Article of Interest

[Lynch Mob]

This "breaking of the social employment contract" has affected two whole generations of the workforce. At the biggest big box, the phrase, "When Sam was alive" followed by a curse of the current CEO was heard quite frequently.

A little blog that "champions the consumer," called Consumerist, enjoys putting up leaked confidential data from the big boxes, including Wal-Mart's plans. In a plan that Consumerist said that was leaked to them by Wal-Mart, the plan noted that:

An employee who is elderly and with tenure and seniority produces less, costs more, and places a greater strain on resources than a young employee with no seniority.

Therefore, it is appropriate to market to and attempt to replace all but management personnel with young employees without seniority - lowering the burden on insurance, profit sharing, accidents and worker's comp, and sick days.

When the company is gaming you, you're going to game the company, and your friends and co-workers will help.... Because they're gaming the company too!

I don't believe that business has ever been loyal to employees, nor will they ever be loyal to them. On the flip side, employees will also never be loyal to the business.

Employees build loyalty to their manager, not the company. Loyalty can be built regardless of how little they are paid, and can be broken regardless of how well they are paid. Every study done on employee loyalty will tell you these things. If they company wants to build loyalty, they must do it one person at a time by how each individual is managed by their own boss.

You build a corporate loyalty by setting management standards and getting all managers to comply with them. This can be accomplished in a similar fashion to enforcing controls. You set standards and you monitor performance. When you find violations, you correct behavior. You don't ignore problems. You don't ignore bad managers and let them infest your business. Bad managers create more losses than any other factor in retail.

So, why would LP not spend the bulk of their time addressing the primary issue creating losses?

[LPGuy]

I have 17 years in the LP business. I was Director of Loss Prevention for three international companies. I have a BS degree in Management and a BS degree in Criminology. Currently, I am CEO of P&L Solutions, a Loss Prevention consulting and outsourcing firm.

In the companies I worked as Director for, I implemented strategies that place education ahead of investigations and auditing.

I don't doubt that you are knowledgeable in your particular area of interest, or even that you were successful in your past employment. However, I will say this: the reason that your models aren't used in major retailers is because your solutions that work for restaurants and small retail chains don't translate well into a completely different retail field (that being large scale department stores and big box retailers).

[Lynch Mob]

I don't doubt that you are knowledgeable in your particular area of interest, or even that you were successful in your past employment. However, I will say this: the reason that your models aren't used in major retailers is because your solutions that work for restaurants and small retail chains don't translate well into a completely different retail field (that being large scale department stores and big box retailers).

Why would it not work? Are you saying that effective management is important in reducing shrink in restaurants and small box, but in big box management does not matter?

[LPGuy]

Why would it not work? Are you saying that effective management is important in reducing shrink in restaurants and small box, but in big box management does not matter?

You must be under the impression that your solutions are unique and not present in large retailers. In fact, you're preaching to the choir - effective management strategies, employee appreciation and loyalty, education of sales associates by LP personnel, extensive prevention methods and more were all very much present in my company. These ideas were all successful in my upscale department store, but only so much so. For everything else, we utilized the good ol' apprehension.

My ultimate point is, you delude yourself in thinking that you're going to reduce shrink at the same levels and with the same strategies in a big box retailer than you will at a restaurant or small box retailer. I've worked in all three types of venues, and the types of prevailent shortage occuring are different at each.

[Lynch Mob]

You must be under the impression that your solutions are unique and not present in large retailers. In fact, you're preaching to the choir - effective management strategies, employee appreciation and loyalty, education of sales associates by LP personnel, extensive prevention methods and more were all very much present in my company. These ideas were all successful in my upscale department store, but only so much so. For everything else, we utilized the good ol' apprehension.

My ultimate point is, you delude yourself in thinking that you're going to reduce shrink at the same levels and with the same strategies in a big box retailer than you will at a restaurant or small box retailer. I've worked in all three types of venues, and the types of prevailent shortage occuring are different at each.

You say my approach is present in large retailers, but you tell me how wrong I am about it working? So which is it? Retailers do it or I am wrong?

Let me see how you would handle this situation.

You get a call from a store manager. She is concerned about an employee who she believes may be stealing. She says that the employee has had several shortages in the past few weeks, including a $50 shortage two days ago.

As you talk some more with the manager, you find out that the employee has been with the company for about 6 months and has a very bad attitude. The manager says the employee has had a bad attitude pretty much from day one. The employee is lazy and has attendance issues as well. She comes in late at least twice a week.

