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Developing a Strategy for Professional Development and Shrinkage Reduction

EDITORS NOTE: William M. BillTitus is vice president of lossprevention, environmental health,and safety for Sears, Roebuckand Co. He is responsible for overseeing over 2,400full-line department stores,off-mall specialty stores, plus their repair and logistics operations.

Titus has over thirty years of retail operations and loss prevention experience. Prior to going toSears in 2003, he held vice president-level positions for OfficeMax and TJ Maxx. Hebegan his career as a controller for Montgomery Ward in Chicago.

EDITOR: As a vice president of lossprevention, what is your view of the responsibility for the LP function in acorporation?

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TITUS: Ive always viewed loss preventionin a very broad context. I came upthrough the control and operations sideof Montgomery Ward, so Ive alwaysseen loss prevention as contributing toeffective operational controls, maximizingprofitability, developing a team, andcertainly reducing shrink.

EDITOR: Since your arrival at Sears twoyears ago, youve reorganized the lossprevention program. How did you beginthat process?

TITUS: One of the first things wedid was take a pretty deep dive intounderstanding our internal customers,including such things as their perceptionof the program at the time, how they feltLP was delivering the service, and theimpact it was having. We did this using avoice of the customer survey. We sentthe survey to half of the store generalmanagers and operations managers, all ofthe field teams, and many product repairand logistics managers. The survey hadabout thirty questions that allowed theperson to rate various aspects of the lossprevention organization and program, aswell as some open-ended questions tosolicit some straight comments. I was verypleased that we had an 85 to 88 percentresponse, which was unheard of at Sears.Plus, we received thirty-three pages ofsome very candid comments. This wasa great tool for us as we developed ourstrategy, as well as a great benchmarkingtool to use going forward to validate howwe are serving our internal customer.

EDITOR: What about the programcomponents?

TITUS: Certainly, we looked at thecomponents, evaluated the existingstrategy, and, importantly, the availableresources. We not only looked at that fromthe corporate level, but we also went toour field LP and store teams to evaluatewhat they felt their priorities were, whattheir accountabilities were, and what theresources were they had available to them.

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EDITOR: How long did this assessmenttake?

TITUS: About sixty days.

EDITOR: What did you find out?

TITUS: It became pretty clear that weneeded to get back to basics…shortagecontrol, detection and detention ofshoplifters, resolution of dishonesty,and safety. At the store level, our lossprevention teams were focused oneverything but that. They simply hadtoo much on their plate. We had justtwenty-four people handling 2,400locations, including full-line stores,off-mall stores, as well as product repairand logistics facilities. They simply were unable to focus ondeveloping the strong partnerships with the operations and storemanagers that are necessary to be effective.

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EDITOR: That must have resulted in some significant organizational and personnel changes.

TITUS: It did. We knew we had to realign our loss preventionteams to support each one of the businesses. So, we developedseparate organizations to support our full-line stores, our off-mallretail businesses, our product repair business, and our logisticsoperations. We first evaluated the existing team members andplaced them into appropriate assignments. Then we wentoutside to bring in experienced, talented loss preventionprofessionals into the open positions. Once we were fully staffed,we went from having an average of forty-something stores perloss prevention professional down to sixteen. That has trulyhelped us develop the day-to-day store-level relationships thatimpact results.

EDITOR: How did the corporate team change?

TITUS: Weve put together a fantastic corporate team ofreally great professionals who have helped us integrate theloss prevention function into each piece of the business likenever before. Were working with our merchant partners, ouroperators, facilities, financial, HRin ways that have truly nothappened in the past.

EDITOR: How did you set up the corporate structure to bring focus and clarity to the field organization?

TITUS: We now have a director of full-line stores that hasregional loss prevention managers and their field organizationreporting into it.

We have a director of operations who wears two big hats.One is all the off-mall businesses, which includes the hardware stores, The Great Indoors, Sears Grands, and our dealer network, as well as our product repair organization with over10,000 technicians, and our logistics operation. Plus, that person wears the hat of our operational and administrative leader here corporately.

Thirdly, I have a director of systems and investigations who has proven invaluable in helping us get the system support and packages that we needed to help understand our shrink trends and conduct investigations.

Our other directors include a director of environmental,health, and safety and a director of shortage control.

EDITOR: Talk a little bit about some of the technology-related programs that youve put in place.

TITUS: One of the things that I found early on was that we were buying disparate technology, meaning technology that didnt integrate with each other or was end-of-life-cycle. We had no strategy to deal with end-of-life-cycle technology. So, we wereconstantly having CCTV systems, EAS systems, alarm systems that were going down that couldnt be fixed. We had to understand what technology we owned and where new technology was going to ensure that, as we started spending dollars, we were able tointegrate and bring along our old technology as best we could.

EDITOR: Give me an example.

