Over the next few weeks the Daily will be publishing Mike Keenan's chapter  "Transitioning to Your New Job as an LP Director" from the book Retail Crime, Security, and Loss Prevention, 1st Edition, An Encyclopedic Reference.

Book authors Chuck Sennewald & John Christman
Released February 20, 2008.
Imprinted by Butterworth-Heinemann
ISBN: 9780123705297

"Transitioning to Your New Job as an LP Director"

by Mike Keenan, CPP, CFI
Vice President of Loss Prevention
GAP North America


You have just started in your new position as a Director of Loss Prevention. It doesn’t matter whether you were hired from the outside or promoted internally, you face the same challenges. The first several months will determine your success or failure. So what do you do?

Start by identifying how you will focus your efforts. What are the company’s expectations for you? In most situations you recently went through an interview process with the Senior Management of your company. What were their expectations for an LP Director? They usually have a high level view of the role of Loss Prevention, however, their perspectives will help you understand what they would like to see from you. For example, is their focus on shortage reduction/control, apprehensions, investigations, auditing, physical security or a combination of some or all of them? You can also identify Loss Prevention challengers and supporters during this process. This can help you better prepare for interactions with Senior Management in the future.

The next step, which is critical to your success, is to determine what your direct supervisor expects of you. Once you are in place, try to set up a meeting with your supervisor as soon as possible. The quicker you understand their expectations, the quicker you can start developing your action plans. Initially, the best way to do this is simply to ask. As a new person, people expect you to ask a lot of questions. Take advantage of that. Usually, your new supervisor will have a list of things that are a priority for them. What are they? Hopefully, by asking, you will start a dialogue that will clearly define their expectations. If not, schedule additional meetings until you fully understand what your supervisor expects from you. Obviously, these priorities should be high on your list of action items.

An important factor for you to consider is the company’s reporting structure. Who do you report to? CEO, President, COO, Store Operations, Finance? Each of these reporting structures will impact how you approach your job. The executive level that the LP Director reports to will dictate how the company perceives LP. The higher the executive level the more cooperation LP will get throughout the company. Ideally, you want to report to the highest ranking executive in the company. However, this is not always the case. Here are two examples of challenges you may face if you report to either Store Operations or Finance. If you report to Store Operations you will be able to effectively impact stores but may be less involved in corporate processes that impact shortage like buying, merchandising, allocation, IT (Information Technology), etc. If you report to Finance, you may be viewed more as an auditor than a partner with Store Operations. You can be effective in any reporting structure but make sure you incorporate an understanding of your reporting structure into your planning.

Another part of the company’s reporting structure that is important is who your co-workers are? Who are your peers? To be most effective, you need the support from Directors in all other areas of the company. Set up “meet and greets” with as many department heads as possible to introduce yourself and understand their expectations of LP. Identify their opinions on strengths and areas of opportunity for the LP department. You should also specifically identify who you need to partner with to achieve maximum results. For example, Directors of Store Operations are critical to running effective LP programs in the stores, Human Resources people are important to investigations, etc. Make sure you cultivate these relationships.

Now it’s time to look at your own department. The first thing to evaluate is the structure. How many direct reports do you have? What are their functions? How many field people do you have? What are their functions? Who do they report to? For example, some report to LP management others report to Store/Distribution Center management. Where are they located? The answers to these questions will give you a good idea of the resources you have available to you from a personnel standpoint. Keep in mind that if you have limited LP people or even if you don’t have any, your company employees are a great resource to help support and drive your programs.

Meet with your direct reports as quickly as possible. A good approach is to meet them first as a group. This helps to understand the synergy in the group and identify common issues. Then meet with each one individually. This will enable you to understand the specific issues each one is facing. A helpful insight into your direct reports can come from past performance reviews. Take the time to read each one and understand what past supervisors thought of their performance and capabilities.

Schedule visits to your stores, distribution centers and any other facilities your company maintains. You must observe first hand how the business looks and works. If your company has a large number of stores, visit a representative sample. For example, different geographical areas, high sales volume stores, low sales volume stores, high shortage stores, low shortage stores, unique stores that do not fit the company’s standard set up, etc. It is not necessary to visit every store in the chain during the first few months in your new job, it is more important to understand how stores are physically laid out and operate. However, if you have a small number of distribution centers and ancillary facilities, visit all of them. Since distribution centers and ancillary facilities are usually unique, it is important to understand, similar to the stores, how they are laid out and operate.

Mix up the people you travel with. Visit stores with your LP people, Senior Management, District Managers, Regional Vice Presidents, Human Resources, etc. Visit your DCs with your LP people and distribution center management. You learn a lot about people when you travel together. Take advantage of the travel time to ask questions and get their perspectives on all areas of the company. You will gain valuable information because they are all great resources.

