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Gems of Leadership for Loss Prevention

EDITORS NOTE: Richard Mellor is divisional vice president of loss prevention at Helzberg Diamonds based in Kansas City, Missouri. He assumed this position in March 1999 after nearly 30 years of loss prevention experience in traditional department stores, including The Bon Ton, Macys, Woodward & Lothrop, John Wanamaker, and Strawbridges.

Mellor is active with the National Retail Federation (NRF), where he is currently the chairperson of the loss prevention advisory council. He has been a member of the council for 14 years. Mellor also sits on the NRF council on diversity.

EDITOR: Talk a little bit about your company and your marketplace.

MELLOR: Helzberg Diamonds has been in the fine jewelry business since 1915. It was privately owned by the Helzberg family until 1995, when the third generation of Helzberg ownership sold the business to Warren Buffetts Berkshire Hathaway, Inc. We currently operate 250 stores, primarily located in major regional malls.

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EDITOR: From a merchandising perspective, your business is a little different than most because the great majority of your merchandise is displayed under glass.

MELLOR: Thats right. All of our merchandise is under glass. None of it is self-service. That makes a difference in how we approach loss prevention.

EDITOR: As the divisional vice president for loss prevention, what functions are you responsible for at Helzberg?

MELLOR: The primary functions are to protect our associates, our customers, and our merchandise, the screening of applicants for employment, and delivering the inventory shrinkage performance. I manage a director of investigations and three loss prevention managers in the field. Our director of investigations supervises an office staff that handles the employment screening process and other support functions for the stores. We have a supervisor and a team of officers responsible for the security for the headquarters building and at our distribution facility.

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EDITOR: Having come from a more traditional retail environment, have you changed your management formula to meet the demands of the jewelry industry?

MELLOR: When I came into this position after many years in the department store business, I found the jewelry business a complex business to understand. What I came to realize was that our loss prevention managers needed to have an in-depth understanding of the jewelry business. So, Ive changed my approach to hiring. Before, I would recruit seasoned loss prevention professionals to fill my organization. Instead, I sought out seasoned jewelry store managers to groom for the loss prevention positions.

EDITOR: Why did you take that approach?

MELLOR: The loss prevention role here at Helzberg is primarily one of teaching. In fact, our motto is education versus termination. The jewelry business requires many controls. The average store manager has a great responsibility for controlling their inventory and putting all the checks and balances in place. Unless the loss prevention manager has a good understanding of how all that works, they cannot communicate effectively to associates and store and regional managers. I felt it was much better for me to look for managers who had these core qualities who I could teach the loss prevention side of the business rather than spend the time teaching an LP person about the jewelry business.

- Digital Partner -

EDITOR: Thats very interesting. What qualities do you look for in the people you recruit out of the operational side?

MELLOR: The first thing I look for is management presence. Someone who has an aura of confidence about them thats reflected in their posture, the way they stand, their walk, their focus in conversation, and how they listen to other people when they speak.

The next would be communication skills. Someone who is straightforward when they engage in a conversation, who focuses on the person they are conversing with, an active listener who listens first, restating what they heard. A person who has the ability to extract the logic from a policy or procedure and communicate that well. To sift through a lot of information and explain it in a way that makes sense to other people.

Gems of Leadership for Loss Prevention

They have to be self-motivated, have an appetite for knowledge, be a proven performer in previous assignments, be in touch with their own strengths and weaknesses, have a good sense of team, and, most of all, possess a sense of fairness. That means they have to be able to speak in terms of why things happen, with no reluctance whatsoever to challenge the postures that the company or individuals might have when they dont believe what theyre being told.

The final attribute is integrity. They have to have a proven track record of doing business in an ethical way.

EDITOR: Its interesting that you have reversed the process that we normally hear. We often hear examples of LP executives that have moved into other parts of the retail business, some even reaching the COO or CEO level. Is there a career path for those individuals that might find them moving back into another segment of the business with their LP experience enhancing their knowledge of retailing at Helzberg?

