EDITORS NOTE: Frank Johns is vicepresident of loss prevention for OfficeDepot, a $13 billion office supplyretailer with more than 950 stores, 22 delivery centers, and 66 sales officesin 23 countries. He is responsible forthe companys strategic directionas it pertains to loss prevention,shrink control, investigation ofethical violations, physical security,safety, workers compensation, andemergency evacuation planning.
Johns has twenty-five years of retailexperience with Montgomery Wardand Mervyns, as district manager,national retail sales manager, anddirector of asset protection. He hasbeen with Office Depot for over sevenyears and is the current chair of theRetail Industry Leaders Association(RILA) loss prevention and auditsteering committee.
EDITOR: You have a very interesting background for a loss prevention executive in that you spent a large part ofyour career in retail operations. Explainhow you got started in retail and how youended up in loss prevention.
JOHNS: I started on the sales floor inMontgomery Wards San Bernardino,California, store. I fairly quickly movedup first as a department manager, thena merchandise manager, and then anoperations manager. Eventually, I begandoing special assignments. For example,I ran the whole remodeling program forthe Los Angeles district where I learnedhow to lay out stores. Back then, districtshad a lot of power over what they wanteda store to look like. So, they had meredraw the whole store, coordinate theconstruction, and remerchandise it for thereopening.
After that experience, I received myfirst store manager position in Santa Ana.That store was a ten- to twelve-million dollar store that was running great, soit was a situation where I came into thestore and basically made sure I didntmess it up. It wasnt the challenge I waslooking for. Eventually, the West LosAngeles store opened up, which wasabsolutely the worst store in the LosAngeles district. It had been open fifteenyears and never made a profit. So I wentto my district manager and asked for thatstore.
EDITOR: What motivated you to go from asuccessful store to a struggling store?
JOHNS: My wife was working at the phonecompany, and we had just had our firstbaby. I thought that I could perhaps makeenough money so she could quit work.When I asked for the store, my managersaid, I wouldnt saddle you with thatstore. But I insisted and said, No, I reallywant the store. Heres how much moneyI want, and Ill take it. He said, Okay, itsyours.
I went in there and literally had to guta lot of the management. The employees were from the surrounding area, whichwas a diversely ethnic community. Butthey were good people who worked hard.They just had poor leadership in thestore. We worked hard and actually madea profit in the store for the first time ever.In fact, at one point I remember I won acar because of the performance of thatstore.
EDITOR: How did you end up incorporate?
JOHNS: I left the West Los Angeles storeto take a district merchandise managerassignment. Then I was asked to becomethe national retail sales manager forfurniture, which was in Montgomery Wardheadquarters in Chicago. During theinterview, I was told that I would have towork from 6:30 in the morning until 6:30at night and half a day on Saturday. But Iwas young and ambitious and said, Noproblem. Sounds great.
So, we moved to Chicago, and I foundout what a pressure cooker it was. But,it was a great learning experience. Atthe time, furniture was a $700 milliondollar business. We were actually thethird largest furniture retailer in America,behind Sears and Levitz. I had tolearn how to work with the buyers ondeveloping their assortments, negotiateco-op advertising funds from vendors,do the sales plans, the profitability plans,develop all the advertising, all the waydown to shooting the ads. I walked inthere not knowing how to do any of this,but with a lot of late hours, I learned howto do it.
EDITOR: In your twenty years atMontgomery Ward, almost exclusively instores and merchandising, what views didyou have of the security function?
JOHNS: The security in the stores waslike the gestapo. They were interrogatingpeople, running out of the stores tacklingshoplifters. District investigators wouldcome into the store and you thought,Somebodys going out of here today.They werent proactive; they were reactiveto what was going on. But remember, thiswas the seventies.
EDITOR: So, after rising to the level of national merchandiser for furniture atone of Americas largest retailers, what happened to make you want to become apart of the gestapo?
JOHNS: I believe everything happens for areason. I loved Chicago; loved everythingabout it. But after three and half years,I was burned out. People burned outthere very easily. So I put my resumeout looking to go back into the stores.One of the companys I sent my resumeto was Mervyns. They kept it on file forover a year before they called me abouta director of asset protection position.During the interview, they told me theirissue was that their loss preventiondepartment had lawsuits stacked highfrom tackling people, bad stops, all thosekinds of nightmare situations, and theywere looking for something different.
EDITOR: So they wanted a managementperson first, as opposed to a lossprevention expert.