Many times Directors will go into a new company and quickly assess the LP Department. Based on their assessment, they quickly roll out new programs. Often times these programs fail because the new Director has not taken the time to understand the culture and the history of the company. Existing programs are in place for a reason. Existing employees will resent being treated as if what they did before was ineffective. LP people operate the way they do because it was how they were trained and directed by previous LP management. Spend the time to understand why current programs are in place. What is the best way to do this? Ask questions and LISTEN. Listening is becoming a lost art. You will roll out more effective programs with less resistance if you take the time to understand the culture and the history. Knowing the history of your company will help you to avoid mistakes made by previous management. Even though you are looking forward, learn from the past. You may want to change the culture you find but it is usually more of an evolutionary process that a revolutionary process. It takes time and effort to change the thought processes of your department and the company but it can be done. Just take it one step at a time.

During this initial time in your new position, you will be exposed to a tremendous amount of information. It is important to take notes from every one of your meetings. Unless you write it down, you will forget a lot of what you have learned. Write down what you see as opportunities. This list will enable you to develop action plans based on prioritizing the input from company management. Refer to this list every month and add new opportunities that you identify.

Its time to start developing your action plans. You’ve heard what your supervisor’s, Senior Management’s and your direct report’s perspectives are on LP, now how are you going to focus the LP Department? Internal investigations? External investigations? Shortage reduction/control? Auditing? Asset protection? An effective loss prevention program is best achieved through a balanced approach.

Your two primary objectives should be to protect the assets of the company and to reduce shortage. The assets of the company include people, property, merchandise, money (cash, credit, checks, etc.), information and the company’s reputation.

Reducing shortage will add profitability to your company. The three major areas that contribute to shortage are internal theft, external theft (vendor theft can be categorized as external theft) and operational execution. These three areas cover almost everything you will deal with in your role as an LP Director. There are numerous categories that fall into these three areas and it is difficult to control everything. However, if you focus on only one or two of these major areas, the one(s) you don’t focus on will increase and could cancel out the success you’ve gained in the other areas.

Your vision and strategy should incorporate protecting the assets of the company and the three major areas that can cause shortage. Within your vision and strategy you must identify your focus areas. Loss Prevention can be a very reactionary business. It is important to develop an organization that can react accordingly to the incidents that occur in a retail environment, however, you must also ensure that you are working towards your vision. Sometimes you can spend weeks doing nothing but reacting to the needs of the business but you must always bring yourself back to your vision. LP Directors who do nothing but react may keep their supervisor and business partners happy in the short term but they won’t improve the overall operations of the LP Department.

Almost everything you work on should fall into your vision and strategy. Once you define your vision and strategy, you should review it with your supervisor to ensure that you are both in agreement.

You are now ready to get into the details. The first thing to look at is the LP Department metrics. What statistics do they measure and hold themselves accountable to? Measurements can include shortage, internal cases, external cases, cash over/shorts, merchandise recovery, credit card fraud, bad checks, counterfeits, etc. Determine how the statistics are trending for the year in each category. Look at the past three to five years to understand the history. This will enable you to gauge the productivity of your Department and identify areas of opportunity you can focus your efforts on.

How does your LP Department track their statistics? Is there daily, weekly, monthly, quarterly or annual reporting? It is important to have LP statistical measurement reports at least once a month. Does your Department track statistics manually or using a case management system? If these reports are not system generated, it is worth the time and energy to develop them. This can be done within your own department if you have the expertise or you may have to work with your IT people. If you have a case management system, these reports can be easily created. Either way, make it happen. It will definitely enable you to better manage your department.

Does your LP Department look at productivity by individual? One of the most effective tools to monitor and increase productivity, are ranking reports. By ranking each person against their peers in every measurable category, you can identify top performers and poor performers. It is not unusual to discover that a small portion of your staff is producing the majority of your statistics. This is especially true with internal and external cases. By improving or replacing poor performers, you can raise the bar for everyone and increase overall productivity. Specifically, these reports will enable you to recognize good performance. A recognition program directly tied into individual productivity is generally well received by investigative personnel. It creates competition, which most LP people thrive on, without creating quotas. Quotas have resulted in numerous civil litigations and should be avoided.

Ranking reports also help you identify areas that might need additional training. For example, if all of your Investigators have low internal case productivity, what training is needed to improve their performance?

Recognition should be an ongoing component of your Department. People are your most important asset. They need to be cultivated on a frequent basis. Do you appreciate being recognized for your performance? Of course you do. Well your people do too! If they don’t already exist, develop multiple ways to recognize good performance. It can be for statistical performance, effectively handling a specific incident, leadership, any type of metrics. Just be sure to make it meaningful. Too much recognition can take away the value to the employee. This is a good area to partner with HR. They usually have a number of programs that they can share with you. A good recognition program encourages people to strive for better performance. The better your people’s performance, the better your results.