So what do you do about this situation? How do you, as the LP Manager, handle this?

[Lynch Mob]

My ultimate point is, you delude yourself in thinking that you're going to reduce shrink at the same levels and with the same strategies in a big box retailer than you will at a restaurant or small box retailer. I've worked in all three types of venues, and the types of prevailent shortage occuring are different at each.

I am curious about your thoughts that shrink occurs differently at these three type of businesses. It is a given that restaurants do not have shoplifting, and dine and dash is pretty rare, but their internal issues are similar.

How do employees steal? They either take product from the store, commit some type of POS fraud (FTR, Voids, refunds, discounts, etc.) to take money, or hook up friends. This happens in all three venues. The same approaches to preventing these activities are the same.

Shoplifting occurs exactly the same way, using the same methods, in small box as it does in big box. The same approaches to preventing shoplifting work in all stores of all sizes.

What are the differences affecting big box that are not affecting small boxes and restaurants?

By the way, restaurants are actually the most complex of the three to reduce lossses, but the same strategies work there too.

[John H. Christman]

In my opinion this question cannot be answered without more information. For example: Does the store have its own security staff? Have they been alerted? Any investigation done to this point? How far is it from the headquarters store (office) if no in-house store LP staff? Total amount of losses to date? Why do shortages point exclusively to this employee? Can all losses be documented with appropriate paper work? The LP person called must decide (assuming he/she has the authroity to make this decision) whether it is cost effective to go to the store and interview the employee or simply have the store manager begain writing her up for tardiness and any other R&R violations and then discharge her when appropriate for R&R violations. Would a phone interview be appropriate? Need more info for a reasoned answer.

[Lynch Mob]

In my opinion this question cannot be answered without more information. For example: Does the store have its own security staff? Have they been alerted? You are the staff, you are being alerted. It is your responsibility to deal with LP issues in that store. Any investigation done to this point? How far is it from the headquarters store (office) if no in-house store LP staff? Total amount of losses to date? Why do shortages point exclusively to this employee? Can all losses be documented with appropriate paper work? All the discrepancies are from an assigned register to that individual. Let's say the discrepancies are averaging $5 a day, twice a week. And have been consistent for most of the past 6 months but this is the first you are hearing about it.The LP person called must decide (assuming he/she has the authroity to make this decision) whether it is cost effective to go to the store and interview the employee or simply have the store manager begain writing her up for tardiness and any other R&R violations and then discharge her when appropriate for R&R violations. Would a phone interview be appropriate? This is part of the answer. What is the LP professional's recommendations for how it should be handled?Need more info for a reasoned answer.

You, as the LP professional, need to decide how the issue must be addressed and resolved. What steps would you take? What are the corrections that need to take place? What are your responsibilities as the LP professional?

Hope this helps.

[John H. Christman]

Just as I suggested, new information assists in answering. We now know that this is an "assigned" register - I assume this means a single drawer with access only by the subject. We also now know that the shortages have averaged about $10 a week for about the past six months - a total amount short to daye of approximately $200 +/. We also know this is the first time LP has heard about the shortages - a major problem in itself. We also know we are the in-house (store) LP staff. We don't know if the subject has been counselled about her tardiness or shortages - an important factor. How is change made - who does it and the "security"of the system. Could the money be removed in the cash office? Frankly, in such situations I'd want to do a thorough BI on subject, and all possibilities for where shortgaes m ight occur, and get the answers to more questions before deciding what tack to take. I've always felt (and found) the more info we have opn the suspect before taking any action, particuarly an interview/interrogation, the better out chances of arriving at the truth - a successful outcome.

[Lynch Mob]

Just as I suggested, new information assists in answering. We now know that this is an "assigned" register - I assume this means a single drawer with access only by the subject. We also now know that the shortages have averaged about $10 a week for about the past six months - a total amount short to daye of approximately $200 +/. We also know this is the first time LP has heard about the shortages - a major problem in itself. We also know we are the in-house (store) LP staff. We don't know if the subject has been counselled about her tardiness or shortages - an important factor. The answer would be no, because it has been happening consistently since day one. How is change made - who does it and the "security"of the system. Could the money be removed in the cash office? Frankly, in such situations I'd want to do a thorough BI on subject, and all possibilities for where shortgaes m ight occur, and get the answers to more questions before deciding what tack to take. I've always felt (and found) the more info we have opn the suspect before taking any action, particuarly an interview/interrogation, the better out chances of arriving at the truth - a successful outcome.

