EDITOR’S NOTE: Karl F. Langhorst, CPP, CFI is corporate director of loss prevention for The Kroger Co. based in Cincinnati. Prior to 2008 he was with Safeway as director of LP for Tom Thumb and Randalls supermarkets in Texas. Langhorst spent twenty-five years in law enforcement prior to joining Tom Thumb in 1997. He is a member of the National Retail Federation loss prevention council and sits on its diversity committee. He is also a member of the LP Magazine editorial board.
EDITOR: I grew up in central Indiana and as a youngster made a weekly trip with my grandmother to a Kroger store, which was a big deal to us. Kroger is not the same company that it was when I was a kid. Describe today’s Kroger Co.
LANGHORST: Kroger is the largest traditional grocer in the United States, but it has become much more than that. Our banners extend across thirty-four states with locations representing everything from value brands to upscale stores. Marketplace stores sell everything from apparel and jewelry to traditional grocery. This diversity provides Kroger with incredible flexibility, positioning us as a leader in all of these retail markets.
EDITOR: Is Kroger a family name?
LANGHORST: Yes, Barney Kroger founded the company in Cincinnati about 130 years ago. The current chairman is Dave Dillon, who just retired as CEO after ten years in the role. Dave joined Kroger as part of the merger with Dillon supermarkets, which speaks volumes about the company. When Kroger merges with another company, they look for constructive input. The process isn’t simply looked at from the top down. Communication flows both ways. That’s consistent in all areas of our business, not just in loss prevention. It’s part of everything we do as a program and as a team. Feedback is both welcomed and expected from the divisions.
EDITOR: Kroger has kept the names of many of the companies that have been acquired. How many brands are there?
LANGHORST: There are about two dozen brands or divisions. But, let me point out that you’ll typically not hear leadership refer to “acquisitions.” We refer to the process as a “merger” of the two companies. This is not simply a matter of semantics. It’s much more a part of the culture.
LANGHORST: Everything that we’ve done as part of the loss prevention program has taken longer than I would have ever imagined. However, I consider that a good thing. We’ve collected the expertise that existed throughout the divisions and gathered feedback from our team. For example, when we put together our loss prevention manual, we collected manuals from every single division and chose the policies that we felt were the best of the best to create a single policy manual that serves the entire organization. It was an arduous process, but I’m absolutely convinced it was worth it.
EDITOR: Was there one policy that was more difficult to implement?
LANGHORST: One of the toughest policies that we had to change was the shoplifter apprehension policy. There’s nothing in our store worth losing your life over. Nothing. And I’m very happy to say that our workers’ comp and general liability claims have plummeted, yet our shrink also has gone down because we’ve learned how to manage it in a different, more proactive manner.
EDITOR: How did you spend your initial days at Kroger?
LANGHORST: My first year with Kroger I was on the road probably 80 percent of the time visiting all of the divisions. I’m at about 50 percent nowmaking store visits, attending meetings, and taking part in various initiatives with division senior management. Our team is actively involved, using a process known as “Gemba walks.”
EDITOR: How is that approach different?
LANGHORST: A Gemba walk is more about actively seeing and understanding the process. It gives the leaders of the company a reliable and easy way of giving support and encouraging process standardization. For example, our Portland alarm center had some processing issues in our programming department. We were taking too long to bring new stores online, and there was a backlog. I just observed the process and listened to the team to get a better understanding of what folks were doing. The team really appreciated the time, but I learned more about the process as well. If it’s something that’s affecting our customers, then we have to address it. In this case, it just happened to be an internal customer. And because we actually saw and understood the process, we were able to develop a solution that satisfied everyone involved.
EDITOR: How many associates are under the LP umbrella?
LANGHORST: We have about sixty who support the field from a corporate perspective and another 700 to 750 out in the divisions. When I came on board, the LP staff was very limited, and in many divisions there was no true loss prevention department at all. We had a risk management team, which was largely referred to as security, as well as some investigators.
During the transition process, we went from division to division establishing the loss prevention staffing modelthe positions we would be hiring, the job profiles for the different roles, and the training necessary for each one of these positions. Where we had district loss prevention managers [DLPM], we developed the role to define specific ownership of the district. Everything within that district, including technology, investigations, security, shoplifting details, or other related roles, fell under the responsibility of the DLPM.
We then transitioned away from contract undercover agents and brought in true LP specialists who not only apprehend shoplifters, but also have other roles, such as safety, looking at perishable shrink opportunities in the store, and other responsibilities that we feel can add value to the business.