It is critical that you manage your LP data effectively. All incident reports (internal and external apprehensions, investigations, recoveries, robberies, burglaries, unusual incidents, etc.) must be maintained and accessible. When taking over an LP Department, it would be unusual to find that they do not already have an existing methodology for documenting and tracking their activities. Understand how it works to make sure you are comfortable that it does what you need it to do. For example, how do you request and receive an investigative report for an outlying store or location?

If you do not have IT capabilities for your LP people, you must have paper reports that capture all relevant information surrounding your areas of responsibility. If you use a systems based case management program, evaluate its capabilities. Ensure that it provides you with the data analysis tools that you need. If you don’t have a systems based case management system, you should make the effort to get one. There are many case management systems available. By working in partnership with your IT Department, you should select the software and system that is compatible with your company’s existing IT platform. If you purchase a systems based LP case management program, make sure it is able to feed external systems, e.g., Civil Recovery/Demand.

If you have a staff that catches shoplifters, most states have statutes that allow merchants to civilly recover damages from adults or the parents/legal guardians of juveniles who shoplift from that merchant. It is usually called Civil Recovery or Civil Demand. The collection of restitution and Civil Recovery/Demand should be pursued in all applicable internal and external cases. The amount that can be collected varies by state and statute. You should make sure you have your legal counsel approve the requested amount of damages in each state.

In situations where employees steal from the company, a Promissory Note or restitution procedure should be in place. If an employee admits to causing a specific amount of loss to the company and they are willing to pay it back, they should be asked to sign a Promissory Note. This form creates a legal agreement with the employee that enables you to pursue them civilly if they do not pay you back in accordance with the terms and conditions of the Promissory Note. Again, you should make sure your legal counsel has reviewed and approved this form.

Many companies use external vendors to handle the collection efforts for them. Some companies have their own internal collection departments. Again, in most companies, one of these processes should already be in place. Either way, review the process to make sure that you are maximizing the collection of Civil Remedy/Demand and restitution dollars. The collected funds can be used to purchase LP equipment and services that will deter future losses. By utilizing the collected dollars in LP deterrent programs, it is easier to justify outside legal challenges that you are using Civil Demand/Remedy as a profit center for your company.

Another important area to review is the LP budget. First understand what your annual budget is and how it was developed. How is the department trending for the year? Is it on budget? Is it over budget? Is it under budget? Are expenses being managed properly? Poor expense management will usually put you under an unwelcome spotlight so make sure you understand the finance methodology of your company. It is critical that you have mechanisms in place that will alert you to over budget and under budget situations before you receive summary reports from the Finance Department.

The next step is for you to understand how the LP Department in your new company operates. The best way to do this is by reviewing the Department’s existing policies and procedures. Is there an LP Department Operations Manual or just a collection of memos and directives which define the operating platform for the Department? Having a comprehensive and detailed Operations Manual is critical to the success of an LP Department. An Operations Manual should define the expectations for the LP Department. It should also contain all of the policies and procedures necessary to execute the expectations for the Department. The content should include internal investigative procedures, e.g., evidence collection and retention, case development, interview techniques, prosecution guidelines, etc. It should include external theft procedures, e.g., the steps necessary to make an apprehension for shoplifting, use of force, evidence collection and retention, prosecution guidelines, etc. It should also include operational procedures, e.g., audits, checklists, etc. The LP Operations Manual should be the foundation for the daily operations of the Department. It will ensure consistency throughout your LP organization. All training should be developed from the policies and procedures contained in the Operations Manual.

If there is no LP Operations Manual, create one. If one already exists, you should revise it in accordance with your philosophy and approach. The LP Operations Manual should always be a "work in progress." As you grow in the job, you should constantly revise it as you develop your Department. Once created or revised, the Manual should be made available to all levels of your Department.

When creating or revising LP policies and procedures, involve members of the LP Department in the process. An effective methodology is to create Task Forces comprised of members of the LP Department. Assign these groups to write new or revise existing polices and procedures. This enables you to take advantage of their experience within the Department and the company as well as have them be part of the process. This leads to ownership and makes it easier to facilitate change. This concept works very well if you decide to create or rewrite the LP Operations Manual.

Are there LP personnel training programs in place? If a training program doesn’t exist, develop one. This should become a top priority for you. An effective training program is absolutely essential. Well trained people enable you to execute your operations effectively and consistently.

If there is an existing LP training program in place, review the content. Is it comprehensive? Does it cover all of the areas that are covered in the LP Operations Manual? Will it keep the company protected from legal challenges of inadequate training? Are the training programs managed by the LP Department or the company’s Training Department? Either way, the high risk that goes along with conducting internal and external investigations can be mitigated with thorough training. Multiple methods for training should be utilized. For example, written, video, E-Learning, on-the-job, classroom, etc. All training should be documented and individual training records should be maintained on each LP person. Training should be updated along with new policies and procedures.

