Deterring Loss with Humility and Respect

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EDITORS NOTE: PaulStone is vice president ofasset protection and riskmanagement at Best Buybased in Minneapolis.Stone started his lossprevention career asa store detective forJCPenney. He also held LPpositions with Mainstreetand Pamida prior tojoining Best Buy in 1991.Stone sits on the boardof directors of The LossPrevention Foundationand on the editorialboard of LossPrevention magazine.

EDITOR: As the vice president of assetprotection and risk management at Best Buy,what are your responsibilities and objectives?

STONE: Today loss prevention at BestBuy covers everything from the physicalsecurity side of the business to our fieldsupport network, which is responsible forimplementation of our shrink plan. Our fieldsupport network is a resource for the districtsales leadership teams and other partners aswell as the head loss prevention cheerleadersso to speak for our culture. We also handleinventory management at the store level,traditional employee theft interviews, andmaking sure our store teams are prepared tohandle daily LP duties.

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Our main focus is really about dataintegrity, which includes shrink reduction; making sure the information is accurate andthat its done on a weekly basis so that we can evaluate the stores and solve the problems ona timely basis. On the LP side, we also have safety; focusing on the safety of both our customers and our employees.

EDITOR: What about risk management?

STONE: Risk management is aboutpurchasing insurance for the entire enterpriseas well as handling claims. This includesgeneral liability or workers compensationclaims, which we do through a combinationof third-party management and our ownpeople. This year well be adding businesscontinuity and crisis management. Our focusthere will be to make sure the enterpriseis prepared for any kind of crisis that couldcome up. Post-Katrina, theres been a lotmore emphasis on those areas throughoutthe industry and the same with Best Buy.

EDITOR: What is the reporting structure?

STONE: I report to the senior vice presidentof the Customer Experience Creation (CEC)team; what used to be called retail operations.The CEC is a grouping of leaders who arenot in charge of retail sales, but supportsales. We have sales development, customerexperience, properties, trainingall theoperational disciplines on our team. We arebuilding this team to be a global supportfunction.

On the asset protection side, the fielddirectors currently report directly to me asdoes my corporate LP director and directorof risk management. We run a pretty leanoperation all around.

EDITOR: How did you get your start in LP?

STONE: I started in loss prevention as astore detective for JCPenney. Right out ofcollege, I had been an operations manager

for a manufacturing company. My wife and I moved to theTwin Cities because she got a job there, but initially I did not. Ihappened to stop at a JCPenney store to fill out an applicationfor any position. While I was there, the store manager walked byand said, Are you here for the interview? I said, Yes, I am. Ithappened to be for the security manager position. She hired meon the spot.

EDITOR: So you didnt set out to be in loss prevention?

STONE: No. In fact, on that day at JCPenney if there wouldvebeen a buyer who walked by and said, Are you here for theinterview? I probably wouldve ended up on that side.

EDITOR: And how long did you stay at Penneys?

STONE: I was a floor detective for six months and then Ibecame security manager. I worked in many of the stores in theMinneapolis-St. Paul area, sort of as a troubleshooter. I spenttwo-and-a-half years with them. Then I went to work for just fouror five months with a company called Mainstreet, which waspurchased by Kohls.Then I went to work for Pamida out of Omaha, NE, andstayed there for three years. I was field auditor, so I would go inand audit the books for the company and take care of the lossprevention issues as well. Finally, in 1991 I came to work at BestBuy as a district loss prevention manager.

EDITOR: Looking back at your LP career, how were you trainedin the right and wrong things to do?

STONE: JCPenney had a sixteen-week training program forsecurity managers where you spent a week literally working inevery part of the business. I did everything there from sellingmens shirts for a week to being the operations manager to beingthe store manager to working in the catalogue department. I wasable to touch every area of the business, which gave me a goodbroad background in the retail business.When I went to work for Pamida I audited the books, whichincluded payables and receivables. That started me thinkingabout people sending invoices or checks to their own home;fraud and paper kind of cases. When you saw the paper trails,it started to add up to how important the audit function is inconjunction with loss prevention.

EDITOR: Best Buy has grown from just 49 stores when youstarted to one of the largest retailers in the world today. Talkabout the growth youve seen, and about how its culture haschanged along the way.

STONE: When we were a small, family-oriented company, therewere a lot of good days, but also a lot of bad days. There were afew times when I wondered if I had made the right decision. In1997, we were on our way to $8 billion in revenue, yet we madejust $1.7 million in profit. You looked at the hard work it took togenerate all that revenue, yet at the end of the day we were notgetting much in return. It was interesting though, that even inthose down times, there was a sense of team and commitmentat Best Buy, starting with Dick Schultz, the CEO, and the othertop executives. They were really visible with a real sense ofcommitment. On my first day at Best Buy, Dick came to mydesk and welcomed me to the company. Thats the kind ofperson he was.

As weve grown over the years, thats a great part ofour culture that has transferred with Brad Andersonsleadershipputting the employee first. Even as we talkabout our commitment and our core philosophies aroundcustomers, the real key is that commitment to the employee.