LANGHORST: No. The staffing depends on the format of the store. For example, a Fred Meyer store out on the West Coast might have two or three LP specialists based on the size of the store. A Marketplace store might have one LP specialist. But in other locations there may be one rotating in and out. The DLPM hires and manages his team. The DLPMs report to the division LP manager, who reports to the division operations manager, but with a strong dotted line to one of our two corporate senior managers of LP operationsWally Walker with the west and Kevin Larson with the east.
EDITOR: Describe their roles.
LANGHORST: Wally and Kevin interact on a daily basis with almost all their divisions, where they have built very strong relationships. The divisions know that they can reach out to us for assistance, guidance, and support whenever they need it. The most important objective of the corporate senior managers is partnering with all areas of the business. They are interacting with all the different parts of the business on a daily basis. Without that relationship and understanding our internal customers, we’re never going to get anywhere with our programs. They’re also responsible for building any internal training programs that we have.
EDITOR: Who’s responsible for technology?
LANGHORST: Randy Christian is our corporate LP technology manager. When he first came on board, he was primarily responsible for CCTV. Now with the support of a project manager, Randy oversees EAS, CCTV, LaneHawk, Gatekeeper/Purchek, biometrics, alarms, and other related functions.
EDITOR: How connected are you with CCTV?
LANGHORST: The majority of our stores are connected remotely. Our point-of-sale team will then try to package a complete product that is then sent to the district LP managers to investigate. We actually have two CCTV and alarm labs that are set up with all of the equipment that supports our stores. One is located at the Kroger technology center just north of here in Blue Ash, and there is also a small lab here.
EDITOR: Kroger has a strong ORC presence. Does that function report to you?
LANGHORST: Yes, Danny Dansak is our senior corporate ORC manager. Kroger had no presence in ORC prior to my arrival, which is something that I was able to bring from Safeway, where we were very successful. We currently have more than twenty ORC investigators, all assigned out to the divisions in the field. You’ll see that a majority of my staff is field staff. We’re purposely very lean at corporate.
We started a financial crimes unit a couple years ago, bringing in a retired FBI agent. He works all of our financial crimes from an ORC perspective. Because we are very heavy into payroll check cashing through Kroger’s personal finance group, with that comes a bit of exposure that we have to manage.
EDITOR: Let’s move on to the point-of-sale team. What do you call them?
LANGHORST: They’re called MAX LPMonitoring All Transactions. Our MAX group, which is headed by Peggy Merschbach, earns lots of awards and is second to none in the industry.
EDITOR: These people are performing the analytics for all exception reporting?
LANGHORST: Absolutely. When I came here, MAX had just been created. Prior to MAX, every division had their own analyst. MAX brought all the analysts to one area, allowing immediate information sharing to identify trends. They were very focused on criminal activity, but we decided to take it a step further and look at anything operational that can cause shrink for the company.
For example, we started sending cases out on apples that were being rung up as nonorganic when, in fact, they were organic. That’s a loss to the bottom line. The LP person would then go to the store, work with store management to interview the associates, and retrain them. At the end of the day, we’re reducing losses to the company, and, just as importantly, we’re retraining and retraining our associates. Over 50 percent of our cases are operational in nature now.
EDITOR: Any other direct reports?
LANGHORST: Yes, Reba Phillips is our central alarm control manager in charge of our center based in Portland, Oregon. We have a terrific facility and staff out there that manages alarms throughout the enterprise. It is a UL-certified facility that is responsible for monitoring the safety and security of our facilities across the enterprise 24/7/365. The team takes that significant responsibility very seriously.
LANGHORST: When I came here, there wasn’t a very well-developed LP bench. I brought some of my senior staff in externally. In the divisions we also brought in some external candidates from different retailers. It wasn’t always grocery retailers, but I wanted strong LP professionals. Now, that’s changed as we have developed significant bench depth in loss prevention across the enterprise. Now when we lose one of our district LP managers, for example, we will look first at our best LP specialists. A career path in Kroger from an LP perspective can start with the LP specialist position and grow from there. That doesn’t mean that there are not good people coming to us from other retailers. We’ll do that as well.
EDITOR: As you look at 2014, what are those driving objectives that you have identified as goals for success?
LANGHORST: A key aspect of success is always to work to align with the business. That is a continuously evolving thing. You don’t ever put that objective away because this is a retail business. Retail is always evolving, and if we don’t stay on top of things, we’re going to miss something. We need to avoid inadvertently implementing things that create obstacles to the business and build programs that support the business and make it as successful as possible. Just look at what’s happening with mobile point-of-sale. That’s an opportunity, and something we continue to look at from both a technology as well as a loss prevention perspective.
EDITOR: Are you guys in that game?