The best way to ensure compliance to your policies and procedures by LP personnel is to have a disciplinary action process. If LP people violate the policies and procedures you put into place, there should be accountability. This will allow you to remove non-conforming employees who can put the company at risk by their actions. Effectively managing a disciplinary process will result in better consistency in your operations

Effective communication is extremely critical to the success of an LP Department. You must have some method of communicating timely information to the LP organization. This information can include new LP and/or company policies and procedures, investigative alerts, open jobs, etc. Some type of Communication Binder should be maintained in all field locations. This Communication Binder can be an actual binder or an electronic folder. An electronic folder that serves this purpose will depend on your company’s IT infrastructure.

One concept that helps to develop a team is to create an identity for the LP Department. This can include an LP Department logo, tag line, and Mission Statement or any combination of the three. Many companies have a Mission Statement but it is not specific to LP. Use the basic concepts from the company Mission Statement but tailor it to the LP Department. Here is an example of an LP Department Mission Statement:

"Company XYZ Loss Prevention is committed to
consistently driving processes that will improve
profitability by reducing losses through investigations
and operational compliance while providing a safe
environment for our Employees and Customers."

A fun way to create an LP logo or tagline is to hold a contest within the LP Department. Your own people can come up with some great concepts that you can turn into the LP Department identifiers. The fact that they created the logo and/or tagline themselves will cause them to take ownership. If your LP people can’t come up with anything that fits your vision, work with your Marketing Department or, if you don’t have a Marketing Department, use an outside vendor.

Another concept that helps develop a team and holds your people to a higher level of accountability is a Standards of Conduct. A Standards of Conduct should clearly define your expectations for your LP people. It is an add-on to the company’s Employee Handbook. By spelling out your expectations, you can raise the performance level of your people. Because it sets a higher standard for LP people above that of the regular employees, you must work with Human Resources to gain their support. That way, if an LP person violates the Standards of Conduct they can be disciplined in accordance with the Standards of Conduct not the Employee Handbook. It will enable you to foster a higher level of ethics and integrity in your LP team. Here is an example of a Loss Prevention Standards of Conduct.

STANDARDS OF CONDUCT

A Company XYZ Loss Prevention Employee’s conduct must be above reproach at all times. Their conduct must comply both with applicable state and federal laws which define the legal limits of their conduct and with Company XYZ policies and procedures which, at times, are more restrictive than state and federal law.

All Company XYZ Loss Prevention Personnel are required to read and sign the “Standards of Conduct” form.

These standards are not intended to cover all situations, rules, policies, regulations, etc., and should not be construed as such. They are, however, indicative of the spirit and intent of Company XYZ policy and the expectation of your conduct and behavior. These standards are of such importance that any person failing to comply with them will be subject to disciplinary actions, up to and including termination without prior warning.

Maintaining the standards outlined on the following pages and the philosophical spirit reflected by them, should be the guideline in each Loss Prevention Employee’s professional approach to their daily activities.

These standards are in addition to the policies and procedures defined in the Employee Handbook.

The original, signed “Standards of Conduct” form must be maintained in the Loss Prevention Employee’s personnel file. (Copy Attached)
 

STANDARDS OF CONDUCT

These Standards of Conduct are expected of all Loss Prevention personnel so that no person will have cause to question our professionalism, integrity, credibility and objectivity. In the performance of our job, we must be highly professional and must meet more exacting standards of behavior and adherence to rules. The nature of our function, authority and responsibility requires this higher standard.

The following type of behavior is not in keeping with Company XYZ Loss Prevention Standards of Conduct:

1. Any activity, which reflects adversely on the ethical or professional stature of Company XYZ Loss Prevention Department. Covered under this statement are such activities as:

a. Mistreatment or abuse of persons in custody.
b. Improper or inappropriate language in dealing with suspects or Employees.
c. Any activity that could be construed as entrapment.
d. Any activity that could be construed as discrimination.
e. Any investigation or other activity which is designed to “harass” or embarrass any individual.
f. Discussion or disclosure, by any means, of past, pending or proposed Loss Prevention investigations or activities with persons without a legitimate “need to know.”
g. Misuse or unauthorized disclosure of company confidential information or Loss Prevention or Human Resources information obtained in the course of employment.
h. Personal relationships that interfere with perception of trust, credibility, discretion and fairness.

2. Failure to objectively and factually report information required or obtained within the scope of employment. This statement covers not only the willful misstatement of facts, but also knowingly omitting pertinent information from reports and/or the purposeful “slanting” or “coloring” of reports.

