Forty Years of Researching Retail Loss Prevention

Editors Note: Richard Dick Hollinger, PhD, is a professor at the University of Florida in Gainesville who studies employee dishonesty and has overseen the National Retail Security Survey for the past twenty-five years. As he nears retirement, Dr. Hollinger reflects on the changes he has observed in the loss prevention industry over his career and the attitudes and approaches that remain opportunities.

EDITOR: What does retirement mean to you?

HOLLINGER: To me, it means that my thirty-three-year career here at the University of Florida will come to a close, but not full closure. Im going to become whats called a professor emeritus. Ill still be advising one or two graduate students who are finishing their dissertations. I will still be playing a role, but I wont be teaching daily undergraduate courses or seminars. My time will be dictated by my desires rather than the universitys desires. My wife, Candy, and I can travel more, and perhaps do some retail consulting and speaking.

EDITOR: How is your retirement going to impact your relationship with retail and loss prevention?

HOLLINGER: Last year I reached out to Bob Moraca at the National Retail Federation (NRF) and told him that I had plans of retirement. He wanted to know what the future of the National Retail Security Survey (NRSS) would be. Its something that, because of my impending retirement, Im not going to be able to direct alone. And I was having trouble getting funding for it. But they wanted to continue it, so I thought we may be able to work out a mutually beneficial relationship. So we all sat down and figured out a way for the NRF to carry out the survey. I would help out as a contributor, editor, and co-principal investigator. But their research unit would actually carry out the data collection, taking that responsibility off my shoulders. And then eventually, I think this will become something that they will do on their own.

EDITOR: Will the project be changing at all?

HOLLINGER: While gradually phasing me out, they will still be maintaining the integrity and direction of the project, and hopefully maintaining or increasing the response rates currently around 100 participating companies.

EDITOR: What has the issue been with response rates recently?

Hollinger receiving his doctoral degree March 17, 1979, with his wife, Candy (left), and his mother, Eleanor (right).
Hollinger receiving his doctoral degree March 17, 1979, with his wife, Candy (left), and his mother, Eleanor (right).

HOLLINGER: Part of the future of retail is that in some ways, the industry is shrinking in front of us as companies acquire each other. As a function of that, there are fewer companies to interview and survey. As I wrote in my MarchApril column, there are also fewer directors of loss prevention. Companies seem to be cutting back on their senior loss prevention people, so there are fewer actual people to fill out the questionnaires. So many of the folks that I had counted on who were regular participants in past years have been outplacedI think thats the new terminology. It sounds ominous, doesnt it?

EDITOR: Do you think that the NRF will include non-NRF members in its solicitation for the National Retail Security Survey?

HOLLINGER: They always have. We merged our datasets of names and companies. The solicitations are going out. But to be honest with you, many of the Retail Industry Leaders Association (RILA) members, the big-box stores, and some of the non-NRF members have never participated at as high a level, and that worries me.

There still are these two organizations that have some overlap, but also some special constituencies. I had always hoped that this would be a retail studynot an NRF study or a RILA study or a Food Marketing Institute (FMI) studybut it would be a study that the whole industry could rely upon without bias or hidden agendas. It would be the bellwethersort of like the uniform crime reports that the FBI producesthat everybody could fall back on and use.

I hear from loss prevention executives that they keep getting more and more surveys from various groups. My hopes are that the National Retail Security Survey will continue and will be the primary data source for loss prevention and shrink. Well just have to see how it turns out.

EDITOR: How many years has the NRSS been in existence?

HOLLINGER: Read Hayes and I did the first study in 1991. It was a two-pager, front and back, more of a brochure than anything else, but it was the beginning of the National Retail Security Survey. And there was one year that I did not do the survey because I was out of the country on sabbatical. So this year will be twenty-five years.

EDITOR: You are well known for your survey, but tell us more about the primary studies throughout your career on dishonesty in the workplace.

HOLLINGER: Employee theft research is really how I got into this field. That was my dissertation and then became a Federal Justice Department grant. So the Theft by Employees project is what got me interested in shrinkage because internal theft is such a big part of total loss. After that project I started getting asked to come to conferences. So it was the employee theft research that really got peoples attention.