LANGHORST: At a high level. We have a solution, actually, that Kroger developed in our own R&D department. We’re right there in those meetings with research and development and information systems. We then partner that with our merchandising people and our front-end team to better understand what’s coming so we can try to be out ahead of it. As a partner, we want to add value and support the company initiatives.
EDITOR: What else is part of your 2014 plans?
LANGHORST: We’re also looking at transitioning our 700-plus convenience stores more into the fold of loss prevention. We’re just starting to look at their point-of-sale exception reports and monitor their alarm systems internally. Convenience stores have some different challenges than our grocery stores, but the basic goal is giving them access to the same loss prevention resources our other retail divisions have.
EDITOR: What are the expectations the company has of LP from a financial standpoint?
LANGHORST: While we do not have direct accountability over shrink, we are very closely aligned with the shrink team on a daily basis. We’ve created an electronic dashboard for our district LP managers that provides all their shrink numbers. That’s one of many metrics that they’re involved in, both from a perishable side and a theft side. We get daily updates on shrink numbers by division.
EDITOR: So, there is a separate shrink team? That is an interesting setup.
LANGHORST: The shrink team reports to retail operations and is responsible for all our retail stores. They have shrink managers in each division, but they also have us. We are involved in a lot of initiatives, so we have to be very closely aligned.
EDITOR: Do you look at shrink as one bucket or several?
LANGHORST: We understand shrink in terms of scan loss, overproduction, perishablesall those things. An LP specialist should be able to walk a store and know if the bakery is correctly maintaining its rotation. He should be able to walk into a milk cooler and determine if the milk products are being correctly rotated based on the date. Kroger is very, very focused on freshness for our customers, and that’s an area where we can really add value.
EDITOR: Is shrink a component on your department’s performance reviews?
LANGHORST: It is a piece of it in the divisions. It has to be. I recall being in a room filled with LP professionals from all different grocery retailers and asked how many had shrink from ORC. They all raised their hands. I then asked, “How many of you have perishable shrink?” Only a few of them raised their hands. I said, “Really? You don’t have perishable shrink?” So I asked, “Which one costs your company the most money?” And they responded “perishable shrink.” If that’s the case, shouldn’t that be an important part of our focus? That’s why LP is focused on both sides of the business. I’m not saying that ORC isn’t important. Obviously it is, or we wouldn’t have the ORC unit where we see successes on almost a daily basis. But you also have to have a complete understanding of what’s on the inside of the walls that you can control. What’s outside you can’t necessarily control.
EDITOR: That an important point that not everyone gets.
LANGHORST: It’s important for LP professionals to focus on talking the talk. It’s great that we can all talk ORC, but until you can talk EBITA or gross profit or OG&A, you’re not going to have a seat at the table. I often ask LP folks, “What are you reading?” It’s great that you read LP Magazine, but are you picking up Progressive Grocer and the other trade journals? If you’re not reading those, you won’t be able to have those elevator conversations that you want. You have to understand all the measurements that affect the business. Kroger is very good at measuring. We have measurements for everything.
LANGHORST: And I get those reports. That’s a little longer than we’d like. Wait time is a huge initiative.
EDITOR: How do you monitor and come up with that number?
LANGHORST: We have state-of-the-art technology that tells us exactly how many customers come in, and how long it usually takes them to navigate the stores. This allows us to display on a monitor at the front end how many lanes should be open now, and how many lanes we should have open in 15 minutes. This helps us to better serve our customers across the enterprise.
EDITOR: If you don’t mind, let’s talk a little bit about your working career. You didn’t start in the food retailing business, did you?
LANGHORST: I did, actually. My junior and senior year of high school, I worked for Safeway in DeSoto, Texas, a suburb of Dallas. I started as a checker and moved to the night crew. Back then, you had a very consistent night crew. There wasn’t the turnover that you typically see now.
After high school at age 18, I went into law enforcement. I started in DeSoto, and then at 19 I went to work for the sheriff’s office in Dallas. If I remember correctly, I wasn’t old enough to buy bullets for my gun, but I was on patrol. I was one of the youngest deputies ever in Dallas.
EDITOR: How long did you stay in law enforcement?
LANGHORST: I was there 25 years17 years full-time and then eight years as a reserve officer.
EDITOR: What enticed you to move into loss prevention?
LANGHORST: I actually wanted to go into the Foreign Service, so I applied for diplomatic security. My wife and I enjoy traveling overseas, and we thought Foreign Service was a great way to go. I was hired by the State Department and was supposed to start the next academy class. Unfortunately, there was a federal election that resulted in a hiring freeze. Once I turned 35 that was it, because I was considered too old.