TITUS: RFID is a great example. You need to understand what RFID is going to look like as you are buying new POS or EAStechnology. That has proven to be invaluable to us in being able to integrate new systems and technology to allow us to spreadour infrastructure dollars to have much broader impact.

EDITOR: Thats a very interesting point. Doesnt that need to understand technology integration speak to the value of good vendor relationships?

TITUS: It does in a number of ways. Let me put it like this. Vendors are like bees. They get to go around to all the differentflowers and observe not only what is happening in the industryfrom a technology development viewpoint, but also how itsbeing applied in other retailers. So, they bring an invaluableperspective to you when youre talking about growth ofyour technology, its impact, and return on investment.Emerging trends, whos playing with RFID, what doesthat look like, what are the learnings from a systemsdevelopment standpoint…all of that type of informationtends to come from a vendor partner who is working withyou, not necessarily selling you a product, but talking toyou about how technological changes can help improveyour impact. They also tend to bring some of the bestpractices to you. Ive never been one to turn away a bestpractice. I have no pride in authorship. If somebodysdoing something better than I am, I want to learn whatthat is.

EDITOR: What are some of those programs that youare most proud of that have allowed you to improve theeffectiveness of your LP team and bring down shrinkage.

TITUS: Its truly about focusing the company…not justloss prevention…on the priorities for reducing shrink.That, quite honestly, has been the most effective thingwe have accomplished. We have made the wholecompany understand that shrink is a priority issue, aswell as is good customer service, driving revenue, andprofit.

The second impact has been developing teamwork.The loss prevention team here has done just aphenomenal job in training and developing the storemanagement teams, the loss prevention teams, on whatwe call the four plays and getting execution of thosemetrics. For the first time, this company now has a scorecard that actually rates those four plays on a monthlybasis, which allows us to analyze and understand whatsworking and whats not working, so we can focus onthose stores and those components that are not movingin the right direction.

I think the third piece has been that weve beenallowed to repair our infrastructure. Weve made asignificant investment in fixing and adding EAS and CCTVsystems that have paid back in spades. Weve gottenphenomenal productivity back in it.

Fourth is weve invested in systems. We implementeda point-of-sale exception-reporting system. We arerunning 100 to 200 percent increases in dishonestassociate cases just because we now have this technologyin the field to provide this data to initiate or expandcases.

I feel very good about what weve accomplishedfrom a program standpoint, from a team standpoint,and from a partnership standpoint. Its exciting to seethe movement and to see the impact. In the last threeinventory rounds, weve had a huge success in reducingshrink and all of the metrics that surround shrink.

EDITOR: Shrinkage reduction never rests with just the lossprevention team. There are two management issues Id like youto speak about. One is the role of senior management and howyou and your team influenced support from senior management.The other is the acceptance of shrinkage reduction as aresponsibility and accountability at the store level.

TITUS: That was one of the change-management principleswe identifiedhow to sell the senior management team onthe importance of shrink and what we need to do to drive itdown. We have an opportunity on a monthly basis to meet withthe senior management team and give them updates on whatwere doing and where were going. For example, when I firstjoined Sears, I found out that we had 870 camera systems, sowe put together a best of tape that actually highlighted all ofthe different shrink issues we were driving. I played the tapeat the first meeting I had with the senior management team,which included everybody from the chairman and the chiefexecutive officer to the executive VP of stores. It probably wasthe most impactful thing that Ive ever done. In fifteen minutesI had absolute support and commitment for capital. I continue reinforcing to them the impact of the investment that theyremaking and the return that theyre getting on the bottom line.Its pretty simple.

EDITOR: What about at the store level?

TITUS: I think the change is probably more difficult at thestore level when you have a significant change. We were startingwith an organization that didnt do the basic things that youwould typically think of in loss prevention. Getting the storemanagement team to understand the benefit of moving tothese four plays and having the loss prevention teams focusedon these four items was difficult. We had to show them thebenefit. When you come into our stores, if Im not catchingshoplifters, if I have a liberal refund policy, and I dont managemy EAS systems, Im inviting loss. When I start focusing on thosethings, youre going to see the change in the customers, therefunds, your in-stock positions, and, ultimately, in your salesand profitability. Over the last two years, the store managers haveseen that, and its been a pretty dramatic transition.

EDITOR: With the success that youve had with the shrinkage reduction, as you look at 2005, what are some of the newinitiatives that youve put on your teams plate to continue thosereductions or to continue the improvement of the LP Team?

TITUS: There are a number of things. One, were going toroll out our exception-reporting system to store level so ourstore-level LP managers will be able to conduct investigationsor to reinforce understandings of cases that they have alreadyinitiated by other means.

Two, were going to implement a refund management systemmid-year that were very excited about. We think it has hugegross margin and profitability implications.

