Customer Satisfaction, which was the goal when we started.

As you are designing KPIs:

  • Start with your high level annual goals for the year
  • Build out a system to discuss the implications (don’t just look at the number)
  • Assign someone to write up the implications on a regular basis
  • Create a commonly understood definition of the KPI, and document it where it can be easily accessed




Mass Layoff Events October 2009

20 11 2009

Today the US Department of Labor – Bureau of Labor Statistics reported the October Mass Layoff Events (here are the Sept and Aug blogs).  We have watched this since late last year when the number of events crossed the 2,000 mark.  This marks our 14 month in a row where we have exceeded that level.  While this is still an alarming rate of Layoff Events at least we can say that the trend could be moving in the direction of dropping below the 2,000 next month.

I still have concerns about the state of the US Economy as we approach the end of the year.  If I were to guess, I think we will see this number drop below 2,000 for November, but return to greater than 2,000 in December and/or January.





Producer Price Index October 2009

18 11 2009

Yesterday’s Bureau of Labor Statistics (BLS) release of the Produce Price Index (PPI) saw prices moving north again, this time a .3% gain compared to last months .6% loss.  The numbers seem to be stabilizing (one month a little up, on month a little down).  Looking into a little more depth we see that Energy and Food are the primary drivers.

If you are looking for more information relevant to your industry – check out www.bls.gov/ppi/.  They break out the information a number of different ways.

 

 





Employment Situation Oct 2009

6 11 2009

The employment situation continues to demonstrate the frailty of the current economic climate.  In Sept the unemployment rate was 9.8%, Friday it was announced that Oct witnessed this number increase to 10.2%.  “This is the highest rate since April 1983.”  We are also at the second highest point (and growing) in the history of tracking the data – 1948.

(Here is the link to the commissioner’s report to Congress and the original report)

Employment Situation Oct 2009

If we look at a visual of the informtion, a number of things jump out at least to me:

1.  The Good, it looks like (at least to me) the higher the number, or the swifter the increase, the quicker the the unemployment rate drops.  There appears to be a natural slope (green line – A) to the decline in the the unemployment rate after a spike, which then is followed by a less gradual slope that marks a return to a healthy market (red line – B).  In roughly 1975 and again in 1983 we saw two spikes which then followed the green line’s slope – except in the case of 1983, we actually saw that trend bear out over the longer term, yet moved faster during the initial recovery period (reb box).

2. The Bad – if this follows the trend pattern of 1983 we may be looking at another 7-8 year recovery process to return the unemployment rate to around 6% which roughly appears to be natural healthy level.

3. The Ugly – We have yet to see the peak of this trend.  And even if this does turn around in the next month or two, we are so bad a shape across so many other sectors it may take far longer for us to return to a 6% unemployment rate.  If we continue to see credit tighten up at the rate it is going, we will see continued pressure on unemployment.





Price of Oil

27 10 2009

One of the biggest impacts to the US economy is the cost of oil.  We are still the leading consumers, though our lead is being taken over by China.  It is no surprise that the price of oil/gas can either fuel US economic growth, or bring it to a crawl.  I remember (somewhat fuzzy) as a kid waiting in line for gas, and I sold my Ford Expedition in fear that gas was going to see $5/gallon last year. While perhaps I sold the car a little prematurely, the basic fundamental truth about the control of the price of oil is well beyond me. And in someways beyond any of us.

OPEC mostly gets away with what it wants in terms of prices, and China is clearly working to leverage its relations with OPEC countries to improve its position.  While this isn’t necessarily bad for the US, we do lose some of our bargaining power.  And as China continues to increase demand, it drives up market prices.

I am going to try to add the Price of Oil to the Baumohl Indicator series on a bi-weekly basis.  My goal is to continue to explore some of the indicators of US Economic Performance and how they impact business cycles.





Mass Layoffs Sept 2009

22 10 2009

The Bureau of Labor Statistics today announced the Mass Layoffs from September.  The number of events (more than 50 people laid off) is down a little from August, but we are still seeing much larger levels than normal.  The September number of 2,561 layoff events is roughly 2x the normal average.