A buddy of mine told me that Tom Thumb was looking for a security guy. I was ready to try something new, so I walked in the door thinking I knew a lot about retail security. After all, I’d worked off-duty at Tom Thumb for seven years, so I must know a lot, right? I knew nothing. Two weeks into it, I realized that shoplifting was not the major problem at Tom Thumb or any retailer for that matter.
EDITOR: But you rose to be director of LP, correct?
LANGHORST: Yes, I was director of LP with Tom Thumb, and then after Safeway acquired us, I took over both Randalls and Tom Thumb. I moved to Houston, but travelled back and forth to Dallas almost weekly. I literally started with a folding chair and a card table and built the team from there.
EDITOR: Not all former law enforcement people are successful in retail. What were the things that convinced you to build a career in LP?
LANGHORST: I can say this with all honesty. There is hardly a day goes by, even sitting here in this office today, when something different doesn’t come up in retailing. People very much have a sense of pride and ownership of the grocery store. Our associates and customers both do. They’re very passionate about it. With that passion comes accountability to make sure our customers have a good shopping experience. Everything that comes with a good shopping experience having products in stock, freshness, safety are components that LP has an opportunity to impact. I very much like the challenge and the excitement of it. Every time the company rolls out a new initiative, there’s likely a loss prevention or risk component behind it someplace that we need to be involved with.
EDITOR: As you and your organization try to become the best of the best, what do you think is key to obtaining that goal?
LANGHORST: Continually evolving and being receptive to new ideas. I think loss prevention as an industry has come an amazing distance in the last few years. We’ve challenged ourselves to get better, to learn more, to be a business partner, and to evolve with the technology and the changing processes that are coming out there. But there are new challenges every day.
For example, take Generation Y. There’s a whole component in the workforce that you have to continue to understand. Earlier this year, I decided that I needed to learn more about Gen Yers, who make up a large part of our workforce. We were developing an integrity and honesty video for our associates. We started to go down the traditional path of the guy in the white shirt and tie standing up saying, “You shouldn’t steal from the company.” I wondered how that approach was going to resonate with the Gen Y associate. So, I reached out to some of my progressive peers in the industry to find out what they were doing. We also did focus groups with our Gen Y associates to get their point of view.
Then I took it one step further and found a Gen Y associate in the building who was going through our young professionals’ resource group and asked her to mentor me. We go to lunch, I run things by her, we talk, and I ask for feedback. It’s been a great experience.
EDITOR: That’s a twist on mentoring.
LANGHORST: You’re never too old to learn. And you should not be afraid to look for knowledge wherever you can. Then share that knowledge.
EDITOR: How do you share knowledge internally?
LANGHORST: We have a blog now strictly for our 130-plus district LP managers across the enterprise. It’s a confidential blog where they can share ideas or ask a question. It’s just one example of finding new ways to share best practices and facilitate communication internally.
EDITOR: Do you have other formal means of ongoing communication?
LANGHORST: We’ll do several things depending on the training. We just finished a robbery prevention video. We have our own film studio, film crews, and produce everything internally. We filmed at the pharmacy because pharmacy robberies are on the rise. We filmed in a jewelry store format. We filmed in a c-store format. That video now goes out to all associates in cash-handling positions across the enterprise for them to understand how to help prevent robberies, or if they’re in a robbery, what the expectations are.
Our divisions also develop their own communications elements, from traditional posters to newsletters to internal websites. But we’re finding that videos seem to be the most effective.
EDITOR: Earlier you talked about pulling together the different policies and procedures from all the different brands and picking the best of the best. Kroger is about to add another brand. Is there a possibility that there’s something they are doing that’s better than what you’re doing now that would change your procedures?
LANGHORST: I hope so. I’ll take a good idea in a heartbeat. When Kroger merges with a company, it’s done for a reason. Management believes that company can bring something to the bottom line, and it’s a good operation. I have no doubt there’s some great things and some great people there. I’m excited for the opportunity to interact and sit down and learn.
EDITOR: One last question. Outside your office is a large sign with a lot of signatures. Tell me about that.
LANGHORST: Earlier this year Duke University’s basketball coach Mike Krzyzewski came to our store manager meeting. Fortunately, I got to spend some time with him. One of the things he talked about was team standards. When I had a team meeting with my division LP managers shortly after that, I asked them to come prepared with a standard that they wanted for the LP department. They voted on it and made the decision. It was left up to them to decide what our standards would be for the LP department. The final day, we had a large board printed at the front listing those standards. We unveiled it as everybody went to leave that day. They each came up and signed the team standard. They also received copies of Coach K’s book, The Gold Standard: Building a World-Class Team. That’s how we created our standards, and they own them.