JOHNS: Chuck Lynch, the CFO who Ireported to, told me afterward that itwas the seventeen years experience Ihad in the stores they were looking for.He felt that the stores and warehouseswere loss preventions customers. Andthe customers were up in arms over theloss prevention department and wantedchange. They felt that because I had thatstore experience, I was more in tunewith how they felt. So my mission wasto come in and change the strategic andphilosophical view of loss prevention inthe department store environment.
EDITOR: As a non-LP management person,what did you find different, if anything,with the work disciplines between LP andstores organization people?
JOHNS: Loss prevention people werevery dedicated, very loyal. It didnt reallydepend upon the direction. Whatever thedirection was, they followed the direction.They were good soldiers. Plus, they werevery thorough; extremely so. A lot oftimes, the stores or merchandising folkswould not cross the ts and dot the is likeLP would. They made sure they got thingsdone on time, and that they were right.So, when it came to the administrativepiece of the business, they were very, verygood.
EDITOR: Coming into that positionwithout an LP background, how did theLP organization react to you?
JOHNS: They were very concerned; there was a lot of animosity. First of all, therewere some people in the organization who thought they should get the job.Plus, they were concerned that here wassomeone who doesnt know what hestalking about. Hes not one of us. Hedoesnt know about catching a shoplifter.He doesnt know what we experience;what we go through. Im sure theythought that I was just going to come inthere and clean house, which was not thecase.
EDITOR: How did you overcome that?
JOHNS: Theres something about training,developing, and promoting people thatmoves all that stuff aside. When yourecognize people who are doing a goodjob, promote people from within, thatsbetter than even giving them moremoney…but we did that too. Plus, I gotinvolved and toured stores with them.And I got them involved. We wouldhave knock-down, drag-out meetingson strategic issues. I had to earn theirrespect, but I earned it a little differently.I didnt set out to learn everything aboutloss prevention so that I could be moreof an expert than them. Im sure that PaulJones and Randy Meadows to this dayhave more expertise in loss preventionthan I do. But, I do know how to train,develop, and recognize people.
EDITOR: Speaking of Paul and Randy,youve had a number of individuals whohave worked in your organization whohave gone on to be directors and VPs ofloss prevention. What was it about thosepeople that contributed to that success?
JOHNS: I am very proud of all thosepeople who were on my team. PaulJones is now senior vice president ofloss prevention at Limited Brands. RandyMeadows is the VP at Kohls. Rick Paquinis a director at The Gap. Steve Degener isVP at Ross Stores. It feels good to knowthat theyre out there doing a great joband maybe have taken some pieces ofwhat we developed together and ranforward with it.
All of these individuals are qualityindividuals; people who really contributedto the organization. They were verysupportive. They offered up their ideas.They were people who were very engagedin the business; who played multiple rolesand had good strategic ideas. Thats notto say that we always agreed, but thatsokay.
EDITOR: There are many young peoplereading this interview in similar stagesof their career as this group was atthat time. What counsel can you offerabout preparing oneself personally andprofessionally to reach these levels?
JOHNS: The most obvious thing is tobe proactive and have a great attitude.Secondly, you should always be seekingmore responsibility; not necessarily askingfor a promotion. You earn thepromotionbefore you deserve the promotion.You should always be asking yourself,What more can I do to add value to thecompany.
Part of having a great attitude is likingwhat you do. If you dont like whereyou work or what youre doing, get yourresume out and move on. Attitude andalways striving to do more are the thingsthat can get you to the next step.
EDITOR: Lets jump forward to youreight years at Office Depot. Under yourleadership, Office Depot has enjoyedsome extraordinary shrink results. Whatare the priorities that made that happen?
JOHNS: The first thing is being a realbusiness partner and delivering qualityservice. We have multiple businesscustomers because we are a multifacetedcompany. We do direct mail and retail. Wehave warehouses and sales organizations.We are international. You have torecognize who your customer is first andunderstand what they want from you.What were doing is providing a service.We dont ring the register. We dontdeliver one nickel of sales. Recognizingthat and developing your strategic planaround what your customers need fromyou, to me, is vitally important.
Secondly, its making sure you havea strong team, and your team has avoice. They need to be moving forward,following the same strategic direction. Youmust be constantly training, developing,and recognizing people. Weve had verylittle turnover here over the years, andthe reason is because we take care of ourpeople.
Thirdly, its being proactive. You cantbe old loss prevention and just react toissues. You must always be looking for thenewest technologies and programs thatwill help you serve your customer better.
EDITOR: You have a great deal ofexperience directing LP in a companythat was predominately apparel, and nowwith a company that is non-apparel. Arethe components of shrinkage different inthose two worlds and do you approachthe business differently because of that?
