The core of this article focuses on the impact of cutting-edge technology and technical analysts working in Hollywood Entertainment’s loss prevention department. However, these technologies and people are only one key part of a fundamental shift in Hollywood’s approach to loss prevention. In addition to the people and technology, two other critical drivers are behind the success  of Hollywood LP.
Tactical vs. Strategic Loss Prevention
A more significant challenge comes from those thieves who survive long enough to evolve and move on to more subtle and sophisticated methods of stealing. Catching predatory employees or eliminating the opportunity for theft in the first place requires a team effort involving every department within the organization. This collective approach must also be combined with a more sophisticated, predictive reporting methodology.
The more insidious forms of paper shrink also require a more expansive, outwardly-focused solution. The field LP team will have a very difficult time meeting the paper shrink challenge without buy-in from a wide array of executives within the company. This team-oriented objective can only be realized by using a more strategic, holistic management approach.
In all fairness, a tactical or “inwardly focused” loss prevention organization can be effective in spite of their limited scope. The tactical mode of thinking focuses on the day-to-day loss prevention activities on the store, district, or regional level.The tactical approach tends to focus on discreet issues, such as associate cases or inventory shrink rather than the aggregate systemic interactions that allow such issues to exist. Most modern field LP personnel spend their days thinking tactically, but when the corporate team adopts this limited view, the organization will have difficulty realizing its full potential.
The Hollywood Experience
Hollywood Entertainment’s loss prevention department has spent the last two years evolving from a tactical (inwardly oriented) to strategic (outwardly oriented) perspective, with significant, measurable results. The LP group has achieved astounding increases in productivity while shrink is decreasing and on-hand inventory is skyrocketing. We feel these successes are a direct result of strategic efforts in the field and corporate office.
The shift from tactical to strategic loss prevention sounds great in theory, but making it a reality can be a significant challenge. Like any other growth process, this can be a difficult and sometimes painful experience. At Hollywood, the transition was sparked by the motivated leadership of the LP department, which then spread quickly throughout the organization. Strong, forward-thinking leadership at the top levels of the loss prevention organization is critical, as well as an unwavering commitment to excellence by all of its members.
There are three essential elements of a successful loss prevention strategic team:
- Leveraging technology in the corporate office
- Evolution of loss prevention field personnel
- Top-level management synergy
In the past, the LP team at Hollywood was purely tactical. We took cases, monitored inventories, and reported results. The relationship between the corporate loss prevention team and the other corporate executives was distant and functional, and very few people outside the LP organization had a coherent understanding of our activities, objectives, or methods. Loss prevention discussions that did take place revolved around opinions generated by administrators in various positions throughout the company, but lacked the factual framework provided by meaningful data.
Today, the Hollywood corporate loss prevention team has fully implemented a strategic loss prevention vision. Starting at the highest level, there are weekly LPmeetings that are attended by the CFO, CIO, EVP of stores, SVP of merchandising, and all other key members of corporate management.
Through these carefully orchestrated meetings, every critical leader in the company has developed a keen understanding of LP issues and challenges. In addition, these leaders are regularly exposed to current and developing trends within the retail industry as well as Hollywood’s own organization. This has led to an increased awareness of LP issues when considering new initiatives. The loss prevention group is now seen as an intrinsic part of the strategic solution.
This last point has been critical to our success and cannot be over-emphasized: We have managed to prevent loss before it occurs because the leadership in other departments has a strong understanding of critical LP issues. This synergistic approach is absolutely essential for a strategic loss prevention organization.
Leveraging Technology  in the Corporate Office
Successful execution of a strategic vision also calls for a specialized, highly focused corporate team. Modern database technology provides corporate loss prevention personnel with enormous amounts of information, but tapping into that stream and converting it into useful, easily digestible reports requires specialized skills.
Hollywood has assembled a talented analytical team within their corporate loss prevention group that has played a fundamental role in our shift to a strong strategic position. The personnel in this group have backgrounds in database theory and programming, as well as a strong understanding of finance and business fundamentals.
