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
"Transitioning to Your New Job as an LP Director"
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
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
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
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
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
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
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
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
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
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
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.
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
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
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
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
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
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
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.
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
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
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
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
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
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
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
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
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
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
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.