3. The failure to report any information, however obtained, which could conceivably bear on or be pertinent to any Loss Prevention investigation or be of legitimate interest to company management. For example, any customer or Employee detention must be reported to your Supervisor in accordance with established timeframes.

4. Failure to submit reports as required by Company XYZ Loss Prevention policies and procedures.

5. Violation of any of the provisions of Company XYZ “Use of Force and Weapons” policy.

6. Any misuse, careless or improper handling of funds, evidence, or records entrusted to our care.

7. Any misuse of company equipment or property, misuse of position or authority, or agreement to accept “favors” not granted others and available or offered us because of our position is prohibited. Covered under this statement are such things as the following:

a. Inappropriate use of company phones.
b. Removal of company merchandise or property for personal use.
c. "Borrowing" company merchandise for use in decorating or furnishing Loss Prevention offices.
d. Taking advantage of your position to secure favored treatment with regard to obtaining merchandise or any other advantage not granted other Employees.
e. Any misuse of the Company XYZ Loss Prevention Photo ID card and/or badge.

8. Failure to follow Company XYZ Loss Prevention policies and procedures with regard to stopping, questioning and/or apprehending both Employees and the customers.

9. The failure to be completely truthful and candid in response to any official request for information.

10. Inappropriate use of CCTV cameras and equipment. CCTV cameras and equipment must be used for work-related purposes only.

11. Failure to follow policies and procedures outlined in the Loss Prevention Department Operations Manual or directed by the Director of Loss Prevention in the form of a memo.

The above statements are not intended to cover all situations, rules, policies, regulations, etc. and should not be construed as such. They are, however, indicative of the spirit and intent of Company XYZ Loss Prevention policy and the expectations of your conduct and behavior. These standards are of such importance that any person failing to comply with them will be subject to disciplinary action up to and including termination of employment without prior warning.

Maintaining the standards above and the philosophical framework created by them should be the guideline in your professional approach to your daily activities.

I HAVE READ AND UNDERSTAND Company XYZ Loss Prevention Standards of Conduct. I understand these standards are not intended to establish any expressed or implied contractual rights. I also understand that any violation of these standards may result in disciplinary action, up to and including termination of my employment without prior warning. These standards are in addition to the policies and procedures defined in the Employee Handbook.

______________________ _______________________
NAME (PRINT)                   Employee NO.


______________________ _______________________
SIGNATURE                               DATE


Technology should not determine your LP strategies. Technology should help you achieve your LP strategies. As part of your assessment process, you need to evaluate the technology currently available to your Department. Do you have CCTV? If so, how is it utilized? Are there fixed cameras, Pan, Tilt and Zoom (PTZ) cameras or both? Is it overt, covert or both? Do you have Digital Video Recording (DVR) technology or analog video recording technology (VHS)? Are there remote monitoring capabilities? Do your people have desktop computers or laptops with docking stations? Do they have access to LP/company systems for investigative purposes?

Physical security is a responsibility that most likely falls directly onto your shoulders. Burglar and fire alarms systems, lock strategies for doors, access control (if applicable), cabling of high value apparel, locking caselines, locking fixtures, safes, securing high value products (Pharmacy, Fine Jewelry), protecting merchandise trailers, etc. There is information available on these topics in this book. You should learn about each category so that you can incorporate your physical security strategies into your overall vision for your LP Department. When it comes to physical security, the simpler the better. The easier a physical security system is to use the better compliance you will get from the users. This is important because, even if you have a great physical security system, if no one uses it, it has little value.

Now ask yourself, does your current equipment and technology enable you to accomplish your vision for the LP Department? If not, determine what you need. How do you know what’s available? Simple, talk to the LP vendor community. There are hundreds of vendors who sell and service LP equipment and technology. All of them would be interested in educating you on their product(s). Once you have learned about and are ready to choose a type of equipment or technology, reach out to fellow LP Directors that use the particular product(s) and ask them for feedback. Most will be happy to give it to you. Or, reach out to your fellow Directors first and then talk to the vendors. Whichever approach you take, other LP Directors are a great resource.

Now you’ve done your homework on the equipment and/or technology you want to buy and you’re ready to start the process to purchase it. The first step is to learn what your Finance Department requires to justify an expenditure. All companies have different methodologies for this process but all require that you demonstrate an ROI. Learn the formula for your company and incorporate it into all of your proposals.

Exception Reporting is an essential LP tool. Strategically using exception reporting will improve your efficiency because you can focus on problem (exception) resolution. You don’t need to know when things are working as expected, only if there is a problem. Of course, the most common exception reporting systems for LP are POS based, however, exception reports on almost any company process that impacts shortage are valuable. Knowing which stores have high or low results in comparison to the entire store population enables you to focus on areas and locations that are exceptions. For example, Mark Out of Stock (MOS) percentages, a high number could mean that the store is not handling MOS merchandise properly or there is some other issue. By investigating that high number you can identify, address and correct the issue which will reduce the MOS. Reduced MOS improves profitability. If a store has a low MOS number, it could mean that they are not processing MOS properly or possibly even throwing it away. This would cause shortage and the store would not be replenished for the damaged merchandise. Use exception reporting to identify anomalies and investigate the anomalies. You will be able to spend less time and get better results because you are addressing exceptions only.