Hiring to Win
Building an effective analytical team requires vision, the ability to identify weaknesses in empirical arguments, and the managerial courage to hire unfamiliar skill sets. This process can be broken into four primary elements.
1. Identify departmental and company needs, including an honest evaluation of weaknesses existing within the current infrastructure.
Reflect on meetings you’ve had or initiatives proposed that might have been rejected prematurely. Why did these discussions falter? Was your project dismissed based on lack of empirical data? These questions must be asked before proceeding to the next step. Identifying needs can be a difficult task, but a necessary one in any organization. Partnerships with the CIO and CFO can lead you to these answers, as well as identifying how the needs of your organization can be met from a budgetary standpoint.
2. Select analysts carefully. Be extremely particular about candidates’ qualifications and level of enthusiasm.
To ensure you are prepared to maximize the outcome of your interviews, solicit ideas from your IT, finance, and operations teams. Identify existing tools, reports, and data sources. Attempt to gain an understanding by viewing your organization’s productivity from an outsider’s point of view. Ask questions about desirable IT skill sets, and what top challenges exist within the existing organization. When interviewing for the analyst positions, recognize specialized skills, but base hiring decisions on a preferred mix of talent (skills) and attitude. In the end, you must have a fundamental understanding of the systems that currently exist so you can focus on those specific needs with each candidate.
Select only winners with a “can-do” attitude, or those that see potential solutions to every challenge. These are the people that will run through walls to attain success for the organization and for you. The best advice in this regard is: never settle for less. Do not settle for someone who “has potential” or “might do well with the proper training.” Attempting to develop a technical skill set can take years, depending on the individual. If you select the skills and attitude properly, you should be quite satisfied with your selection for many years.
3. Communicate your vision during the interview stages and frequently afterward.
During the interview and regularly after the hire, discuss your ideal solutions with the analyst(s). Provide examples or illustrations as necessary to stimulate discussion and spark creativity. As you interview your candidate, you can assess the candidate’s response versus your own vision to get an idea of acceptance and enthusiasm.
After the hire, communicate regularly with the new analyst to stimulate ideas and solutions needed to meet your requirements. When you discuss your ideal solutions, be specific about the functions or content you want produced. Depending on your system or report requirements and the person you hired, results may become available much more quickly than you expect.
4. Foster individual and group creativity, and provide guidance based on your experience as a loss prevention professional.
If you’ve selected the right individual, equipped with the proper skill sets and enthusiasm, and understanding your vision, you are likely missing one piece of the puzzle—the loss prevention experience. Analysts come from varied backgrounds with different experiences, but few have seen the loss prevention world directly. Your role is to provide the background information, frame the problem, and provoke thought toward developing solutions. Many times the best technical development efforts are spawned by off-the-cuff conversations within the context of your daily interactions. Engage your analyst team members in these discussions regularly.
Leveraging Technology
The Hollywood LP corporate team has taken advantage of every opportunity to leverage technology in order to maximize productivity and drive results. Our LP team has built customized case management, restitution, exception reporting, and collections applications. As in many organizations, Hollywood’s IT resources have many important initiatives to address, and development time is managed very carefully. This has actually allowed more autonomy within departments to create applications to serve departmental and enterprise needs.
With focused efforts and rigorous quality checking by the loss prevention developers, we have been able to build, test, document, and implement new applications within weeks. These homegrown systems might otherwise cost months or years to develop by a broader team without the requisite loss prevention experience and focus to drive the effort.
One series of development efforts within Hollywood’s LP department resulted in a suite of applications geared specifically to automate traditional loss prevention tasks.
The Hollywood LP Database Application Suite is a series of database applications that blend together seamlessly for tracking and reporting purposes. These paperless reporting tools allow our team to easily track and report trends without the error and expense associated with a paper-intensive environment. Since each of these applications is home grown, they are highly flexible, extensible, and uniquely adapted to meet our needs.
The Power of Paperless
The Hollywood LP team built and deployed a Palm™ Pilot audit application in early 2001. After a year of using our own application, we teamed up with an external vendor and went wireless using Palm Pilot/cell phone hybrid devices.