This is a slight sign the economy may be bottoming out.  What is still disturbing here is the consistency of the level of mass layoffs.  For the last 12 months (see blue box in chart) we have had over 2,000 events per month compared to a normal level of 1,250.  We are still adding too many people to the unemployed – and a system that is built to run on full employment.  Over the last 20 years we have only seen two other spikes, yet in both of those periods we only saw a brief period of spike.  And again in neither of those cases did we ever reach 2,500 events.  Over the last 12 months we have seen 5 months in excess of 2,500 events.  Not good news on any front.

Quite soon, we need to see a substantial drop in Mass Layoffs to give us a positive  indicator that the economy is turning around.  We see a good number of positive signs, but this one is still a big red flag.  Again, if we look at the post 9/11 trend you can tell this trend tapers back to normal.  Mass Layoff Events Sept 2009





Producer Price Index Sept 09

20 10 2009

This morning the Bureau of Labor Statistics released the September 2009 Producer Price Index report.  The PPI dropped a little this month mostly due to cost of gas declines (0.6% decline).  In August we saw a significant increase at 1.7% raises a little alarm in that the fluctuations are evident.  The fact that most of this is based on energy prices swinging is both a little calming and potential for more signs that oil prices are moving too much.

“Wholesale prices in the U.S. unexpectedly fell in September on lower fuel costs, a sign inflation remains muted and the Federal Reserve has leeway to keep borrowing costs low as the economy recovers.”  Bloomberg

What does this mean to me: we will probably not see much increase in prices over the coming months (keep watching the price of oil/gas).  This is also a sign that while some of the recent indicators have been good, we might see a lull in the recovery process.

As a part of this series, I am also going to add the price of oil.  It was not one of the Baumohl Indicators, but I think that might have been because it comes out of the financial markets.





Consumer Price Index Sept 2009

15 10 2009

The CPI for September was released today.  Nothing all that surprising – it looks like the rebound last month towards a positive trend (perhaps not for everyone), or an upward trend continued for a second month.  It appears as if the trend may be resetting with a 1.3% drop from where we were in Sept 2008.

CPI History 1997

How to use this information:  Have your internal statistician look at CPI (and PPI) and see if they give you any early warning signs against some of your variable costs – raw materials, finished goods, average selling price, etc.

  • Does CPI move with your Cost of Goods Sold (COGS), or your margins?
  • Could it give you a one month warning to tighten the belts a little bit?
  • What is the impact on your average selling price?
  • Do your customers move faster than you?

Historical Trends

If we look at this from a historical perspective, we can tell there has been a stead upward trend since the mid 60’s.  The variability was pretty consistent from the mid 60’s through 2004, then in 2005 it looks like the variability began to increase.  These charts don’t provide us much actionable information, but show us the trend has been consistent, and that there was a disruption with the recent economic conditions.  This disruption is what is highlighted in the earlier part of this blog.

CPI History 1913





Employment Situation Sept 2009

6 10 2009

Statement of Keith Hall, Commissioner, Bureau of Labor Statistics before the Joint Economic Committee UNITED STATES CONGRESS (PDF of his speech, or PDF of the actual report)

Job losses continued in September, and the unemployment
rate continued to trend up, reaching 9.8 percent. Nonfarm
payroll employment fell by 263,000 over the month, and losses
have averaged 307,000 per month since May. Payroll employment
has fallen for 21 consecutive months, with declines totaling 7.2
million. In September, notable job losses occurred in
construction, manufacturing, government, and retail trade.
Construction employment decreased by 64,000 in September.
Job losses averaged 66,000 per month from May through September,
2
compared with an average of 117,000 per month from November 2008
through April.

“Job losses continued in September, and the unemployment rate continued to trend up, reaching 9.8 percent. Nonfarm payroll employment fell by 263,000 over the month, and losses have averaged 307,000 per month since May. Payroll employment has fallen for 21 consecutive months, with declines totaling 7.2 million. In September, notable job losses occurred in construction, manufacturing, government, and retail trade.

Construction employment decreased by 64,000 in September. Job losses averaged 66,000 per month from May through September, compared with an average of 117,000 per month from November 2008 through April.”





Mass Layoffs August 2009

24 09 2009

Yesterday the Mass Layoff report was issued by the United States Department of Labor – Bureau of Labor Statistics.  The data here is interesting in a few ways.  The Mass Layoff report highlights the number of events where 50 or people were laid off by the same firm.