To stop return fraud, a Refund Control program is absolutely necessary. Without an effective refund control program, your company is at risk. Poor refund control can lead to internal theft (fraudulent returns by employees) and external theft (shoplifting for the specific intent to return.) It can also allow duplicate receipts, counterfeit receipts and the reuse of the same receipt multiple times.

Thieves find ways to circumvent polices at individual stores. The best defense is a corporate wide system to track returns. The main focus should be on non-receipted returns. If your POS system allows a way for cash to be obtained without a receipt, the thieves will find it. A refund control system that stops non-receipted returns works by requesting ID from individuals returning merchandise without receipts. You set the parameters for how many returns you will allow before you shut them down. This is called "velocity." The system should also identify counterfeit receipts and previously used receipts and stop them as well.

Refund control systems can be developed internally or purchased from an outside vendor. Either way, refund control is a must have.

One of the issues that you will face when it comes to the implementation of new company systems is where and when the LP requirements are included in the process. For example, a new POS system needs your involvement to make sure the proper controls are included to prevent losses at the registers and in the cash office. Many times the LP requirements are scheduled to be implemented at a future date. This future date is often called "Phase 2." Be aggressive in having the LP requirements included in "Phase 1." "Phase 2" may be delayed or even cancelled and you will have lost your opportunity to get the LP components you need. Developing an effective partnership with the IT Department will enable you to always be part of "Phase 1."

Organized Retail Crime (ORC) is a significant part of external theft losses in most retail environments. Evaluate the extent to which your company is a target of ORC. Based on this analysis, determine how to use your LP and store resources to minimize this threat. Do you lock up your targeted product? Do you place it behind counters? Do you work with law enforcement to apprehend the thieves? Do you allocate some of your LP personnel to focus only on ORC? Whatever plan of action you develop, be sure to include ORC in your strategies to control losses.

Shortage programs are an integral part of any LP program. Controlling shortage is a process. You must have all areas of the company working together to control shortage. There must be daily attention to all shortage control procedures. For this to happen, there must be support for reducing shortage that comes from the senior management of the company or else it will not be a priority.

The first step in creating a shortage program or enhancing an existing one is an Executive Shortage Committee. This committee should include senior management and Director level people. The higher the management levels in these meetings the better. Representation should include, LP, Finance, Operations, Distribution, Buying Line, IT, Internal Audit, Inventory Management, Human Resources, etc. You want people on the Committee who can go back to their Departments and make things happen. This Committee should focus on all areas of the business that can impact shortage. It should develop action plans that the people on the Committee can go out and execute. Examples include, store/DC LP standards, focus on high shortage stores, focus on high shortage merchandise, EAS tagging standards, etc.

A shortage program should include monthly shortage meetings in all stores and DCs. These meetings should include the facility Manager and key people in the location. The monthly topics should focus on high shortage areas and processes. All facility employees should be made aware of the focus topic each month. This can be done through separate meetings held at different times throughout the day. Retail schedules rarely allow for storewide meetings, so the individual meetings should be scheduled so that all employees are given the necessary information.

Another effective method is the development and implementation of individual Store shortage "action plans." These action plans should be based on the shortage results from the most recent Inventory. Focus areas can be companywide, store specific or a combination of both. The plans should define what each store is going to do to address the high shortage areas. District/Regional Store Operations and LP Managers should be required to approve the action plans. The action plans should be inspected throughout the year and stores must be held accountable for not executing their plans.

Some companies focus their efforts on high shortage or "target" stores. These "target store" programs are based on the concept that reducing shortage in the highest shortage stores will be the best return on the investment of resources. This approach is usually very successful in those stores. The challenge with this approach is that "non-target" stores can experience increased shortage because there is not a focus on them. Those stores can then become the new "target" stores.

An effective shortage program must include employee awareness training. Employee awareness starts with educating employees on their role in controlling losses in the company. What can they do every day to positively impact shortage? You must define the expectations for every employee. They need to take ownership for controlling losses. If they have “ownership” for controlling losses, they will be more likely to help than if they don’t feel they have any responsibility. This can be done by communicating your message(s) in new hire orientations, company newsletters, posters, etc. Developing a shortage logo and tagline will “brand” your program. As with an LP Department logo and tagline, create a companywide contest to get ideas. Your company employees can often times come up with some great concepts. If your company employees can’t come up with anything that fits your vision, work with your Marketing Department or, if you don’t have a Marketing Department, use an outside vendor.

