The Big Question

As the CBT researched its feature story on the State Farm vice presidents in Columbia (page 26), we discovered rumors that the State Farm operations center in Columbia might close its doors. It’s difficult to tell where rumors begin or their level of credibility, so the CBT took a look into what might be driving them.

State Farm doesn’t really know where the rumors began. Either way, the company has run into the rumors over and over again — some far-fetched and others plausible. But almost all of the rumors have this in common: State Farm might close its doors in Columbia and send its 1,200 employees into another city, retirement or unemployment.

Nationally, State Farm’s revenues total more than $64 billion, but the Fortune 100 company faced large payouts from five catastrophes in 2011. Last year, it profited $845 million, a 56 percent decrease from $1.8 billion in 2010, Bloomberg reported in March 2012. Recent reductions in profitability are also a result of decreased returns on investments, a significant profit driver for the insurance industry.

Although the Columbia facility has 80 open claims positions it looks to fill, during the past two years there were more than 2,100 State Farm employees affected by closures and mass layoffs nationally. In federally mandated WARN notices, required of all companies with more than 100 employees planning a mass layoff or plant closing, State Farm has stated reasons from consolidation to efficiency. In total, the consolidation efforts affect more than 40 facilities in the 44 states that returned CBT’s requests for information and range from a handful of employees to an entire operations center.

In Rohnert Park, Calif., two years ago, more than 400 State Farm employees gathered in an auditorium to hear upper management announce the facility’s closure in eight months time. They came prepared with tissues and armed with relocation packages for those willing to move to Bakersfield, Calif. When State Farm closes facilities, the company often offers transfers to a number of employees. Others retire, and the rest are left searching for new jobs.

 

Addressing the uncertainty

When the CBT pressed State Farm for a statement about the possibility of a Columbia closure, the company gave its official response to the rumors:

“Our 1,200 employees provide support and leadership for so many of the nonprofit, community and neighborhood groups throughout Columbia and the surrounding counties,” says Vice President of Operations Jean Baird. “Columbia is a great place for an exceptional organization like State Farm.”

The statement provides very little certainty of State Farm’s future in Columbia.

Three of the biggest real estate transactions in North Texas for this year to date were by State Farm and totaled 1.1 million square feet of office space in three separate buildings in the Dallas area; one facility will be a customer service center. State Farm is also building a new 291,000-square-foot claims center in Dallas and currently does not know how many positions will fill this building. The Columbia office focuses more than half its efforts on claims and the other half on underwriting and general support. With an expansion in Dallas, a contraction somewhere else is likely. But will that be Columbia?

Columbia’s stability

State Farm says the expansion in Dallas is unrelated to the stability of the Columbia facility.

Columbia is much larger than any facility recently closed but is just one of 37 large operation centers in the country. The closure would not be an historic first, and consolidation typically involves the unification of smaller departments before larger offices are affected.

Eight years ago, State Farm discussed closing the Columbia office but decided to close the operations center in Monroe, La., instead in 2005, following a yearlong internal study aimed at improving efficiencies. Monroe was chosen for a number of reasons, including its proximity to State Farm’s Baton Rouge facility 200 miles away (Columbia is 250 miles from the State Farm headquarters in Bloomington, Ill.). About 400 employees were relocated between Tulsa and Columbia, and the rest of the 1,085 employees were left jobless.

State Farm has more than 1 million auto policies and more than 700,000 residential and commercial property policies in Missouri. No decisions have been made public, but State Farm says a decision of this magnitude would come from headquarters. And it remains a possibility. Although a number of signs indicate a shift that might or might not affect Columbia, unless Columbians are reassured, the question remains: How can we keep the insurance behemoth here?  CBT