The function of early warning monitoring is to identify firms-at-risk of closing or mass layoffs prior to actual decisions by companies to shut down or move. The federal WARN Act requires employers to provide 60 days advance notice of a plant closing or mass layoff to local Chief Elected Officials, the State Rapid Response Dislocated Worker Unit, as well as workers, and their representative union. WARN notices, along with trade act notices and other indicators of troubled firms maintained by state and local development agencies (loans in default, tax problems, etc.) can be used as a baseline to establish an early warning system. The logical networks of early warning "informants" include the logical stakeholders - local mayors and council members, local unions, civic and religious institutions, chambers of commerce, utility firms, industry groups and other institutions.

Early Warning Networks are a key component of job retention and sector-specific growth. The Steel Valley Authority's Strategic Early Warning Network (SEWN) began in Pittsburgh in 1993 as a network of business, labor, and community leaders, in response to economic hardships faced by Pennsylvania's small manufacturers. SEWN provides services that bridge public and private sector solutions to business problems as well as between labor and management.

SEWN has grown to be implemented throughout Western, Central and now Northeastern, Pennsylvania and has become a national model for business and job retention. Recently, the U.S. Department of Labor (USDOL) commissioned the Steel Valley Authority (SVA) to publish its Layoff Aversion Guidebook, which builds on the continuing success of SEWN. For a case study of SEWN, visit http://www.workingforamerica.org/.

It is important to anticipate problems at companies that occur prior to public notices. If an industry experiences decline, it may be due to several causation factors. Once this occurs, financing, long-term investment, operating cash flow, and availability of loans, etc. may become a serious problem. Here are some early warning signs from common causes of firm decline:

Early Warning Checklist: Causation Factors and Warning Signs

FACILITY Obsolete physical plant Outmoded operating procedure Lack of spare parts Machinery old and outdated Speed-ups lead to older worker layoffs Repairs are not made Inefficient production process Equipment not up to quality standards Environmental problems Facility is in a metropolitan or suburban that is gentrifying

COMMUNITY Lack of access to raw materials, energy, products and services Lack of skill in local work force Lack of quality or availability of land or infrastructure Local/state tax or regulatory policies Lacking transportation Proximity to market changes transportation costs, etc. High insurance rates Poor access to trucking/rail/water/air Utility rates high, or lack of energy availability Business climate complaints

MARKET Demand or sales declines Products, processes of services become obsolete due to technological innovation Increased domestic or foreign competition Changes in state/national taxation, regulation, monetary policies Change in international relations (re: markets or supplier/customers) Inventory stagnant Loss of market share Industry sector declines

ORGANIZATION Managers, skilled workers or machinery moved to new plant New plant is opened in low-cost location Research and development are cut back Fewer product lines produced Parent corporation has major problems Corporate merger acquisition creates excess capacity Change in profit, market targets or distribution systems Local subsidiary is milked for other investment Hours and overtime eliminated Managers replaced frequently Weak management practices Irregular work or production schedules Lack of workforce training, upgrading or training cutbacks Sales staff/marketing cut Aging owners Shifts reduced Increase in subcontractors, temporary workers Lack of management and engineering talent

» Back to Top