I agree that the more information you have the better. I am not asking this as a quiz for the right or wrong answer on how to deal with the problem. I am asking so I can explain how my views probably differ from most on how to best tackle the problem. I think questions you are asking are logical and what most LP professionals would ask.

The real question is, what is the ideal outcome? What can you do, as an LP professional to resolve this issue? What is the primary issue that created the loss that can be fixed?

[LPCap]

Bring it to their attention. Make them know that you "know". Have a manager counsel them on the tardiness. If you can get them to admit, great, if not, fine as well - at least they know that someone has taken notice.

Something that we did in the grocery business which worked well was cashier postings.

We would post the cashiers Name, #, their items per minute, total dollar amount of transactions, avg amount per transaction etc. We would also have posts which would show which registers were short/over. On that report would be the cashiers who ran on that register. Everyday, the manager would print out a register over/short report with cashier numbers, highlight the registers $5 over/short and post it near the timeclock.

No one wanted to be on that report as being short. Cash losses went down, front end productivity and speed scores went up.

Just bring it to their attention and see what you can get. If you bust them, great, if not, I bet that the shortages will stop.

[John H. Christman]

Answer to Kevin: Against my better judgment, because I don't like hypotheticals, I will offer some answers to your questions.
(1) What is the ideal outcome: There are several, including: stopping the losses, obtainin g a confession, getting rid of a dishonest employee, establishing protocols to prevent or minimize future like situations. Other outcomes are addressed in (2) below.
(2) LP should conduct an investigation which will answer, among others, these questions:
Was a proper BI done, reviewed, and properly responded to?
What was the accurate total amount stolen?
Why did the employee steal (motivation)?
How did she accomplish the thefts? What led her to think she wouldn't be caught?
How could they have been prevented?
Why was LP not involved in the shortages sooner?
Why was employee not counselled re tardiness & shortages from the get go?
Was new employee orientation & training adequate?

(3) What is primary issue that can be fixed?
Some answers to this question depend upon answers to Q's in #2 supra, but may include:
Establish better communications bvetween store manager & LP.
Assure faster reponse to known problems.
Devise system for charting & counselling when shortages occur.
Deal ASAP with R&R violations.
Involve first line supervisor in problems like tardiness.
Agree with LPCap re posting shortages (peer pressure).

The above answers are by no means all inclusive, but are some of the basic answers which should result from a resolution of this situation

[panther10758]

Posting shortages is excellent idea and works wonders. Example we had shortages in one of our departments but was having a difficult time narowing down the culprit(s). I started asking our Cash Office assocaite to post register shortages on board near time clock. I also gave rewards for zero shortage weeks and months! Now what happened next was register(s) we had trouble at stopped coming up short. Now what happened next solved the shortage problem and employee (internal) problem. The thieves (there were three) worked as a team and this made finding the thief tougher as they took turn stealing so we couldnt focus on any one person. However the posting scared them (told me in interview) and they sarted fraudulent returns. that was an easier catch. I caught all three and all three were questioned about the cash shortages and all three admitted their role in the thefts. So yes posting of shortages works. By the way all three were prosecuted cut deals but my employer got restitution in amount of stolen dollars and merchandise. It was a total win for us.

[SecTrainer]

Aren't your three elements what companies have been doing in Loss Prevention for years and years? What company will say they are not looking to implement tight controls? What company will say they do not have a culture of honesty and integrity? What company will say they are not vigorously looking to find and address cases of dishonesty? When you look at what LP has historically been, investigations and auditing, this is exactly what virtually all LP departments are striving for. And, this is where LP goes wrong, in my opinion.

I'm not interested in what companies say, but what they do. While all companies talk about these things, relatively few do them, at least to the extent that would be required to reduce shrink to absolutely $zero. In fact, the real reason for the residual, seemingly unresolvable shrink "in spite of (and not because of) doing these things" is NOT that these measures are ineffective, but that companies make a conscious decision about how extensively to implement these measures relative to the cost of doing so. They implement them up to a certain "cost point", after which further implementation of these measures might well still be quite effective, and might well further reduce the residual shrink, but the cost of doing so would exceed the cost of the residual shrink.