JOHNS: They are very different. Inthe department store environment with multiple entrances and lots ofmerchandise that kids wanted, like Nike,Addidas, and Levis, you were much moregeared to the shoplifter. We caught about30,000 shoplifters a year. Shrink wasimportant, but I ran that with the backend, because I also had internal auditat Mervyns. So, the LP people in thefield were not so geared toward shrinkin the stores; they were geared toward shoplifting and internal theft. Shrink cameonto the radar screen with field managers,district managers, and regionals.
Office Depot is considerably different.Were one way in, one way out. A lot ofour theft-sensitive merchandise is lockedup, even though we have dramatically reduced that over the last year or two. Because we dont apprehend shoplifters,our district managers have twenty-five orthirty stores and are focused on drivingshrink and safety issues through an audit process in the stores. We didnt really doaudits at Mervyns. We do them here andpeople are held accountable to them inthe stores organization, which, to me, is amuch more proactive stance.
We added internal investigations after I came here. We had fraud, ethical issues, and theft in general. They didntdo that part of the business, but I knewthat was still a part of loss prevention andhad to be done. But, the main thrust ofour business is built around auditing the facilities and finding the issues wheretraining can help the people in the storeto do a better job.
We are very involved with our business partners in the stores, warehouses,and international as well as our financepartners, in dissecting the components ofshrink and targeting those components,whether they are from a merchandising ora loss prevention end. We do everythingwe can to drive sales, yet protect themerchandise, realizing that the best wayto reduce your shrink is to drive yoursales.
EDITOR: What are some of the strategicinitiatives that youve implemented atOffice Depot?
JOHNS: Ill never forget my first day here.I walked into the office and there wasnta PC in the office. When I asked how toget my computer, they said What do youmean, computer? The last guy didnt haveone. It was the same thing out in thefield. All of the LP managers were doingaudits by pencil and faxing them in. Plus,there was no POS exception-reportingsystem. So, one of the first things we didwas get a POS exception-reporting systemto start driving some internal cases. Wealso worked diligently on automatingthe audit system. We ended up with aweb-enabled audit process that doesmore than just collect the audit scores,but also analyzes the results.
We also implemented an awarenessprogram that makes sense for us. Foryears, I used to go to conferences and seehow Cyberquest used a kiosk for Lowesawareness program. I always loved it, butknew that buying a kiosk for every storewas cost-prohibitive. But once that systembecame web-enabled, we rolled it out.
One of the things we had to do wasdevelop a totally different organization.When I first came here, I reported to thestores organization. The warehouses andinternational were off doing whatever. So,we changed the reporting structure. Thismet a lot of resistance, but it was a bigwin for us.
EDITOR: How so?
JOHNS: The stores organization here usedto audit both stores and warehouses.They would spend the same amountof time in an $8 million store as theywould in a several hundred million dollarwarehouse. The warehouses had a lot ofissues. In fact, shrink in the warehouseswas higher than the stores. In my mind,I thought, There are no customerswalking into the warehouses, how couldshrink be higher…its impossible. It wasoperational issues.
So, we decided toput a loss prevention organization in thewarehouses. As I said, this met resistancefrom the stores organization and becauseof the financial hit. But, it was the rightthing to do because warehouses aresignificantly different from stores. It hadto be done.So, we put Bill Gavins group togetherand drove the shrink down to where itsless than half of the stores shrink now.We did that by focusing on operationaldisciplines and safety issues anddeveloping audits and other programsthat are specific to the DC environment.
EDITOR: Any other initiatives?
JOHNS: Im sure were one of the few lossprevention departments that have theirown forensics lab where we look at alltypes of fraud, both internal and external,including brand fraud, where people aredoing things to get into our website. Wehave the ability to capture a lot of thingsthat are going on with email and theInternet. For example, we have nets outthat will catch someone who accesses aporn site from an Office Depot computer.
EDITOR: That is unusual. What made youmake that decision?
JOHNS: We continued to have internalissues where we needed to analyzesomebodys hard drive. Maybe it was aterminated employee or an employeewho was under investigation. We hadto go to a third party, which not onlycosts money, but takes time. So, ChrisBitner, my manager of that department,researched it and discovered that wecould do it relatively inexpensively. Wedecided to invest the money so we couldhave more control of those types ofinvestigations.
EDITOR: Earlier you mentioned changingreporting structures. Youre in whatfunctional department today?
JOHNS: We report both to the chiefcompliance officer and the chairmanof the audit committee of the board ofdirectors.
EDITOR: Whats your opinion of theadvantages and disadvantages of onereporting relationship over another?