You have to behave differently in a large company, especiallya public entity. Ive seen the struggles our organization has gonethrough over the years. Thats part of the journey companiesgo through in order to grow as fast as we have. Some of the bigcompany principles still need to catch up with us, but thats thebeauty of it, too. We still maintain some of the small companyideas and ideals.

EDITOR: Best Buy is one of the few companies that stationstheir LP person at the front door in such a visible position.Where did that idea come from?

STONE: It started in 1985 with my predecessor. Its a multifoldposition and a key part of our deterrent-based program. Yourfirst impression of our store is that person standing there inthe yellow shirt. Your last impression of the store is also theperson standing there in the yellow shirt. The role they play onthe outbound is to check receipts on boxes and suggest thingsthat might have been missed in the transaction. Do you needbatteries? Do you need film? Did you get everything you wanted?Its also to talk to customers that are leaving the store withoutpurchasing anything to find out why, so they can possibly changetheir experience. I hear stories every week about a yellow shirtthat saved a sale or saved a customer.

EDITOR: What can a young person today hope to get fromstarting in the Best Buy loss prevention function?

STONE: I think if they want to make this a career, they can worktheir way into our leadership ranks, even if they start at the frontof our store in the yellow shirt. They have the chance to sit in mychair at some point in their career. Thats because weve done agood job through the years of listening to our employees. We askthe people in the field how they would do it better.

Weve seen our store LP people grow into many differentsides of the business. They become store managers. Theybecome district mangers. There are a lot of avenues open tothem, whether they start in loss prevention or not. We donthave boundaries, especially at the store level. Some of our bestsalespeople started in loss prevention.

EDITOR: What advice can you offer those people in theyellow shirts about what it takes to move up the ladder in thisorganization?

STONE: First, I would tell them to participate in the partneringatmosphere that exists in Best Buy stores. I would tell themto get involved in the functions in the back room, to learninventory and the impact that it has on shrink. You cant solve ashrink problem if you dont know how its created.

I would also tell them to get involved in the front end of thebusiness, to understand the gaps we might have that customersor employees can take advantage of.

Overall, I would encourage them to get to know as much ofthe back side of the business as they can and at the same timecreate these partnerships and work on their communicationskills within that store. Thats what will get them noticed as apotential candidate.

EDITOR: What would you advise them about the reading or learningthey could do on their own that would help them move up?

STONE: As far as reading, anything to do with leadershipskills or anything that will help them know themselves asan employee. For example, Best Buy uses a concept calledstrength-based organization, which is based on a book called Strengths Finder. Its all about knowing what you are good atand building your career on those strengths. The point is toread books that will give you new ideas and ways to think aboutyourself.

EDITOR: What are you reading right now?

STONE: Im reading a book called Mavericks at Work byWilliam Taylor and Polly LaBarre. As a department weve readquite a few books over the years. A number of books by MarcusBuckinghamFirst, Break All The Rules and Now, DiscoverYour Strengths; Jim Collins Built to Last and Good to Great;The Servant Leader by James Autry; and Peter Senges TheFifth Discipline. If you can grab one idea out of these books,personalize it, and become a better leader, then it was worthyour time.

EDITOR: Describe the philosophy of loss prevention at Best Buy.

STONE: First and foremost, we try to be a deterrent-basedprogram. Everything we develop is intended to be a deterrent.We do not have a catch em philosophy at all.

Second, we are very transparent with our employees. If wethink we have a shrink problem, we are not going to keep itfrom them. We need them to be part of the solution. We set upa program in which people in our stores are in charge of lossprevention. It is an employee-driven program.

We expect people to know their roles and, at the moment oftruth, to think about the fact that its their store and that theyneed to do the right thing for their store. Whether that meansthemselves as an employee who thought about stealing, or ifthey see a customer making a bad decision.

When we talk to our loss prevention people, we hit hard onthe idea that these are customers and employees, not potentialthieves. You treat people differently if you see them as potentialthieves rather than as customers. We want to make sure thatwere more customer-focused and deterrent-based.

EDITOR: What are some of the initiatives and programs thathave been successful at Best Buy in managing shrink?

STONE: Our loss prevention program focuses on four areas.First, I have to start with our shrink plan. There was a time in themid-90s, frankly, when we werent that good at shrink. We didntunderstand the intricacies of our loss prevention program likewe probably should have. We finally came to understand that wewere the problem because of the way we were approaching ourbusiness. We started to hold round tables with our employees,and they helped us create the shrink plan we have today. Since1995, every store in our company is required to implement andmaintain the shrink plan.

Second, it is expected that store managers talk about shrinkevery day and let people know its not just an awarenessprogram. It is grassroots. Its not me telling them, Here are your30-day topics. Its more about making certain they understandthat last night, we lost a camera or we lost a laptop. It is all aboutlocalizing the message.

Third is cycle counts. Prior to our success at shrink, wedidnt do cycle counts on a regular basis, even at the store level.Im not talking about a full physical count, but about a processin which every day or every week stores now count differentcategories of goods and then figure out where they stand in theirshrink on a weekly basis. Its almost like a scorecard concept.