MELLOR: Thats very possible. Each year we assess the performance of those individuals and talk about where their next steps might be. However, I have to say quite candidly that these store managers who have made the transition into LP are very pleased with the role that they play in the organization. They have embraced the role and feel good about what they contribute to the organization. So even though there is growth potential for them, they find the job very fulfilling with a great sense of worth.

EDITOR: I would think that their operations background is especially beneficial for the auditing aspect of their jobs.

MELLOR: The auditing function and the teaching role really go hand in hand. As high-performing store managers, they had proved they were good at controlling their inventory and maintaining proper discipline in the business. The audit function requires that they are not only good at conducting the audit, but also in explaining appropriate policies and procedures that store managers and assistants must follow. That instruction is done both one-on-one as well as in more formal settings like regional meetings where they conduct classes on loss prevention techniques and strategies. So the teaching and auditing role is something that comes naturally to someone who has excelled as a store manager.

EDITOR: What about the other aspects of their loss prevention roles?

MELLOR: When you consider the other aspects of the job, the investigation and interviewing portions, the experience they have in controlling their inventory is actually a good foundation for doing investigations. Its the last part, the interviewing part that is different from anything they have ever done before that presents the biggest challenge.

You can teach the basic skills of interviewing, but the refinement of that skill can only come from experience. So at the beginning of their training process, I send them to Wicklander and Zulawskis interview and interrogation training, and shortly after some practical experience in the field, they go back for the advanced training.

As a leader, I must give specific direction and be patient with the learning curve. I rely on my director of investigations for the coaching and preparation for their interviews, but they have to learn what works and what doesnt by doing the actual interviews. Thats where patience comes into the picture. It takes time to build effective technique and self-confidence in their abilities.

EDITOR: Thinking about the exposures that you face in the jewelry industry, they must be far different than what you faced in a big-box environment.

MELLOR: The main difference I see is that the jewelry business is a much more controlled environment. All of the merchandise is protected in some way. Its not available for people to simply pick up and take. Our most frequent exposure is the grab-and-run theft. Once a person who has a desire to steal gets their hands on an expensive piece of merchandise, and the door is so easily accessible, the run becomes a natural thing to do. Thats the most prevalent and is very difficult to stop. It takes skill on the part of a sales person to keep the merchandise under control and to be able to assess signals and warning signs of a potential theft.

EDITOR: Maintaining control of merchandise when selling must be one of the skills your LP people teach.

MELLOR: Thats exactly right. Weve taken the experience of store managers who have had these types of losses, to learn from and instruct other store managers on how these incidents occur. We do that in various ways. We do one-on-one training at the store as well as in group settings with store managers. We produce our own training videos. We also document the strategies in our loss prevention manual, which goes into detail on various strategies to protect yourself and the merchandise.

EDITOR: What about employee theft?

MELLOR: Thats one of the differences between the jewelry business and department stores. Because we have controls in place to detect when merchandise is missing, like daily inventory accountability, there is less opportunity for internal theft. External theft…grab-and-runs and distraction thefts…are our biggest exposures.

EDITOR: Explain distraction thefts.

MELLOR: Distraction theft involves multiple people who come into a jewelry store with the intention of distracting as many associates as they can while one of their partners takes advantage of the opportunity to either get into a showcase or while a sales associate is serving what appears to be a customer, uses sleight of hand to go into the showcase quickly and walk off with the merchandise.

EDITOR: Do you have armed robberies?

MELLOR: While they do occur in the jewelry business, we are not a typical target.

EDITOR: From this explanation, you clearly operate in the purist definition of the term loss prevention.

MELLOR: Absolutely the case. There is no truer environment where the title of loss prevention applies.

EDITOR: Since you came to Helzberg four years ago, what strategies or systems and technologies have you initiated in your role?

MELLOR: Changing the direction of the loss prevention department was certainly the first challenge and the strategy that meant the most as far as our success. Prior to my arrival, the LP function was primarily investigative. But as weve discussed so far, that role has changed significantly. And, of course, hand in hand with that was the challenge of getting the right people in the LP roles.