Then when Read Hayes, Bart Weitz, and I started doing this survey, we realized that we would have to include all the different sources of shrinkage, including shoplifting, which is a big piece of the pie as well. But youre right, Ive done more papers, more books, and more research on employee theft and employee dishonesty than I have on probably any other topic.

EDITOR: What changes have you seen over the twenty-five years of the survey in which slices of the shrinkage pie are the biggest?

HOLLINGER: When we first started out, a lot of people who were filling out the survey told me that they really couldnt divide this pie up very easily. They had this thing called shrinkage, which was their loss, and they knew what that was. But where the loss came from, where it originated, was a much more difficult thing because they didnt have an audit trail to easily determine where the losses were coming from. Then we started pressing retailers to give us some more accurate numbers, so the numbers started to get more stable.

Last year, 2015, was the first year that we actually saw shoplifting slightly exceed employee theft as a percentage of the whole. I dont know exactly what to make of that. I think it probably has something to do with the attention and perhaps the behavior and serious involvement of professional shopliftersthe ORC groupsthat are hitting stores and doing some very serious damage to those shrinkage rates. There still is this problem of the internal theft, the dishonest employee, but maybe retailers are doing a better job of controlling internal theft while still being victimized by the professional organized retail gangs.

EDITOR: Even given the pace of improvement in technology and methodology in the industry, were still seeing similar rates of employee theft. Do you think that internal theft is just a cost of doing business that retailers will have to pay no matter what?

Hollinger on his boat practicing for retirement.

HOLLINGER: The main trend that Ive seen over the yearsleveraging technology, moving away from people catching people toward technology catching peoplehas been geared primarily toward the shoplifter. And its much more difficult to catch employees, particularly because employees know how the system works, where the cameras are, how to disarm the tags, how to shut the system off, and basically how to avoid getting caught. I think employee theft is the hardest of the pieces of the pie to have a direct impact on because of that.

Theres also this huge problem that retailers seem to not be able to get their handle around, and that is how to select a staff of people that will give them the high level of dedication and commitment to the organization.

EDITOR: Have you seen a greater or lesser emphasis by LP in educating employees on dishonesty or creating training programs to prevent dishonesty?

HOLLINGER: It has been my impression that many of these awareness programs were dismissed by employees as not really being valid or effective because they were in many ways more of a wish by the employer than a reality. And many of the ones I looked at very early in my career were very draconian. I remember looking at videos that essentially said that if you steal, youll go to jail, and your life will be over. And we know thats not the case. And in many ways employees know that. They know that they can get away with more than employers let on. And they also know, to some extent, that retailers are reluctant to prosecute. I remember talking to loss prevention directors in the very early days of my research on this, and in many ways, employee theft is an embarrassment. It says we have hired people, they have worked alongside of us, we have trained them, we have made them aware of the loss, and yet they still steal. And in many ways, that paradox is still with us.

EDITOR: Then how best should retailers discourage employee dishonesty?

HOLLINGER: It turns out that our best indirect measure of shrinkage is employee turnover, which is a sad commentary because it says that many retail employees see retail employment as a temporary job, not a career. I gave a lecture just the other day, and I asked how many of my students worked or have worked in some aspect of retail, and most of their hands went up. And then I asked how many were contemplating a career in retail, either in sales or merchandising or in loss prevention, and after they stopped laughing, all the hands went down.

Retail is still not viewed in the same way as other jobs. Most of my criminology students want jobs in law enforcement, legal firms, the FBI, or Homeland Security. They want careers that will last beyond the current holiday season, so to speak, and they want jobs that pay well. And thats still a problem with retail, where many retail employees are still paid minimum wage.

Yet companies that do pay better actually have lower shrinkage rates. If you pay people better, you have lower turnover, you have higher levels of dedication, and the employees now have some skin in the game because its their company too and their profits. And if the company is doing better, they will get increased hours and increased wages. So they begin to realize in those circumstances that its in the best interest of the store and the employee to have lower shrink. And one of the ways to do that is to pay people more.

But unfortunately, many retailers see retail employees as temporary, as marginal employees, much like we see agricultural workers here in the state of Florida. When the oranges are done and the tomatoes are finished ripening, everybody gets laid off. And the same thing happens in retail right after the Christmas season. So until retail can convince young, bright people, both in loss prevention and in merchandising and other areas, that retail can be a career, I think were going to continue to have serious problems with internal theft and employee dishonesty.