Fourth, our general managers are required to do anadditional interview on perspective candidates. The purposeis not to ask the traditional interview questions. Its to lay outtheir expectations of that employee if they elect to come aboard.Heres how we operate in sales, heres our expectations aroundoperations, heres our expectations around shrink. If you cant liveby these expectations, you probably dont want to work here.

The last piece is that if we have a store that goes over budgetin shrink, there will be an over budget meeting at which thestore manager has to talk about what happened and then, moreimportantly, talk about how theyre going to fix the problem.Thats how weve learned to manage shrink on a local level.Ideas have come out of those meetings that have helped us buildoff our current shrink plan and come up with best practices thatwe can share with stores that get into trouble.

EDITOR: So, the role of the local store manager is critical inthe shrinkage plan. Is shrink results part of their incentive orbonus plan?

STONE: Store managers have a comprehensive bonus plan.In fact, every employee in the store is eligible, and it is not justrelated to shrink. A few years ago, we did have a bonus plan

11_copy_copythat was specifically related to shrink results, but we migratedthat plan into an over-arching plan that gives everyone a vestedinterest. They can help drive the bonus payout for basically agrouping of stores. So, its not just their store, but the district.

EDITOR: How would you describe the role of seniormanagement in helping you and the operations team managethe shrink program?

STONE: I go back to 1995 when we had a flare-up in shrink.In no uncertain terms, our senior executives told people thatshrink would become very important. In fact, shrink becameone of our key focus areas. This helped people understandtop managements commitment that high shrink was notacceptable in the organization. After three years, shrink wasremoved as a key focus area. That was a happy day for us andgood news for the company. It told everyone that our shrinkwas under control and we were getting the numbers down,which weve been able to do now for the last eight years. Butthe commitment is still there, every day, even as new leadershave taken their spots within the organization. Those seniorexecutives constantly talk about the shrink program and theircommitment to making it work.

EDITOR: You mentioned new responsibilities that you weretaking on, including business continuity and crisis management.How will you manage those responsibilities within total assetprotection?

STONE: Crisis management will have close synergies withour safety program. Our crisis management framework…ourpreparedness for a crisis…is in effect our safety program. So wewill expand our safety program to include some specific focusareas, such as if you live in hurricane country, youll do a fewdifferent things than you would if youre in earthquake country.

The rest of the framework calls for formation of somepartnerships and collaborative groups for when a crisis happens.During the crisis, we need a group to manage the centralfunction, or command center, if you will, here in Minneapolis.Then the recovery and restoration would be the next phases.Thats when different teams step up. The crisis managementteam will coordinate all that activity.

I will lead the crisis team, which today is sixty employeeshere in Minneapolis. This team will set up the conference callsand make sure the right questions are being asked and the rightpeople are on the calls. As we go into recovery and restoration,we will help those teams get organized.

Typically, people group crisis management and businesscontinuity together, but they are two separate functions. Crisismanagement is handling a crisis as it happensto be preparedfor it, handle it as it happens, and then move to restoration.Business continuity is about having a contingency plan in case something would happen. Im not quite sure how that willmove down through the field, but we think that some groups,such as supply chain, need to have a more rigorous plan.

EDITOR: Looking in your crystal ball, what are your thoughtson how the loss prevention function will evolve, not onlywithin Best Buy, but within the retail world?

STONE: The chief security officer has emerged over thelast few years, which says to me that at a certain point everyorganization will try to leverage its people. In loss preventionwe need to put ourselves in a position to be leveraged,whether that means taking on risk management or crisismanagement or HAZMAT or whatever. We need to be opento that, see the synergies that could exist, and how it couldwork for the organization. If we look at ideas like the safetyprogram being a critical piece of crisis management, theremay be ways to transform different disciplines of our businessinto one, which may make it more robust over time. Thatsone of the keys.

LossPrevention has written about the importance of improving leadership skills within the profession. Thatswhy weve wanted to be involved in certification, becausewe believe strongly its about leadership skills. In the retailindustry, success is always about the manager, not aboutthe market or where you put the stores. I know location,location, location. But its really about the people who run thatbox. The same is true with the loss prevention department.Its about the leadership who runs the department and whoworks with the teams and helps develop these people. Thathas got to be part of our future. Every other discipline inour companies develops their leaders. Loss prevention is nodifferent.

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EDITOR: What values do you place on family and community?

STONE: From a values perspective, our company has donea tremendous job of solidifying the core values we have asan organization. One of them that hits home is humility andrespect. There are people here who over the years have shownthe ability to look at themselves first, instead of pointing their fingers at other people. Thats been ahuge plus in many of thepeople Ive worked for and with.

The companys sense of community activity has also been tremendously important to the organization and myself. We encourage all of our leaders to participate, whether we takea half day to help clean up a school or paint houses or sendour Geek Squad out to wire a schools computers. There aremany other local community activities that the stores anddepartments within our corporate office support, such asworking at crisis centers, Toys for Tots, or Habitat forHumanity. Best Buy also has a childrens foundation, whichhas given millions back to the communities that we serve.

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