Teaming Up on Loss Prevention
THE GREAT RECESSION HAS HIT MERCHANTS HARD. The U.S. Department of Labor estimates that more than a million retail positions have been lost and a significant portion of those jobs are not expected to return. With retailers suffering staff reductions at both stores and corporate headquarters, one of the biggest challenges for retail loss prevention (LP) departments is halting operational breakdowns that lead to loss. One way of doing so is through the creation and deployment of special in-store loss prevention/asset protection teams.
In an ideal retail environment, after inventory is acquired for sale and displayed, it is all sold and none of it is returned. That, of course, is not the reality. Out of any given inventory, some items are returned, others lost, damaged, or stolen. That’s known as “shrink,” and it is on the rise. According to the Global Retail Theft Barometer, an annual study underwritten by an independent grant from Checkpoint Systems, the global shrink rate increased by 6.6 percent when comparing 2010 to 2011.
One factor in the increasing percentage of shrink is the loss of experienced personnel who are knowledgeable about operations and procedures that can prevent problems that result in shrinkage. These workers are the front lines of a loss prevention/asset protection program. At the store level, for example, operational breakdowns from lack of experienced personnel take place across the spectrum of operations, leading to receiving errors, incorrect pricing of new goods or of merchandise slated for markdown, improper storage that results in damage to goods, unrotated perishable or expired items, and cash-handling laxities.
At the corporate level, similar personnel losses can lead to an absence of LP programs or the implementation of poorly designed and inadequate programs. The results can be catastrophic, causing wasted labor as well as unrecoverable losses that can spell the end of a business altogether.
The latter is not a baseless doomsday warning: in my capacity as the president and CEO of a retail LP consultancy, after having served for many years in retail LP with major multinational companies, I have seen retailers suffer these consequences, including two companies with more than 845 locations in 48 U.S. states.
Companies may not be able to avoid personnel cutbacks or turnover, but they can mitigate the damage to the loss prevention program. One tested way to prevent the breakdown of LP processes after the loss of key personnel is to set up teams dedicated and trained to focus on LP and safety to help ensure that the locations are doing everything they can to limit loss from shrink and risk management exposures.
Like any good retail strategy, the LP team must have executive buy-in if it is to succeed. Unless this upper-level support is clearly communicated, and time budgeted, store managers will remain unconvinced that they should devote time and other resources to the team’s activities.
If the company’s head of LP is trying to sell such a program, part of getting corporate approval will be to provide return-on-investment data to company executives as well as the expected outcomes. In my experience, companies that institute these LP teams see a minimum of 10 to 20 percent reduction in shrink and accident costs per store. The cost of the team can be calculated by combining the time dedicated by each hourly associate and any ancillary costs. These ancillary costs can include items such as the cost of purchasing or developing training tools or of purchasing appreciation gifts to be used in a rewards program.
Set parameters. Once company executives pledge their support, the head of LP must set parameters for the LP team program so that the teams know what their objectives are. In the grocery sector, for instance, food quality assurance factors are imperative as are direct-to-store delivery procedures, while in specialty retailer stores, teams will focus more on higher-end product exposure.
The corporate LP department must create team tools, such as audits, checklists, and sample meeting agendas. The head of LP should seek input from other corporate departments, such as operations and training and development, as well as input from selected field leadership and store managers.
The LP head must also delineate communication avenues, including establishing a corporate contact point for all teams when global issues are identified. This could be a hotline or LP department contact person.
Some of my retail clients have chosen to implement teams that not only deal with LP but also with safety and risk management issues, including general-liability risk factors and associate safety and accident review. If safety is to be incorporated, all of the team’s activities should be laid out in the same way as LP activities, including a communication link through which issues can be reported at the corporate level. The assistance of corporate safety personnel should also be sought in developing related checklists, forms for problem identification and reporting, and other guidelines.
All of this information, when completed, should be compiled in a handbook and training guide. Sections should include member composition, meeting structure, team objectives, the communication process, and issue resolution.
Pick a leader. A store manager or highly motivated assistant manager should be selected to be the LP team’s leader—known as the sponsor. The sponsor’s role is to oversee and direct the team. That includes liaising with higher-ups regarding the team’s performance and findings. This person will also coordinate with other stores in the region on activities and trends.
Ideally, the person selected will be a top-performing assistant store manager—or someone with loss prevention and safety experience or who shows interest in these areas. This person should receive training from corporate LP on how to oversee the in-store team, how to provide support, how to keep the team on track, and how to accomplish the objectives without devoting more time or resources to these activities than called for in the corporate team directives.