  • Perhaps a little good news for the US economy
  • A little analytics lesson

First off, the US Economy.  We can look at a couple of things here that probably tell us the situation is still bad, but perhaps another indicator that we are rebounding.  In the first chart, the bars represent the events (not total layoffs – but the numbers are highly related).  You can see that the number for August appears to be quite a bit better than July and the previous 12 months, but August is also lower in general.  When you consider the raw volume of the last 12 months, perhaps we just ran out of people to layoff.  My initial assessment is that while it looks like we are heading in the right direction, we may just be witnessing the normal August dip.  Call it cautious optimism.

Aug 2009 Mass Layoff Peaks

Now looking at the data from a visual standpoint…below is how we typically look at this type of data.  Here we would conclude that things look like we have hit bottom and are moving in the right direction.

Aug 2009 Mass Layoff Raw Data1

Yet if we look a little more closely at the data above (and perhaps dig at some of the underlying regional or industry data) we can make a lot of different potential comments.

  • We are coming out of a major event – any data is going to be a little blurry.  Any investments are going to be risky, but with that risk comes the upside reward of potentially being a first mover.
  • The general trend might be improving, but the volumes are still way above normal levels.  How long can we continue to shed people like we have for the last 12 months?
  • The peaks and troughs also show that we are still greater than 2x normal levels.  Clearly, there are still problems in the economy.




Consumer Price Index (CPI) August 2009

16 09 2009

Here is this morning’s press release of the August 2009.  It is a great example of how not to explain complex data.  Here are opening two paragraphs.

On a seasonally adjusted basis, the Consumer Price Index for all Urban Consumers (CPI-U) rose 0.4
percent in August, the Bureau of Labor Statistics reported today. The index has decreased 1.5 percent
over the last 12 months on a not seasonally adjusted basis.
The 0.4 percent seasonally adjusted increase in the CPI-U was driven by a 9.1 percent rise in the
gasoline index. This increase accounted for almost the entire advance in the energy index and over 80
percent of the overall increase. Despite the August increase, the gasoline index has fallen 30.0 percent
over the last 12 months.
On a seasonally adjusted basis, the Consumer Price Index for all Urban Consumers (CPI-U) rose 0.4 percent in August, the Bureau of Labor Statistics reported today. The index has decreased 1.5 percent over the last 12 months on a not seasonally adjusted basis.
The 0.4 percent seasonally adjusted increase in the CPI-U was driven by a 9.1 percent rise in thegasoline index. This increase accounted for almost the entire advance in the energy index and over 80 percent of the overall increase. Despite the August increase, the gasoline index has fallen 30.0 percent over the last 12 months.

In general, the CPI numbers are all over the place as a result of a rebounding economy.  It is also a great example of why we need to look at individual numbers and come up with an executive overview of what this means.

Over the next couple of days, I will add more analysis here as I can dig into the numbers in greater detail.  There is a ton of information here.





Productivity Management

9 07 2009

Performance typically ebbs and flows along a number of fronts.  In the worst cases it declines across multiple areas when it is not managed consistently.  Most productivity initiatives create curves something like below:

Productivity Management

  • At point A – we have identified a performance issue and have created a plan to improve performance.
  • At point B – we have succeeded and typically move on to solve another issue.
  • At point C – we start to see productivity decrease from lack of management and attention.

Unfortunately, most things don’t have pretty economic curves or requires focused thought to create one.  And if we do not create a performance plan we typically see the inflection point at C happen closer to A.  This happens because we have not put a plan in place and/or when we feel some momentium we abandon management of the initiative to fight the next battle.





Because you can…doesn’t mean you should

14 04 2009

We do a number of things in the name of business intelligence.  We say we have to have real time information.  We have to have hundreds of reports.  We have to be able to look at everything in every direction.

Business Intelligence software promises us this and make this seem like an achievable goal.  And yes it would be great to know everything about everything and get a perfect 360 degree view of the organization.

Yet it is not really achievable, actually not even close.  Instead ask what are the goals & objectives of the organization, and how does this support that end.  We are very quick to say “we can do that” but we need to temper that with “why should we do that?”  Think of the goal of a dashboard – to providereal-time information on a specific subject.  I have known many managers that constantly stare at the screen to see if anything moved.  

