A Tale of Two Companies: A Roadmap for Merging LP Departments

A Tale of Two Companies: A Roadmap for Merging LP Departments

LensCrafters is the largest chain of optical superstores with more than 860 stores in the U.S. and Canada. Sunglass Hut International is recognized as a leader in specialty niche retailing with nearly 2,000 Sunglass Hut locations and more than 200 Watch Station and Watch World stores around the world in a wide variety of high-traffic shopping and tourist destinations.

In March 2001, Luxottica Retail, the parent company of LensCrafters, acquired Sunglass Hut International. As part of this acquisition, Luxottica made the decision to merge the Sunglass Hut loss prevention operation with the LensCrafters organization based in Cincinnati, Ohio, to form one unified Luxottica loss prevention team responsible for protecting assets across all brands.

The Challenge

How do you combine two world-class companies with world-class loss prevention departments and very different technologies into one cohesive unit?

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Philosophies from both companies were very different based on their operations. Half of the team viewed LP as auditing, training, and awareness, with minimal investigations as needed. The other half viewed LP as investigations driven, with audits, training, and awareness conducted when you had the time. Everybody thought their way was the right way.

For us, this was a very exciting time in our careers. We were excited to know that after a major acquisition, the end result was to preserve the best of both teams. LensCrafters has been recognized by Fortune magazine as one of the top 100 companies to work for in America four years in a row. This was a great beginning.

One of the first steps was to develop a plan to merge the loss prevention functions together and truly develop an approach that would add bottom-line value and leverage the talents on both teams.

A Roadmap

With my new partner, Alan Greggo, director of loss prevention for LensCrafters, we began our journey by sitting down together and committing to paper an analysis of both departments. We examined the programs, the highlights, and…the most difficult piece…an honest and objective review of the results, both good and bad. Together, we completed a road map to what we believed would bring the company the most success that is represented by the following attributes:

  • People first
  • Re-recruit the team
  • Resolve to succeed
  • Embrace change
  • Review all programs
  • Keep what works
  • Reevaluate what did not
  • Combine where possible
  • Cross train when needed
  • Build what we don’t have
  • Review all vendor solutions
  • Reevaluate and change if needed

This strategy showed us which programs to keep, which to stop, and which to combine. It also showed us what we needed to create to get us from where we were to where we wanted to be: a highly effective loss prevention team.

In short order, we were able to begin developing our new vision for the newly created Luxottica Retail loss prevention team. We worked with both the LensCrafters LP managers and the Sunglass Hut LP managers to make sure we had their input and participation. We had several team meetings to assist us in designing our approach as well as our new structure.

In the beginning, we had some initial challenges as all of us began to embrace the changes that had to take place. This was a completely new organization, now with three separate brands and 2,600 stores. The LensCrafters company also has the complexity of laboratories and doctor offices in each location.

As we implemented our road map, we went to work quickly on unifying our newly created team and ensuring that we were able to get buy in and leverage the vast array of talent. We were extremely proud to find that we had such great people with a tremendous amount of diverse experience.

Igniting Passion

Now, how could we ignite the passion for our newly created team?

Simply. We found partners within, and leveraged our vendor relationships.

We immediately enlisted our senior director of legal and associate relations, Keith Borders, who helped review our game plan and ensure we worked within both legal and cultural boundaries. He also assisted us in embracing our differences and similarities by providing special training sessions and workshops to ensure we were maximizing the talent we have. Classes such as “Navigating Change” and “Diversity of Styles and Cultures” were extremely beneficial.

We also worked with LensCrafters’ training and support people, some of the best that we’ve met in retail. They helped continue our journey and provided specialized classes specifically geared towards navigating change.

Additionally, we had the complete commitment from senior management, especially Bill DiGrezio, vice president of operation services, to make this journey successful. DiGrezio and Borders along with members from training and development invested their time and energy to assist us in this endeavor, which was appreciated by each membe rof the department who saw first hand that this was truly a team effort.

The time devoted to these activities was crucial and proved to be extremely beneficial. Managing and embracing change is seldom easy, but it’s always about the people. The major ingredient for success with change is staying in touch with the associates involved.

Good Communications

Everyone started to formulate their own opinions about what the future holds. That’s natural, and very human.Communication is extremely important to allay fears for the worst, and let each person know they are in the master plan.We talked to everyone, individually and in meetings, to give them personal assurances that we wanted them on the team. Almost a year later, people are still invited to discuss their concerns and have an open dialog on any topic. The door is open all the time.

A Tale of Two Companies: A Roadmap for Merging LP Departments

At one of our meetings, the loss prevention team decided to take the enormous challenge of beginning 2002 as a completely cross-functional team. This meant that each team member would need to become proficient in audits, training, shrinkage reduction issues, and investigations in all brands. It became immediately apparent that our shrinkage issues in LensCrafters were completely different than our issues in Sunglass Hut and Watch Station. We were proud to discover that this newly formed team was eager and excited to embark on this complex challenge. We continued on our journey.

Reviewing Systems

The next step was to review all of our systems. In short order, we realized that we had some common systems as well as systems unique to each side of the business. In order to be successful, the team realized that cross training would have to be completed to ensure that all of us were proficient on all systems. Again, our partners in training came to our aid.

Additionally, there was immense  benefit in each LP manager working with their counterparts to train each other on each system that was unique to a specific brand. We began to look at shrink across all brands and leveraged each other to ensure we had a sound strategy for shrink reduction throughout the company.

Exception Reporting. With over 2,600 stores, exception reporting is critical. We were very successful at Sunglass Hut with our exception-based reporting system and quickly expanded that system LensCrafters. Working closely with our partners in MIS, we were able to integrate our reporting system with our POS system. The system imports all of our POS data into an easy-to-use, Windows-based interface that allows us to run our own queries. By tracking trends based upon store, district, region, time of day, day of week, transaction type, and dollar amounts, we are able to focus on those stores that are outside the established norm. Our investigators can then easily determine if the cause is due to dishonest activity, improper training of our associates, or a need for better policies, procedures, and management practices.