EDITOR: In the past youve used the phrase trickle-down ethicsdoes that apply here?

HOLLINGER: Although the survey is anonymous, there are many loss prevention directors who I have come to know personally who have confided in me about their particular companies. And when they have a highly ethical management team, pay a living wage, give sick leave, provide daycare, provide their employees with the kinds of expectations that one gets in a genuine career, then shrinkage is under control, and profitability goes up.
Im not sure why there arent more retail chains that have looked at these models and realized that you get what you pay for. I think trickle-down ethics does work, and responsibility and care for the workforce does have a trickle-down effect on the employee. They begin to realize that this could be more than just a job; it could be a career. It could be something that they could invest their lives in.

EDITOR: Do you sometimes think that there may be many C-level executives who would rather hear about a big investigation than a theft prevention program?

Professor Hollinger presenting the results of the National Retail Security Survey at the 2011 NRF loss prevention conference in Dallas.

HOLLINGER: I think any C-level person in an organization would be impressed by a large successful investigation, just as we are in the public, whether it is drugs or smuggling immigrants or a retail theft case. Were always attracted by the big cases, and we look at it from a law enforcement perspective. I tend to view loss prevention more from a human resources perspective than from a law enforcement model.

Clearly were enforcing laws, and clearly we are establishing standards, but from what I can tell you after almost forty years of research, how you treat people makes a difference. And I think the magic in the process is simply convincing the employee that its in his or her best interests to increase the honesty of the workforce and also of the shoppers. And if that happens, then everybody benefitshigher sales, lower shrinkage, and higher profitability.

But youre right, C-level executives oftentimes tend to look at what have you done for me lately or maybe what have you done for me in the last hour as opposed to what is the overall trend and looking at the bigger picture of how to reduce shrinkage.

EDITOR: What is your opinion of organized retail crime (ORC) as an influencer in the LP community?

HOLLINGER: I remember the first book that I read on shoplifting. Mary Camerons book published back in the early 1960s, had a whole chapter dedicated to professional shoplifters. Theyve always been out there. ORC is not new; weve just been focusing recently on how sophisticated they are and, especially, how they have been using online auction sites as opposed to flea markets or other ways of liquidating stolen assets.

But I would argue that in many cases, these huge ORC caseswhile they are real, and Im not trying to diminish their importancedo tend to distract from the day-to-day shoplifters. Read Hayes has a typology that he has developed over the years. There are professional shoplifters who are very sophisticated and use shoplifting to make a living. But there also are what he calls primary household shoplifters who are just trying to get through the day and who are stealing enough to get around their shrinking budget. Then there are people who steal by necessity because they have no food or cant afford necessities. There are so many different variations of shoplifting, we sometimes just look at the big cases and get distracted.

The analogy that I like to use is that of the leaking faucet. Yes, when one of your pipes ruptures, you instantly know something is wrong because you see that the carpet is wet and youre splashing through your house. But when you look at the larger loss of water, or in this case the loss of profitability, that ruptured pipe is dwarfed by that washer that hasnt been replaced in twenty years. That leaking faucet, that drip, drip, dripthats the traditional shoplifter that, in many cases, weve forgotten about in our zeal to shut down these ORC cases.

I really do believe that there are these big ORC cases, but in retail, we always seem to be in search of the silver bullet. We want that one solution that will stop shrinkage or lower it to a point where it wont be a problem anymore. And I think every time we think we have found that silver bullet, whether it be RFID or digital cameras or cracking down on ORC gangs, we soon learn that theres still shrinkage and still at unacceptable levels. So I think we have to look at this more from a global, holistic perspective rather than just focusing on whatever the sexiest topic is at the moment.

EDITOR: Doesnt it appear that the silver bullet has always been predicated on a new type of technologya new camera or new tagthat is almost always focused on external theft? Where has the silver bullet been that focuses on the behaviors, training, motivation, and development of employees to be dissuaded from stealing?

