How Do Successful LP Leaders Lower Shrink? By Leading

Thieves are not the only ones who impact shrink. In fact, they may not even be the biggest factor in a store’s overall shrinkage. The most important lesson I learned in my seventeen years in loss prevention is that what shrink depends on the most is the store culture created and maintained by the store leader. A responsible leader who coaches and develops people, who addresses issues in a timely manner, and who leads by example will instill the sense of ownership in his or her employees. The result is a store environment that fosters higher sales and lower losses.

Anyone with a basic knowledge of loss prevention knows that shrink comes from three sources—process errors, internal theft, and external theft. A responsible leader can impact employees’ decisions in all three of those areas. Here are some specific examples that I have witnessed firsthand.

Lowering External Theft through Better Customer Service

I recently visited a customer’s store in Yulee, Florida. Within thirty seconds of walking in, I was greeted by an associate at the register, an associate in the accessories department, and the manager on duty. I was duly impressed. I remember thinking that to an honest customer, that’s one welcoming and attentive store, but to a thief, what an intimidating environment. And for the store, it’s a win-win.

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Thieves don’t like attention. They don’t want to be remembered and recognized. So for external theft, the ultimate deterrent is great customer service. From this it follows that the LP leader’s first job is training the store employees to respond in the right way when they see a person walking in. This training is best done outside the classroom in the store environment, working side-by-side. As the leader sets the example, the employees tend to follow. This is how a positive store culture begins to be established.

Great customer service does not just deter theft, of course; it also keeps good customers coming back to shop more. So this is a double-edged sword in a good way—less shrink and more sales equals more profit. By focusing on customer service, the LP leader serves a dual role—preventing loss and enabling sales. Unfortunately, some companies tend to focus on cutting costs so much that they also cut labor, leaving stores understaffed or without sufficient training. This can be short-sighted, I believe, because with fewer staff the customer service inevitably suffers as well.

Preventing Internal Theft by Setting a Personal Example

In my early days in loss prevention, one of my mentors taught me an important lesson. A small percentage of people we encounter, he would say, are inclined to do bad things, and no one will change them. Another small percentage of people would never steal under any circumstances—they are just built that way. The rest—the majority—we can influence one way or the other. And here is, perhaps, the most wide-reaching way the LP leader can impact his or her organization.

An employee’s decision to steal from the company, whether it’s to take cash, pass merchandise to a friend, or participate in refund fraud, is often tied to how he or she perceives the store and the company. Does the employee think he or she is treated unfairly by the management? That the company does not care? That the store is disorganized, so no one will notice funny business? Does the employee see the manager break rules, take shortcuts, waste resources, or behave in a questionable manner? The yes-answer to any of these questions can tip the employee’s attitude in the wrong direction, and he or she may do something dishonest should the opportunity arise.

From all this it follows that the leader’s job is two-fold when it comes to internal theft. First, the leader must behave in the way he or she expects the employees to behave. Nothing new there—this is the Golden Rule that’s been in the books since there were books. And second, the leader must foster the culture of open and honest conversation within the organization, starting with himself or herself. Employees must feel empowered to take action when they notice something amiss. They should also feel confident that when they bring something to the manager’s attention, the manager will take appropriate action while protecting the whistle-blower’s identity when needed and possible.

Reducing Process Errors by Active Involvement

A seasoned LP professional can tell a lot about a store’s likelihood to have a high shrink level by simple observation. Are employees smiling? Are they offering assistance or standing behind the counter on their cell phones? Is the store organized, clean, and clutter-free? Are the fixtures dusted? The store does not need to be perfect—it’s retail after all—and merchandise does not stay in its place for too long. But it should be apparent that everyone from the top down cares and has a sense of ownership.

Sloppiness in the general look of the store usually betrays sloppiness in all other aspects of the store’s operation. Take for example re-ticketing errors: a customer brings an item with no price tag to the register. If the employee doesn’t know that the store is supposed to be neat and organized, will he or she know the process for finding the right price? And will such an employee care enough to follow the process or just make up the price on the go? Sloppiness impacts shrink especially in shoe departments—shoes get split up, and you end up with a bunch of boxes with just one shoe in each. There go your sales. Profit erosion from sloppiness is also evident in buy-X-get-one-free promotions. Free does not mean don’t ring one up.

To combat shrink from process errors, an LP leader should be engaged every single day—not just checking boxes off the clipboard, but really engaged with the daily operations and with each employee. My favorite slogan for many years has been this—see it, say it, do it. One of the best practices I’ve witnessed many times over my career is watching a leader roll up the sleeves and do something that isn’t pleasant. Truck late? The leader rolls up the sleeves and helps unload it. Bathroom seen a better day, but associates are busy? The leader grabs a mop and cleans it personally. When you show that you are not above those tasks, people recognize that. In fact, you often don’t have to say anything—people recognize when they see you set an example.

Developing Future Leaders

The LP leaders that I have observed to have the biggest impact on shrink are those who do all of the above, plus take the time to develop more leaders. This makes perfect sense since one person can only do so much, but a whole team of like-minded people, spread throughout the organization, can accelerate company performance exponentially.

How does one start to develop people? I noticed that it’s the small things that can make a big difference, for example being there to greet the new folks on their first day, having the training plan ready before they show up for work, and working with employees side-by-side and setting a positive example. At the same time, it is important to encourage employees to navigate on their own. Allow them to make mistakes and then coach through the process.

My mentor from my first LP job is still with the company, still excelling at his work. But even more importantly, he developed and placed more than a dozen excellent people in leadership positions throughout the organization. Some of his protégés have gone to other companies where they are making a positive impact thanks to the culture they’ve lived under. We used to call this the tree with many branches. And it’s a wonderful tree—one that delivers results for the organization, helps people better themselves, and one day leaves a legacy of excellence behind.

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