Loss prevention (LP) has evolved over the years to become a critical component of the entire organization. In this interview, Mike Keenan with TAL Global provides reasons why senior leadership teams must work closely with LP to lower shrink, increase profitability, and keep people safe.
RETAIL EXECUTIVE: What is a Loss prevention (LP) advocate, and how can the C-suite ensure that every employee becomes an LP advocate?
KEENAN: I believe that a well-run store equates to low shortage. By making every associate part of the C-suite’s strategies, stores will be operated better, and people will be safer. That’s why C-suite leaders must understand why it’s important to emphasize loss prevention.
That’s done by building loss prevention into the company’s operating policies and procedures. Therefore, when employees are trained properly from the beginning, they’re trained in the components of loss prevention. Employees don’t need to conduct loss prevention investigations. They really just have to be aggressive about following the company’s policies and procedures. I advise the C-suite to include loss prevention when it’s creating policies and procedures. Then, together, we can build in the loss prevention controls from the very start.
Retailers must maximize their resources. One of the ways to do that is to include loss prevention in all aspects of the business, because if that’s done, there is going to be, in my opinion, better profitability. If retailers can control loss — if they can maintain compliance with the approaches set forth by the business, and they can keep people safe — they will add to the overall profitability of the company.
For example, when it’s time to create a new receiving procedure, a committee is created to revise the existing policy. Invite loss prevention to these meetings. But traditionally, when asked to be included, LP receives a response suggesting that we need not be there because we have better things to do. However, that’s the wrong response. Not attending these meetings puts LP in a reactive position, when we need to be proactive. If LP is included in business conversations from the start, we can build in the controls to prevent all sorts of problems.
“I advise the C-suite to include loss prevention when it’s creating policies and procedures. Then, together, we can build in the loss prevention controls from the very start.”
Every company has good, solid receiving procedures — counting every carton it receives at the store, for example. But without accountability for loss, consider the store manager who says, “You know what? We don’t have time. We don’t have the payroll. Just take the merchandise and accept it.” Well, if you start having shortage in that store, you would naturally start focusing all of your efforts in the store because you assume it is receiving all of the product allocated to it and, therefore, that the loss is occurring at the store level. However, due to lack of proper receiving check-in, the shortage may actually be happening in the distribution center. You won’t be able to correct the problem because you don’t know it exists.
By making each and every employee an LP advocate — and adding accountability to their performance metrics — processes and procedures are better executed, shrink decreases, and profitability increases.
RETAIL EXECUTIVE: When you sit down with the members of the retail C-suite to discuss ongoing loss prevention efforts, what titles must be part of the discussion?
KEENAN: The top LP person in the organization should be part of the senior leadership team. Many companies don’t include loss prevention on their senior leadership team because the meetings are “business discussions.” In these meetings, they talk about the business, what’s working, what isn’t working, what product is struggling, what stores are struggling, what markets are struggling, what regions are struggling, etc.
Part of what LP professionals have to do is to realize that if they want to be truly effective and be considered part of the business, they actually have to attend the high-level meetings that they probably aren’t attending now. It’s important to make sure that LP and the C-suite alike understand that LP is a critical component of a successful retail business operation. The more LP knows, the more we can help support company business initiatives. LP professionals should be business professionals with expertise in loss prevention. In addition to equipment and staff, I fight for accountability from the store manager level up. If the C-suite is an advocate for loss prevention, it will add value to the profitability and success of the business.
RETAIL EXECUTIVE: You’ve coined your “Wave Theory” with regard to shrink. Please explain.
KEENAN: The Wave Theory works like this. First, there’s the wave coming in. When shrink is high, LP leaders receive support and resources from senior leadership to address the profit drain. For example, one of my former employers had a bad shrink problem. I spoke to the head of stores about including shortage on field employees’ performance reviews. But you can put only so many metrics on a performance review. There was quite a bit of objection to it, but because shrink was high, we were able to include shortage in reviews. Once we did, there was an immediate increased focus on shrink. Sure enough, store managers and district managers began calling my team to inquire about how to reduce shrink. Once managers were being held accountable for the shortage, it became important for them to control loss. This is the first step toward reducing shrink.
The number one thing I have always requested from senior leadership is to enforce accountability down to the store manager level, because that’s where the shrink really occurs — at the store. I’m an LP professional, so I am able to easily sift through what’s real and what’s “showtime” when I visit the stores; store managers are good at showtime. But if store managers are truly invested and engaged in their stores, I am able to glean that simply by walking through the store, talking to the manager, noticing the condition of the store, talking to associates, etc. When you hold people accountable for shrink, the focus on controlling loss is noticeably better and profitability increases. Why? Because they execute the controls already built into the policies and procedures more effectively.
This leads to the “wave out” part of the Wave Theory. When shrink improves to an acceptable level, the wave goes out, meaning that the C-suite tends to reduce its focus on it. And, as a result, shrink is removed from employee performance metrics. In my experience, when you remove the accountability for shrink, shortage goes back up. Most of the senior leadership team members I have worked with in my career are very savvy, and they understood my point. The secret to consistently low shrink is to put accountability for shortage in place and keep it there.
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