Our team is now completely paperless, with all loss prevention audits performed on Palm-powered cell phones. Once the audit is complete, it is beamed from the phone to the store printer so the store director can have a paper copy, then the data is sent up to a server over the cellular network. The information is immediately available to report or analyze further, with a web-based data warehouse that anyone in the LP group can access at any time. Our LP field team performs thousands of audits a year, and this paperless auditing approach has resulted in a significant time savings during the audit process.
The productivity increases associated with the paperless Palm audit are significant, but even more critical is the ability to gather timely business intelligence. If the business needs to know about a certain key variable, a new audit can be built and deployed wirelessly to the Palm phones within hours, allowing the field team to quickly and accurately gather the necessary data.
A Proactive vs. Reactive Stance
Shrink can be a shadowy and amorphous opponent, especially once you resolve all of the “easy” topical issues and begin to focus on the roots of the problem. Often, this is where the most significant paper shrink, predatory employees, and customers are exposed.
Our strong technological position has allowed us to get in front of our shrink issues and attack them head-on, rather than waiting until the inventory and wondering what happened. With the advent of the Palm audit, we not only track traditional data streams (transactional and store inventory data), but we also collect ad-hoc data streams that can be used to identify and monitor new opportunities.
These customized data streams have allowed us to stay one step ahead of our emerging shrink problems, rather than reverting to crisis management mode once the problem has had a chance to take root and flourish.
Predictive Analysis
In addition to our wireless auditing solution, the Hollywood LP analytical team has developed predictive shrink-related reporting that is distributed and used by field management at all levels.
Our internally developed LP Team Reporting System compiles nineteen different shrink-related variables, with the end result being a score that positively correlates to shrink performance for every level of field management. Each manager is then force-ranked against their peers using algorithms that eliminate variations due to store count or sales volume within a particular market.
The end result is a very simple and powerful report that the field operations group can use to compare their relative performance against their peers, and identify their most significant shrink reduction opportunities without guesswork. This type of reporting has been well received by the operators and continues to raise the bar in store compliance to policies and procedures.
The Evolution of Loss Prevention in the Field
Developing synergy at the highest levels of management and leveraging technology at the corporate level will only benefit the organization if your field organization is positioned to implement the strategy.
Strategic Partners and Mentors
The role of the loss prevention field personnel at Hollywood has evolved to meet the challenge. The regional loss prevention managers (RLPM) are now strategic partners with the regional store team. This “Enhanced Operations Team” approach is in stark contrast to the historical role of the RLPM, who traditionally only got involved during inventories or when an employee integrity issue surfaced.
In addition to taking cases and resolving integrity issues, the new Hollywood loss prevention manager is a trainer, mentor, auditor, and inventory authority. This remarkable transformation has created powerful synergies in the field between the store management teams and the LP managers, which has led to a significant increase in cases and decrease in shrink. Based on the ownership of the process, the LP managers are now seen as critical assets for the store’s organization, and their contribution to the success of the business is significant and measurable.
Accountabilities
The loss prevention field managers are also held accountable for shrink reduction, exceptions, expenses, shrink, training conducted, and cases. Each quarter, a progress report is generated for the LP managers that reflect their standings in each key area of their accountabilities for the year. This report allows each RLPM to closely track where they stand in their market and where they are relative to their peers. This progress report also allows the LP zone directors to manage each of their LP managers so there are no surprises during the year-end review process. This formalized, rigorous, and exacting review process has been a powerful driving force behind the increased performance of our field organization.
An Unwavering Vision
The key to the evolution of the RLPM at Hollywood is that our leadership clearly identified needs in the field and leveraged our staff to meet those needs in tandem with the store operations group. This has led to an unprecedented level of cooperation between operations and loss prevention teams. Our unceasing emphasis on accountability, flexibility, and ability to meet the needs of the organization has led to the emergence of a new breed of LP manager at Hollywood, capable of fulfilling many roles within the organization.
Unity of Purpose
Each of the three core components discussed in this article is essential to the successful execution of a strategic loss prevention vision. Having one or even two of the components of this strategic triad is insufficient. All three must be present to attain the level of organizational focus necessary to take your shrink reduction to the next level.