HOLLINGER: I think the issue is the notion that somehow we can buy a new technology and install it, and then shrinkage will just dissipate, will go away, instead of investing in people who are the heart of retail. The retail shopper is a person, and the retail employee is a person. And until the retail employee sees a benefit in trying to control losses in their storeand I use that pronoun purposefully, their storeuntil they buy into the loss, there isnt a camera, there isnt a tag, there isnt a technology in the world that will completely solve the problem until it is seen as a cooperative problem in which the employees are a part of the solution.

Ive always arguedand sometimes been laughed off the stagethat this is a problem that cant be easily solved with technology. Now, that said, many of the supporters of the National Retail Security Survey, over these many years, are companies that sell very sophisticated products that can be used as tools in solving these crimes or providing a deterrent. I dont want to minimize their effect, but they have to be used by an educated employee staff and not just the loss prevention people. It has to be the sales staff working hand in hand with the loss prevention personnel.

EDITOR: Over the nearly four decades of your career, have you seen changes in LP leadership thinking or changes in C-level thinking as they view LP?

HOLLINGER: I think thats been one of the biggest changes. I remember when I first started approaching retailers about doing research back in the 1970s, wed ask to talk to the person in charge of loss prevention and security, and wed have to go down to a basement office. And it was pretty clear that their level of influence in the company was right up there with grounds and maintenance, sanitation, and garbage disposal. Loss prevention was a necessary task that needed to be done, but they clearly were not sitting around the table where the most important decisions were being made.

Thats the biggest change. Now we have chief security officers. Now we have vice presidents of loss prevention. If I look at my career, one of the things that makes me the happiest is that now loss prevention sits at the table equalmaybe not in all cases but oftento the influence of human resources or to the merchandising vice presidents.

And over the years weve been doing this survey, shrinkage has been going down. Thats the good news. The bad news is its not zero yet. But nevertheless, I remember in the 90s we were reporting average shrinkage numbers around 3 and 4 percent. In some cases, some firms had 5 percent.

EDITOR: The LP industry has struggled for years when it comes to recruiting talented young people into the industry. From your perspective as a professor, how can the LP industry more effectively recruit young, bright people out of college, not only from criminal justice but also from business and finance and other disciplines?

HOLLINGER: Its not that difficult. Every university worth its salt has a career day, where representatives from various industries come to the university and talk with the students. Its advertised across the campus. The students bring their resumes, and they can connect one-on-one with hiring representatives from a bunch of different companies.

I cant tell you the number of times that we have had career day and my criminology and sociology students have come back disenchanted because the only people that these companies sent to career day were people in either merchandising or HR. These students would walk up, naively, and say, Id like to talk to somebody in loss prevention. And the HR rep would say, Oh, gee, thats a shame. Nobody from that part of the business is here. Heres a number to call, and heres my card. Ill see if I can connect you. If every retail company sent an LP representative along with the merchandising people and the HR people so that these students had someone there to talk to and give them some hope that there was an LP career opportunity in their futures, this problem would go away overnight. Companies have needs, and students have needs. Its just a matter of putting these two together in the same room and not having to go through some obtuse website for recruiting purposes. And it doesnt have to be individual companies. I think the industry could do a better job of making use of career days, even if it means having vendors send representatives, or a retail group, not just retailers themselves.

EDITOR: Certainly, we at the magazine and those in the LP community owe a big debt of gratitude to you for all of your contributions to the industry. We wish you and Candy a lot of wonderful time together in retirement. We hope that you will continue to be a contributing writer to the magazine because we always look forward to your observations on whats going on in the LP industry.

HOLLINGER: Oh, you can count on that. What I want to say to the retail industry is to thank them for allowing an outsider to be a part of this outstanding segment. I remember when Dan Doyle proposed my presence on the Loss Prevention Advisory Board at the NRF, and I said, You know Im not a retailer. He said something to the effect of, Were tired of talking to each other because we dont have anything new to say. We want someone who has the guts to come in and tell us that there are other solutions to consider. For me, as an academic, thats what were trained to dothink outside the box and come up with new solutions and look at new theories. So I want to express my thanks to the industry for letting me play around, so to speak, in the retail industry and hopefully make some contribution. But for the most part, I think this has been a win-win situation. I have benefited greatly from this relationship and hopefully the industry has as well.

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