As far as technology, we have developed an exception-reporting system that is transportable in the field via laptop computers. That was dovetailed with the companys initiative on data mining. We have been refining the system over the past two years. The transporting of the information to the loss prevention manager in the field is also coupled with specific strategies for investigating the type of information thats communicated through the director of investigations and linked with the information in an email format.

EDITOR: Was that exception-reporting system internally developed?

MELLOR: No, it was a system that we purchased from Retail Expert, but refined to suit the jewelry business. The nature of the jewelry business is different in the way transactions are rung. Therefore, we had to spend considerable time with the vendor developing the kinds of key performance indicators we were looking for.

EDITOR: I would suspect it goes without saying that since you have been here, youre shrinkage levels have dramatically lowered.

MELLOR: The shrinkage performance at Helzberg Diamonds has always been a very good one. It has improved. There was and is room for improvement. However, we are very pleased with our shrinkage performance and are considered to be a leader in the jewelry business as far as shrinkage performance.

EDITOR: Do you have certain stores that have higher shrinkage levels than others? What in your environment causes that to happen?

MELLOR: What typically causes a high-shrink store is turnover of a manager or a manager who is new to the business and doesnt understand all of the controls that need to be in place in operating the store. They might experience a higher shrinkage performance at the end of six months or a year. But they generally learn the controls over a period of six months or so. For the most part, theyre not on the high shrinkage listing a second season in a row.

Gems of Leadership for Loss Prevention

EDITOR: Getting back to technology, I assume your stores have video capability of capturing all of the selling process?

MELLOR: Absolutely. We saturate the store with video coverage. We currently have video tape recorders, but are moving to digital now.

EDITOR: Is your CCTV system one you inherited?

MELLOR: Mostly inherited. However, weve stepped up the type of equipment that we use to color cameras and multiplex systems, and, as I mentioned, we are now moving to digital recording. In some stores, we are using interactive video and audio monitoring. Thats a new strategy for us, which we are also utilizing at our corporate headquarters and at our distribution center.

EDITOR: What do you mean by the term interactive monitoring”?

MELLOR: Interactive monitoring is audio and video transmitted off-site to a monitoring facility at strategic times of the day that best protects us.

EDITOR: The tapes that currently accumulate from your CCTV monitoring are obviously useful in investigations. Do you use those tapes as a tool for loss prevention or customer service training?

MELLOR: Those tapes are predominately used for investigations. But in many cases, learning by mistakes and viewing the pictures are worth a thousand words, as you well know. If we have a significant theft or incident, the LP manager will confiscate the videotapes immediately. There is ample opportunity to revisit the video with the store manager and, where appropriate, the store associates to show them exactly how something has occurred.

I mentioned a little bit earlier that we develop our own loss prevention video training that is mandatory for all associates. These are professionally produced videos where we reenact how thefts are done the distraction theft, grab-and-run, thefts behind the counter, and thefts into the showcase.

We reenact these in the video so it is clear to our associates exactly how merchandise has been stolen from us in the past.

EDITOR: As you look into the future, whats on your wish list in terms of either systems or technology enhancements that will further improve your results?

MELLOR: Certainly further refinement of the exception-reporting system. Conversion to digital recording in the stores is also a big plus as far as having the ability to monitor and instantly view store video at corporate headquarters and by the loss prevention managers.

One practical technology advance on the audit side would be going from a paper environment to a handheld device. That would not only give them quicker, easier functionality, but it would also provide instant recording of the information and the ability to transport that data electronically to the corporate office where we can develop reports for the executives that are responsible for the stores.

EDITOR: As a seasoned LP executive, what are your expectations of vendors who support you with these types of technology solutions?