Since shortage control requires daily attention, your goal should be to create a culture of loss prevention. You want all employees doing the right things every day. Doing the right things means not stealing, reporting those that do steal and following established procedures to prevent loss. A loss prevention culture takes time to develop but it will pay off every year in low shortage if it is maintained throughout the company.

A quote that has been around for a while is “a well run store equals low shortage.” This makes perfect sense but how do you ensure that a store is running well? How about another quote? “You get what you inspect.” An LP audit program enables you to monitor store compliance to shortage control policies and procedures on a periodic basis. By monitoring store performance and correcting identified deficiencies throughout the year, you can prevent a poor shortage result.

If your company does not have an LP Audit program, you should consider putting one in place. If your company does have an existing audit program, you should evaluate its effectiveness. Often times you will find the existing audit program does not have a true impact on controlling shortage.

The two keys to a successful LP audit program are objectivity and accountability. The first key is objectivity. The audits must give an accurate picture of what is actually happening in a store. If they don’t, they have limited value. In order to correct issues, you must know what they are. Auditors must be able to objectively report their findings. Of course that makes sense but it doesn’t always happen. Here is something to consider. If the person who conducts the audits reports directly to the District Manager or Regional Manager who is responsible for running the stores, can they truly audit objectively? Will their “partnership” be jeopardized if the LP person fails them in an audit? Will their performance evaluations be negatively impacted? Review audits for the past year. Is every store passing? If they are, it is an indicator that the audits may not be objective. It would be a very well run company indeed if every store passed every audit. Try to set up your LP auditors so that they report independently from the people who run the facilities they are auditing.

The second key is accountability. If a store fails an audit, are there consequences? Are the consequences serious enough to get the attention of the person being audited? For example, if a store fails an audit, does it result in disciplinary action? Does it impact their performance evaluation or bonus? If the consequences aren’t meaningful, store management will not focus the appropriate attention on taking the actions necessary to pass the audits. You must elicit Senior Management’s support in developing the appropriate consequences so that store management knows that it is a company priority.

If you don’t have an effective store audit program or don’t have one at all, how do you get started? Create a Task Force that includes loss prevention executives and store line senior management. By including store management in this process, there will be more of a sense of ownership and the audit will have more credibility. Develop an audit that addresses shortage control in all areas of store operations. This does not normally include creating new polices and procedures but just selecting those that will make a difference in reducing shortage. The contents of an LP Audit should include, Cash Office, Receiving, Point of Sale (POS), Physical Security, EAS Tagging compliance (if applicable), and anything else that impacts shortage. As a side benefit, this process can result in strengthening controls in almost all existing store procedures because when the Task Force reviews each procedure they will usually find ways to improve them.

To ensure that the new audit works effectively, make sure you “field test” it. This enables you to identify problem questions and correct them before you roll out the entire program.

Once finalized, the revised procedures and new audit forms should be provided to all stores. Stores should be given some time to “ramp up” before the new audits are scheduled to begin.

One way to ensure auditing consistency is to create a Loss Prevention Auditor’s Manual which contains detailed explanations of what the auditor should be reviewing for every question on the audit. This manual will ensure that all auditors review the same areas in exactly the same way. The completed Manual should also be provided to every store so that they also know every question and the audit instructions. Communicating this information to the stores will eliminate many of the challenges when points are not awarded.

To help stores pass their audits which is, of course, the goal of the program, stores should be required to complete daily or weekly checklists. These checklists are a tool to ensure daily attention to the policies and procedures that are reviewed on the audit. Checklists can be created directly from the audit. Many times stores will break the audit into sections and use them as checklists.

Another component of an audit program that gets results is a random and unannounced audit schedule. The only way to get a true picture of what is really happening in a store is to show up when the store doesn’t expect you. Another benefit of a random and unannounced audit schedule is that all stores will operate more consistently on a daily basis in expectation of receiving an audit.

Audits must be conducted often enough to allow “course correction” during the year. Many companies take once a year inventories. It is the consistent execution of shortage control policies and procedures that provide the positive end of year results. One formula that works well is a quarterly audit in all stores and a monthly audit in high shortage stores. Of course your program must fit your company’s structure and budget. Timely reporting of audits is also important. As soon as an audit is completed, the results should be communicated to the store and the District Manager. After that, audit scores should be tracked along with all of the other company performance measurements and be included in annual performance evaluations.