We use this system as both a proactive and reactive tool. As a proactive tool, we use it to drive our “First Contact” program. When our POS data is reviewed, the system searches for predefined exceptions, such as unusually high refund activity. The system then automatically sends the detail directly to the store manager for review and response. The store manager can then determine if this was a training issue or an equipment issue, such as an inoperative credit card reader, and take the necessary steps to correct the problem. If the store manager determines that it is a LP issue, they contact their loss prevention representative immediately. In stores where we may have only one associate working at any given time, this program goes a long way to remind everyone that, yes, there really is someone monitoring the operations of the store.

Another proactive application of the system is the ability for an investigator to query a store prior to conducting an audit. They then have a much clearer picture of which opportunities need to be addressed before they get there, and are prepared.

As a proactive tool, we currently have 32 different queries that are run automatically, and then e-mailed to the investigator who has responsibility for that area. The reports are run weekly, during the morning hours of Sunday,and are then automatically e-mailed. On Monday morning, the reports are waiting for the investigator to review. Our investigators are then able to focus on the stores that need immediate attention based on their trend.

As a reactive tools, they can also query a specific individual before an interview takes place to determine what areas need to be explored when they spend time talking to the associate.

A Tale of Two Companies: A Roadmap for Merging LP Departments

Case Management. We also decided to select a new case management package that would be web enabled. This was critical due to the multiple remote locations of our team. The software helps our staff manage the investigative process by developinginvestigative action plans for each case. The system groups data according to fields, such as type of case, suspects,specific losses, day, and time. Our database helps the investigator accurately collect data for trend analysis.In cases where restitution was agreed upon, the database tracks restitution payments and schedules, generating account balances and payment schedules and produces the documents to be sent directly to the subject.

All of this information resides in databases at our corporate office so that the investigator does not need to keephard copies of the volumes of paperwork involved in extensive cases.

The web-based design also allows us to use this as a training and awareness vehicle for the department. We have established a LP portal that houses our loss prevention policies and procedures and our goals and objectives. The department can access this from any computer and always has an instant reference available to them for any questions that may arise.

Audit Software. As part of our department mission statement, we believe that “speed is life.” To that end,we recognized the time lag between auditing stores, completing the paperwork, generating the action plans,and involving all the appropriate levels of management in the results…and more importantly…the solutions.

We knew that LensCrafters had an excellent and productive audit program in place, but Sunglass Hut had moreadvanced technology for executing their audit program. Working with an outside vendor, we created proprietary softwarethat streamlines the entire process.

The software was built in two secured parts, one residing on a central PC in our corporate office and the other on theinvestigator’s PDA. The wireless units transfer the audit results from the PDA to the corporate office, and action plansare generated based upon that information. The action plans are then e-mailed to the appropriate regional and district managers, as well as a hard copy mailed to the store manager.

Known-Theft Process. We have also automated our known-theft reporting process, and maintain that information in a data warehouse. This gives us the ability to be more proactive in providing training and awareness programs, as well a physical security solutions, must faster than ever before.

Shrink Matrix.In-house, we developed a shrink matrix report. This report combines information from a number of different reports and systems that can have an impact on a store’s overall profitability. Information such ascredit card charge-backs, cash over and shorts, and deposit variances are all combined with some of our exceptionreporting data and calculated onto one sheet of paper. The report is color-coded and at a glance, anyone, at any level ofmanagement, can see which stores, districts, or regions are performing well, have some areas of opportunity, or aretrending at risk. This helps us keep the store operations top of mind throughout the company.

A Tale of Two Companies: A Roadmap for Merging LP Departments
Bulk-Count System. Another in-house program we developed is a real-time, bulk-count process that enables us to accurately track shrink weekly. Currently, this program is being successfully tested in our watch locations. In essence, the system automatically converts the top 80 percent of our vendor SKUs to a generic, bulk count SKU, and “freezes” the inventory. Store personnel do a standard piece count and telephone their results to the corporate office through aninteractive voice response (IVR) system. We are now in a position to predict shrink results daily. This real-time information has enabled us to conduct more accurate inventories, and most importantly, address training, merchandising, and physical loss issues immediately.

EAS. Our electronic article surveillance (EAS) system is currently being reviewed as we work closely with our vendor. We are always on watch for newer, better, and more cost-effective technology. Currently, LensCrafters manufactures our own EAS tags, and this may be an option for the entire company.

Alarms. Likewise, our alarm vendors have joined us. We are currently updating older systems, and are streamlining our alarm reporting process. In one test, we are currently receiving all alarm information in an electronic data interchange (EDI) format, which is then sent to the data warehouse for storage and retrieval. This information is queried weekly for exceptions, which are then investigated.

The Journey Continues

We are off to a great start, but we still have more to do.

Merging two companies has been a challenge that we are proud to say we have accepted, and even prouder to know that we have managed successfully. To be honest, as a management team, we are at about 80 percent of where we want to be, but are excited about our progress.

We evaluated the effectiveness and need for every facet of the loss prevention business, and made many changes. As we continue to solicit and listen to feedback from our loss prevention team, we are constantly reevaluating the decisions we made, and adjusting where it is good business to do so.

People and technology go hand in hand. You can have the greatest people in the world, and if technology is lacking, their jobs become more difficult, and their effectiveness is diminished. If you have outstanding technology, but no onewho understands or uses it, you have spent a lot of time, money, and resources on something that is going tobring you very little return. The key is having the best of both worlds…and the best of both companies.

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