MELLOR: Helzberg survives on the way we treat our customers. This company is one that puts a premium on respect for everyone in the organization. The respect and partnership that we nurture in our organization transcends to our vendor base as well. The nature of our business is unique, and the types of vendors that we deal with are not the typical vendors that other retailers use. We are not a business that has a need for a lot of different types of gadgets to protect merchandise. Our vendors provide things like safes, vaults, and showcase design and fortifications. The services that are required to maintain these types of things allow zero tolerance formal function at any time. So response to our needs on a timely basis is probably the most important thing that we look for.

EDITOR: You have personally contributed to the loss prevention industry by your years of involvement with the National Retail Federation. As chairperson of the loss prevention advisory council, what types of initiatives is the council looking at today?

MELLOR: First and foremost is making available educational opportunities for the LP industry. Our challenge and major focus is providing the venue for loss prevention managers, regional managers, and executives to learn from each other. One of the things the council talks about is the subject of diversity. Not only about attracting people of diverse experiences, diverse culture, diverse backgrounds to join the advisory council, but also how each of us are developing avenues and opportunities within our organizations. Recently, I was asked to join the NRF council on diversity as the loss prevention representative. This has given me a great opportunity to learn from those diversity professionals and act as a conduit between the two NRF councils when discussing common challenges facing retailers today.

EDITOR: What is your view of diversity in loss prevention?

MELLOR: The role of a security detective or security manager in the retail environment 10 or 15 years ago had much more to do with the physical part of the job apprehending shoplifters and contending with potentially dangerous incidents every day. Women typically did not seek out that type of position.

Our director of loss prevention, Lee Bland, is simply amazing. She has managed to integrate LP into the culture of our stores. She relates to our associates in such a way that they incorporate good loss prevention practices into their everyday tasks. Our regional managers, Mike Battles and Stan Berger, and field representatives are among the best in the business. This team drives the program with an incredible work ethic. They understand the main goal of a store is to properly service the customer, maximize sales, and ultimately make a profit.

As the loss prevention industry has swung from the security type role to the loss prevention role, today we are more about strategies and programs and use of equipment and technology to perform our job well. That has opened the door to people with a much greater variety of educational degrees and abilities to come into our industry. While theres been a gradual progression of more women in the business, I think the opportunities are growing and will continue to grow.

Regarding attracting minority players to the LP field, there is absolutely a need to attract more and more minority professionals to loss prevention. As our society, as well as the retail industry, becomes more multicultural and multilingual and retailers expand beyond the U.S. borders, the demand for players who can communicate effectively is important. In loss prevention, not only do we need to interact professionally with our customers and business partners, but we have to deal with the criminal process as well. In some cases, we find ourselves dealing with people of diverse cultures who speak a language other than English. It is beneficial to have individuals in our organizations that have a better understanding of those cultures and languages. The opportunities for people with diverse backgrounds, who speak second and third languages, are huge.

To effectively get our job done, it takes a broad base of diverse individuals to manage not only the LP function, but also all functions in retail. While the opportunities are great, how we appeal to those individuals is a big challenge. Its difficult to manage that challenge, but at Helzberg Diamonds our diversity council is deeply involved in helping the organization meet the challenge.

EDITOR: Your position of leadership at Helzberg as well as in the LP industry is something to be proud of. What are some of things you feel are important in becoming a successful LP leader?

MELLOR: Let me give you a short list of qualities that I believe are important for any manager or executive in business, but especially in loss prevention.

  • Be persistent in the selection of quality team members.
  • Always model the behaviors you are looking for in your team.
  • Identify and document what is important to you as the leader.
  • Explain your vision behind your future expectations for the team.
  • Define and communicate what loss prevention performance means.
  • Connect the dots on how the LP function and individual achievement impacts the companys performance.
  • Mentor your direct reports and ask for their opinions.
  • Always compliment good performance.
  • Be candid with feedback on mistakes, but express your understanding that mistakes are part of refining skills. Dont waste time on the blame game… win fairly, lose fairly, and move on.

EDITOR: Thats terrific. Thank you so much for speaking with us. I believe our readers will really enjoy hearing what you have to say.

MELLOR: I appreciate the opportunity. Best of luck with the magazine. I think you are providing a wonderful service to the loss prevention industry.

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