What we really need is to understand how to use the function of time and integrate that into a analytical management process.  What would you get more out of, a tactical dial that shows us one KPI, or a meeting at the end of the day to review a number of KPIs?





Key Performance Indicators (KPIs) & Key Risk Indicators (KRIs)

6 04 2009

Key Risk Indicators (KRIs) are an interesting concept, or twist to Key Performance Indicators (KPIs).  Instead of thinking of KPI measuring performance, think of a KPI as really just an indicator that the objective is at risk.  They are really the same thing.

If your objective is to Maintain Salesforce Effectiveness, a solid indicator might be revenue per sales rep.  If our revenue per sales rep is declining, it should be treated as a trigger for a broader discussion on the objective, not necessarily the KPI.  At the same time, we will want to analyze a number of other performance indicators for a deeper, richer discussion.

We look at KRIs for example employee turnover is this not just a performance measure against the objective Retain Great Employees?

In the end though, we are just splitting hairs by calling something a KPI or KRI.  It matters far more that we have the discussion about the objective(s), than trying to build separate processes to measure subtle nuances.





Align to Customer Value

16 03 2009

On thing to consider in terms of developing KPIs (Key Performance Indicators) is how they are aligned to the customer’s wants.  All to often we ignore this perspective, yet it is perhaps one of the most important factors.  

For example, one of the growing cost saving tools companies use is call automation services.  “For sales, press 1.  For customer service, please hold while we test your patience.”  

Companies do this because they are measuring cost per call, or efficiency.  What the customer really wants is a convenient resolution to their call, or effectiveness.  Clearly these goals are working against each other and in most cases destroys customer loyalty and brand value.  

In the end, we need to balance costs with value, and we need to understand customer and corporate strategy.  Are we focused on customer intimacy as our core business focus, or operational excellence?  Are we measuring the business in a manner that reinforces our business model and customer value creation, or strictly by the bottom line?





Efficiency vs. Effectiveness KPIs

13 03 2009

Key Performance Indicators (KPIs) should be measures of risk to annual goals or strategic objectives.  If we can keep this list of KPIs minimal, we stand a much greater chance of keeping the organizational focus on improving key processes.

To derive these KPIs we need to understand the organizational inputs, outputs, and desired outcomes.  While this is a little academic, it is a good way to start to organize and define your KPIs. Outputs / Inputs are measures of efficiency, while Outcomes / Inputs are measures of effectiveness.  By overlapping the organizational or departmental focus we can align and define these KPIs to make sure they are driving the desired behaviors.  

Tradionally Sales and Marketing goals are to be effective, thus revenue per head, or win percentage are better measures.  While finance and IT are generally geared for efficiency withcost per order, or IT spend per target are more common.  

KPI design is far more difficult than people expect and is often unique to the environment as strategies, objectives, and priorities vary organization to organization.





Scalability as a KPI

7 03 2009

One item that companies should do a better job with is understand departmental scalability.  Are the company grows, do each of the departments grow with the same scale?  Does finance not scale because of compliance and risk, or because of broken processes?  How do we know if we can’t track Revenue / Departmental Headcount over time?

And if we do start to do a better job tracking metrics like this, doesn’t this give us greater insight as to where the organization gets the most bang for the buck?  As well as give us a defensible rational to defend against empire building for personal reasons?




External & Market Indicators

25 02 2009

One item most organizations struggle with is leveraging external indicators. Early last year, the price of gas created a chain reaction. Most companies cost of goods sold increased to where they were forced to raise their prices as their margins eroded.  

Even if we do that, we typically do not have a systematic way to incorporate the learning into a business process. What we would need is the ability to understand the external indicators, know of potential sources for the information, and work these into ongoing environmental scans.  

What is the value of understanding how the consumer price index impacts your revenues? What happens if you were able to move before your customer in terms of supply chain interruption? In some cases, this could mean millions to your top or bottom line. There are a number of organizations that knew the market was struggling in 2008, but did nothing to prepare.  And a number of those names will never be the same (GM, AIG, Circuit City, etc).

When is the last time you did a formal environmental scan, discussed the results, and put new actions into place?