Yes, controls need to be implemented, but good controls are a one-time thing. You should not need to keep re-evaluating your controls (other than new technologies). If you need to keep re-evaluating, you don't have good controls.

I'm sorry but I completely disagree. Controls must continually be reevaluated because they will never be perfect, first of all, and because employees and patrons have proven their ingenuity in defeating controls - especially controls that are not continually being reevaluated. Controls aren't a "set it and forget it" proposition by any means.

Yes, investigations need to be done. But, LP should not spend every waking moment trying to find the employees and customers who are stealing. This type of approach will only breed dishonesty. Just as the parent who only tries to find their child doing something wrong will only create mutual distrust and a lack of respect, which will ultimately drive the child to act exactly the way you do not want them to, it works the same in the workplace.

I'm sorry, but this is sheer nonsense. Carry it out to the only logical conclusions that such a questionable proposition leaves you with (i.e., that enforcement breeds criminality) and you would have to support the ridiculous proposition that we could eliminate crime by disbanding police departments and LP departments altogether. The fact that I was a watchful parent never, EVER bred the desire to be dishonest in my children. If and when they strayed from the path, it was because of an irresistible opportunity combined with their belief that under the given circumstances I wouldn't find out about it. If I failed them on those occasions, it was by being distracted for one reason or another from my role in properly overseeing my children's activities, not because of such oversight. I do not mean to be rude, but I honestly question whether anyone who holds such a philosophy should be involved in loss prevention in the first place.

All you have to do is read the various message boards out there to find that there is a HUGE us vs. them mentalty when it comes to ops vs. LP. As long as we are driven to investigate and audit as the primary functions of what we do, we will never see this change. That is the point of the article. Everything we have been doing for decades is really doing absolutely nothing. So, if we understand that, why not find another way to approach the business?

And the point of our response, collectively, is that we do not agree with your fundamental premise - i.e., that "Everything we have been doing for decades is really doing absolutely nothing", because nothing could be further from the truth. One of the chief reasons that new retail businesses fail, in fact, is because they typically cannot afford to implement strong LP programs and shrink gobbles the critical early profits. (Small Business Administration). The Association of Certified Fraud Examiners reports in its 2006 Report to the Nation that the average loss due to internal fraud for small businesses of less than 100 employees was GREATER by far ($190,000) than the average loss per incident suffered by large companies ($120,000). The reasons? A lack of or failure to enforce basic controls in small businesses, first of all, and a greater (obviously sometimes unwarranted) degree of trust in small businesses. So much for trust and loyalty. Report quoted in Small Business Fraud Prevention Manual - ACFE 2006. The evidence is clear...controls and preventive measures work. Trust might be nice, but it doesn't breed honesty where honesty doesn't already exist. "Trust, but verify" should be the motto.

I can certainly see value of improving the "us-versus-them" adversarial relationship between ops and LP, but not by adopting the philosophy that what you do is irrelevant!! The way to do this is to bring ops on board with LP by developing a strong awareness of your mutual interest in minimizing losses. For instance, I would show ops folks how uncontrolled losses can quickly destroy everything that they themselves are working to accomplish.

1. "You work hard to make a sale, while one of your fellow employees (or a shoplifter) is stealing more in a few minutes than all of the profits you bring in during the whole day"...

2. "Every penny of profit that walks out the door is simply gone when it comes time to thinking about employee compensation, raises, health and educational benefits. All of us - management and the associate team - win or lose together"...

3. "You have every reason to be angry when you discover that someone is stealing because they're stealing from you and me and all of us, not just the corporation, so get mad, DO something about it, and report it!"

4. "If someone in your department is stealing, you might be asked whether you know anything that might help our LP folks discover what's going on. There's never anything personal about this whatsoever, and we should all welcome the opportunity to participate even in some small way to preserve and promote the absolute integrity of our department"...

...that sort of thing. And, even if I believed what you are saying in your article, the one thing I would frankly never do would be to go onto the Internet and publish the argument that "LP is accomplishing absolutely nothing". If, as you say, there is an adversarial relationship between ops and LP, you've given them some very nice - if highly dubious - ammunition for their case against you, and the executives they show your article to will likely never see this debate on this forum refuting your ideas.

[LPGuy]

You say my approach is present in large retailers, but you tell me how wrong I am about it working? So which is it? Retailers do it or I am wrong?

Both. These strategies are present, but not as some type of replacement for apprehension.