JOHNS: I think that having loss preventionreporting to somebody who is not partof the administrative management ofthe company is a great thing. The chiefcompliance officer does a good job ofstaying above the fray. And when thereare issues with people doing illegal orfraudulent activities, then we have a directvoice to the board.
At Mervyns I reported to the CFO,and that was great relationship. Backthen, we did investigate people who werein management capacities. But today,its not the same with Sarbanes-Oxleyand situations like Enron. Things havechanged. If youre reporting solely to aperson who is running the company, itsmore difficult to investigate that person orsomeone else in that part of the pyramid.
EDITOR: It sounds to me that where weare in the evolution of loss prevention,you would recommend your currentreporting relationship.
JOHNS: I think so, because you need tohave that third party who is an overseer ofwhat youre doing. I think HR should havethat same relationship, because they dealwith sexual harassment and other issues.When we reported to store operationshere, how many investigations did we diddo internally? We were focused on theaudit process, not necessary on peoplestealing within the organizations. That canbe a blind spot; it really can.
EDITOR: In addition to leading the lossprevention effort within your company,you are also the chairperson of the lossprevention steering committee of theRetail Industry Leaders Association (RILA).What is RILAs mission and what does itmean for the LP profession?
JOHNS: The primary mission is educationof the loss prevention community. RILAis also taking a role in benchmarkingand helping drive loss prevention issuesthrough government, which is very, veryimportant.
EDITOR: Describe the relationship thatsolutions providers have with RILA.
JOHNS: We believe were much strongerif we partner with vendors rather thantreat them like second-class citizensexcept that, Oh, by the way, we wantyou to buy a bigger booth this year, sowell treat you real nice until you buythe booth, and then forget about youafter that. In fact, we have vendors onthe advisory council. Kevin Lynch fromADT, Carol Sommer from Civil Recovery,Mike Grady from Vector to name a few.The reason is that vendors are partnerswith us. They deal with a lot of differentretail organizations and have great ideasthat can benefit the loss preventioncommunity. If we put blinders on and actlike they dont exist, then were remiss.
EDITOR: Tell us about the RILA lossprevention conference at the end ofMarch.
JOHNS: Its going to be in New OrleansMarch 29th through April 1st. We have agreat sign up already; double where wewere last year at this time. We have a greatprogram, with topics on homeland security,cybercrime, audit, DCs. Plus, we have aterrific closing speaker in Ollie North. Hewas with our troops on the ground in Iraqand has some great stories. I think hesgoing to be a great closing speaker.
EDITOR: How is this conference differentfrom others?
JOHNS: One of the things we dodifferently is keep away from the talkingheads doing all the sessions. The reasonis, to the loss prevention person in thefield, they dont want to hear the vicepresident giving his forty-thousand-footview of whats going on. They want theperson who they can relate to, whos inthe trenches, telling them how you do it.These are the reports I use. This is therisk program I go through to determineif its a high-shrink or low-shrink market.This is how I do investigations. Whenyou look at our agenda [see page 40],there are not a whole lot of VPs speaking,because thats not what its all about.Thats important, and weve really tried todrive that.
EDITOR: I understand theres a newaddition to the schedule.
JOHNS: This is the first year that werehaving a charity golf outing at the endof the conference. Downing & Downingdoes a great job with the golf tournamentat the NRF, but we wanted ours to be abit different. The Downing tournament ishuge, with lots going on. We wanted oursto be more intimate with emphasis onrelationships and giving.
This year, all the monies will be goingto be the American Red Cross. God lovethose people. Theyve had a really toughyear, with the Florida hurricanes and nowthe tsunami; plus, coming on the heels of9/11. The Red Cross over the last four yearshas been a very busy organization and canuse all the money we can give them.
We do want people to pony up theirown money where they can and if theircompanies can help, thats great. Even ifpeople dont like golf, heres a chance tohelp the American Red Cross and spendsome quality time with others in theindustry.
EDITOR: Anything else about theconference?
JOHNS: Obviously, were going to drivethe education piece real hard. Plus, Ithink its a great time to network with thevendors in a more intimate setting. Butone thing I would like to say that I dontthink we talk about enough is, to all theattendeeskeep your head screwed onstraight when youre at the conference.Dont go out and do things that youshouldnt be doing. If youre married andhave kids, act like your wife and kids arestanding right next to you every momentyoure there. Ask yourself if youre doingthe right thing. Most conventions geta bad rap because some people areoff doing things that they shouldnt. Iwould really like to see loss preventioncontinue to migrate to where we donthear about these kinds of behaviors. Afterall, our industry stands for ethics. Weshould stand for moral values. Thats ourbusiness.