Cash control is an important part of any LP program. Review the existing procedures – “follow the money.” What are the controls in the cash office? Are all cash office personnel background screened? Is the physical security of the cash office (locks, safe, camera coverage, etc.) adequate? How are the basic funds for each register drawer set up? How are they transported to the sales floor? What are the controls at the registers? How is change handled? How are cash pick ups done? Who counts the daily sales and creates the deposits? Who verifies the deposits? Are the deposits taken to the bank by sales personnel or are they picked up by an armored carrier service? Are there controls in place to make sure that the deposits arrive at the bank? If a deposit does not make it to the bank or there are discrepancies with the deposits that are identified by the bank, how is it communicated and to who? The answers to these questions will enable you to identify the effectiveness of your company’s cash control procedures.

Timely notification of cash register over and/or shorts to LP is essential. Determine how stores communicate register shortages to LP for investigation. Make sure that LP is notified as quickly as possible. Once notified, how do the LP personnel keep track of the shortages by store? Cash shortage investigations should always be a high priority for your LP personnel. Employees who steal cash are usually stealing in other ways, too.

Credit card fraud, fraudulent and/or bad checks, fraudulent traveler’s checks and counterfeit currency are other concerns that should not be ignored. Each of these areas have available controls that can be utilized by retailers. Meet with your Finance Department to learn about the controls that are currently in place. Ask them to provide you with regular reports on fraud losses. Review how employees are trained to accept checks. Is there a check guarantee program? Are ultraviolet lights used to check for counterfeit currency, traveler’s checks and credit cards? Do employees check for identification? Are imprinters used for credit cards that won’t scan? The best way to prevent fraud is by having well trained and alert employees. Train employees to follow all of the required steps when accepting credit cards, checks, traveler’s checks and currency.

One of the most effective ways to get information regarding people or issues that are causing theft or shortage is an employee hotline. Implementing a confidential way that employees can communicate information will increase your chances of identifying where and how losses are occurring in your organization. In addition, by paying out cash awards for information that leads to correcting the cause(s) of the loss, you will increase the information flow. Although most people don’t call specifically to get the money, they appreciate getting the award.

Employee hotlines can be managed internally or by an outside vendor. As long as the information can be provided and managed confidentially, either way will work. However, make sure it is an 800 number so that employees can call from anywhere. Many companies use an outside vendor because they believe it makes the employee more comfortable in making the call knowing it is not going to a person inside the company.

Once you have established an employee hotline, publicize it through all available methods. Employee training and orientations, newsletters, the company website, paychecks, wallet cards, posters, employee handbook, etc. One effective way to ensure that all employees always have access to the number is to print it on their Discount Cards. In addition to the LP Hotline, make sure that you get all of your LP messages out using the same methods.

When rolling out LP programs, always use the company’s current communication protocol. For example, if you roll out a new procedure on controlling credit card fraud to the stores, use the existing company communication vehicles. If the stores get a weekly operational hard copy communication, include your LP procedures. If the stores get a weekly E-Mail communication, include your LP messages. This way the stores receive the LP information as part of the other information that is rolled out that week. Incorporating LP information into the communication vehicles of the business is the best way to get your messages out to your audience.

Background screening is the best way to prevent hiring a dishonest employee before they even walk onto the selling floor. Review your company’s existing background screening program. Do you have one? If you do, is there drug screening? Are there criminal checks? Credit checks? Employment verification? Education verification?

Because of the high turnover in retailing, background screening is expensive so implement a strategy that is cost effective. Determine the risk levels of your employees. Management and cash office personnel should be at the top of your list in terms of risk level. People in these positions have the most access to cash, merchandise and company property. Evaluate all of the positions in your company and develop a background screening strategy that fits. HR is an excellent partner in this evaluation process.

Participation in a national retail database is an absolute. National retail databases include dishonest employees and shoplifters from fellow retailers. This information is the most specific to the retail industry. They are relatively low cost and usually have a higher “hit” rate than the other checks and verifications. However, these databases are only as good as the information that is submitted to them. Talk to other LP Directors and find the national database that includes the most retailers that you are likely to hire your employees from. If your company does not participate in one of these databases, you should definitely consider joining one.

As you spend more time in your new role as LP Director, look for opportunities that can add value to your Department. Is your Department responsible for Safety? If not, is it something you could absorb into your organization? How about Crisis Management/Business Continuity Planning? These additional responsibilities expand your scope and make LP more global and valuable to the company.

You’ve heard it many times. “People are your most important asset.” Well it’s true. Your people will make the difference. They will determine your success or failure. People who understand your vision and are committed to making it happen will ensure your success. People who do not understand your vision and/or don’t support it will ensure your failure. The time you spend in developing your people is worth every minute. “You are only as good as your weakest link.” Another well used phrase but it is also true. Every person in your department represents you. What they do every day is a reflection on you. How do you want that reflection to look? If you want it to be good, you need to make the effort.

In conclusion, you are embarking on a journey. It takes time and effort to implement and maintain effective LP programs. It takes time and effort to put in place and develop an effective LP Department. Learn from the mistakes. Celebrate the successes. Enjoy the process.