Team sponsors should have that responsibility added to the key metrics on which they are assessed during their routine employee performance evaluation.
Corporate and or field LP supervisors in conjunction with the store manager need to pick strong hourly associate leaders for each team. These should be individuals who are respected in the stores, such as a well-regarded department manager or receiver. The rest of the team should be composed of associates selected by store management.
Depending on the size of each store, the LP team should be no smaller than three and no larger than eight members. I recommend this because above this number the labor expense begins to erode the return-on-investment model. If the retail environment includes a 24-hour work force, be sure to have representation on the team from all shifts.
To the extent possible, teams should be composed of long-term employees. The institutional knowledge of these associates is what enables an in-store LP team to succeed. Once a team is in place, wholesale changes should be avoided for the first year unless it is necessary due to ineffectiveness. Some new members should be rotated onto the team each year.
The team should be given something to mark its identity—for example, a special pin, badge, nameplate, or ribbon that makes team members recognizable to customers and other associates. Also, if at all possible, each of the team members should receive a small hourly pay increase for their added LP responsibilities. When members leave the team, a certificate of appreciation for their service or some other gift should mark the occasion. In this way, participation will be taken seriously by the team members and others, and good work will result.
Additionally, the LP team leader position has been used by several retailers as a management training step. Once an associate has proven his or her leadership capability as head of the team, the company places that person in the regular management training program.
Time management. The team should meet on a schedule set by the company—either weekly, biweekly, or monthly. When I develop these teams for clients, the team is directed to meet each week for one hour to set objectives and tasks, with one meeting per month dedicated to executing a loss prevention and risk management store audit, looking for issues such as high-end products that are left unsecured or an inoperable emergency door alarm, for instance. Another meeting structure might be a 10-minute meeting followed by 30-minute walk of the store to audit LP and safety issues, then a 15-minute resolution planning session, and a five-minute wrap-up.
The team sponsor needs to put limits on the time allocated to the LP teamwork—especially when a team is successful; otherwise, dedicated employees may overdo project work and shortchange their regular duties.
The team sponsor should also make sure that important boundaries are not crossed. For instance, at one store, an aggressive team leader embarrassed the other department managers with the LP team’s audit findings. This negatively affected store morale and caused the team leader to be replaced.
The team is empowered to identify operational breakdowns and to communicate them to local managers, but it should be done cordially and dispassionately. The team is not there to condemn peers or attempt performance coaching. This should be left to supervisors.
The team also has no enforcement role. It is most certainly not, nor should it see itself as, a replacement for shoplifting agents. The confrontation and apprehension of shoplifters is dangerous and must be left to authorized and trained staff.
Empowerment. When an audit turns up a problem, the team must be empowered to have it acknowledged, and they must see results. There is nothing more demoralizing for a team than to spot deficiencies, to follow the correct path to report the issue, and then see nothing happen in response because of a failure to act by authorities at the local store, regional, or corporate level.
But this isn’t just about team morale. Companies benefit when they act on team findings. When teams use the agreed upon line of communication to the corporation, and it responds, I have seen the correction of errors result in millions of dollars in revenue. At one store, for example, during an audit, the team found that a three-videogame multipack was being sold at the price of an individual game because of improper bar coding by the vendor. The team quickly alerted the company, which issued a recall of the product. In this case, the vendor was required to replace the bar codes on all existing stock and reimburse the retailer its lost revenue.
Senior management also needs to give the team feedback on what the team sends up the line. This should include acknowledgment of communications, information on when and how specific issues will be addressed, along with proper closure, and periodic commendations of the team for its good work. For example, the team’s success can be included in corporate newsletters and e-mails, or celebrated by regional management.
During my tenure as a field loss prevention supervisor for Walmart, we ran a district program recognizing the most effective in-store LP/safety team. The program caught the attention of founder Sam Walton, who implemented it companywide, leading to some of the lowest shrink levels the retailer had ever experienced.
The team should also be allowed to communicate within the store during store meetings, via internal e-mail, or in other ways that information is passed to associates. The team leader should review all communications to make sure they are targeted and clear.
My experience in the retail field and with clients over many years has proven that in-store LP teams, when properly deployed, are a powerful tool. During both good retail times and bad, effectively trained, managed, and supported teams bolster existing loss and risk prevention business processes, which in turn boosts the bottom line.
Keith Aubele, CPP, is president and CEO of Retail Loss Prevention Group, Inc., of Bentonville, Arkansas. He has previously been corporate vice president of loss prevention for Home Depot and divisional director of loss prevention for Walmart. He currently serves as the vice chair of the ASIS International Retail Loss Prevention Council.