An effective retail loss prevention program is a multi-dimensional challenge that has many interrelated components, such as controlling loss, preventing fraud, deterring internal and external theft, reducing damages, and ensuring data integrity. The one necessary condition, essential for these strategies to succeed, is the ability to create and maintain individual and group accountability.
Senior Leadership. It starts with getting support for your strategies from the senior leadership in the company. If it is senior leadership’s priority, it will become everyone’s priority. This can be the most difficult part because loss prevention is competing with every department in the company for that support. Senior leadership knows that controlling loss will improve the profitability of the company; however, is it important enough to make it one of their priorities? That will require making a compelling business case that fits the business model of the company based on an ROI of reducing loss. This will be unique to every company, but without a compelling business case, senior leadership will not make controlling loss one of their priorities.
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Performance Reviews. Once you have senior leadership’s buy-in, you can then create accountability for controlling loss beyond the LP team. The best place for accountability is in your company’s performance reviews. If it is on a person’s performance review, it will get the focus needed to drive your strategies.
Store performance reviews are key because most loss occurs in the stores. A typical store performance review includes sales performance, expense management, people management, and specific objectives like opening store credit or loyalty cards or other specific objectives. Including shrink as an objective on a performance review is the first step in ensuring the execution of your strategies.
However, don’t stop with store performance reviews. Accountability for shrink should be on as many different performance reviews as possible. For example, are your buyers held accountable for shrink? In some companies, buyers are only held accountable for their sales. If you hold them accountable to shrink, they will be responsible for the profitability of the product from initial purchase to final sale. This will motivate them to support high loss merchandise protection strategies like electronic article surveillance (EAS) tagging or securing product in cases or with other protective devices. Of course, by protecting merchandise from loss, there will be more available for purchase by the customer, which in turn will improve their sales results—it’s a win-win for the company.
Your supply chain is another area where significant loss can occur. Include a shrink objective on distribution and fulfillment center performance reviews. You should review all areas of the company where loss can occur to see how you could include a shrink objective that would support your strategies.
Performance Incentives. Once you have the shrink objective on the performance reviews, it is important to incentivize performance by rewarding the achievement of that objective. Normally, the objectives on the performance review include bonus criteria if the objectives are exceeded. If reviews do not include this already, I recommend that it be added. Incentives provide motivation, first to achieve the objective, and then to exceed it.
Paying attention to underperformers is important. There should be consequences for not executing the objectives. I have seen many LP programs that have shrink objectives in place but have no consequences for not executing or not achieving those objectives. It is critical to put consequences in place.
For example, you should have an audit program in place to inspect the compliance to your strategies throughout the year. If a facility fails multiple audits, it should result in some type of disciplinary action for the leader. Every company has a disciplinary action matrix in place. Determine how to apply it to your shrink objectives. Although rewards do motivate, without consequences you will not maximize your results.
Another benefit to shrink accountability is that those being held accountable will be motivated to achieve their objectives and, as a result, will reach out to the LP team for support. This will create partnerships that are essential to the success of your strategies. But you need to be ready. In my experience, when you put shrink accountability in performance reviews for the first time, the LP team must be prepared for demands for support in helping these other areas of the company achieve their objectives. This is what you want, but you must be ready to respond in a timely manner with appropriate solutions. Your business partners can become frustrated with you and your team if they do not feel you are supporting them appropriately. Therefore, you need to make sure that your team is ready to embrace these partnerships and support them in executing their objectives.
The bottom line is implementing senior leadership-supported loss control accountability with consequences throughout your company will ensure more effective execution of your loss prevention strategies. More effective execution of your strategies will better control loss and improve profitability.