Three, were enhancing our training and our talentmanagement. One of the things that we havent done a greatjob of is providing a clear career path for our store loss preventionmanagers. Were just finishing a training continuum that takesa person from store detective up through vice president of lossprevention. We have identified the core competencies, the training,and all of the different resources for each step along the way. Sonow, not only do we have a roadmap, but we can communicatethat roadmap to our store and field teams, which let them takeresponsibility for their professional development.

EDITOR: How has your organization responded to that?

TITUS: They are absolutely ecstatic. One of the things that theyhave found out is that as they create impact and deliver value…andthat value is truly determined in bottom-line profitability and themetrics that go along with that…they are getting more resources. Thecompany understands that it is one of the best places for them tomake an investment because they are getting a fantastic internal rateof return on that investment.

EDITOR: As you look at an LP manager to determine if he or sheis someone you could promote to the next level, what are those qualities that you consider important?

TITUS: It would probably surprise people that we dont look somuch at the technical things. We look for good managers, goodleaders, who are able to assess, problem solve, and develop solutionsand then can implement them to get impact. You certainly have tohave some degree of technical accomplishment…how to investigate,how to catch shoplifters, that kind of thing. But that is actually a smallpart of what we look for as we are developing talent.

EDITOR: You are one of the active leaders in the loss prevention industry. For the young person starting their career, what are some ofthe benefits that young person can look forward to with a career inretail loss prevention?

TITUS: I think retail in general is very exciting. It is probably oneof the only places I know of that is both physically and mentallydemanding. Things are changing all the time. Its an opportunity toget to a significant leadership role in a very short period of time. It isa profession that is constantly in change, both from a technology anda competitive basis. It is absolutely exciting. And the great thing todayis that loss prevention is now seen as an integral part of that retaillandscape.

EDITOR: Clearly in the past, its been shown that people can movefrom the loss prevention discipline into other areas of the company.How do you approach someone in your organization who may wantto transition to other areas in the company?

TITUS: From a personal standpoint, I always try to support apersons career aspirations. From a loss prevention standpoint, ittends to be very productive. If you move people into operationsor merchandising, you now have an advocate for effective shortagecontrol on your side. Its also helps createa great feeling of opportunity within yourorganization because your teammatesstart seeing their career path in a muchbroader context. On the other side, whenpeople move into other positions withinthe company and then come back into LP,theyve greatly expanded their horizons.Whether its operations, finance, humanresources, whatever; that is invaluableexperience that can only help yourorganization and program.

EDITOR: Like so many other executivesin retail loss prevention, you came upthrough Montgomery Ward. What was itabout the Montgomery Ward experiencethat resulted in so many successful LPexecutives?

TITUS: One of the things MontgomeryWard did so well was recruit qualitypeople. Plus, they had a great trainingprogram. The company forced you tounderstanding retail operations andaccounting, so that as a professional,you truly had a broad-basedunderstanding of how retail worked. Iconstantly go back to some of the basicthings I learned at Wards. As a matterof fact, just last week I opened up thetraining binder that I had, which includedall of the P&L documents I had to learn,the backroom receiving, and all of thedifferent accounting processes.

I also believe the loss preventiondepartment was well respected andsupported, and we did a lot of our owntraining; not just technical training, butbroad-based managerial, leadership-typetraining. I dont know that theres asmuch of that happening nowadays inthe industry as companies are constantlytrying to reduce costs. One of the thingsthat were trying to do here at Sears ismake that investment in people.

EDITOR: So many young people think that you have to be a workaholic to besuccessful. With the hectic schedule ofmanaging an organization the size ofSears, how do you find time to balanceyour life, and is it an important factor foryou as an executive?

TITUS: Working hard is necessary todrive your career, but finding balancebetween your work and your personal lifeis one of the most important things youcan do to be successful; because if youdont, youre generally not effective oneither side of the equation. I am alwaysconscience of making sure I invest timewith my family, while balancing it withthe priorities of the company. So, youllfind me going to watch my sons lacrossegame or one of my daughters concertsduring the week. That doesnt mean Imnot here at night or on the weekend.At times, balancing your life really takescourageous leadership. But I look at itthis wayif you are a successful leader;youre creating impact; youre gettingresults; what manager out there is goingto criticize you for finding that balance.

EDITOR: Finally, as you look intoyour crystal ball, what changes or newchallenges might you see for the retailerin fighting the shrinkage battle?

TITUS: First of all, I think that the causesof shrink are probably going to stay thesame for the foreseeable future. However,I think RFID is going to have a significantchange on operational or administrativeshrink. Were going to truly be able tofollow merchandise flow from point A toB to C, and know where any weaknessesare. That technology will require the lossprevention profession to make someadjustments to how we operate.The second thing I see are analyticaltools that will allow us to predict thevalidity of trends in the components thatmake up shrink. These tools will allow usto be further ahead of the curve insteadof waiting for high shrink. Being able toidentify shrink very early on in the lifecycle will have a major impact on how wemanage loss.

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