LP101: Evaluating Loss Prevention Audit Performance

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A well conceived audit program will provide a snapshot of the strength of the operational foundation of the store or facility. Loss prevention audit elements should reflect the spectrum of topics under evaluation (whether storewide audits or those focused on specific disciplines) and assess the scope of performance across a latitude of possibilities in order to appraise compliance. Questions and answers should reveal the level of conformity to policies, practices and procedures as well as assessing the awareness and understanding of the employees.

The elements included in a loss prevention audit should never be a surprise. The purpose of the audit is to verify and evaluate compliance to known standards established and practiced by the company and executed in the stores and other facilities. Policies and procedures exist for a reason. They should be communicated, understood, and enforced at all times. If they are irrelevant or outdated, they should be changed by the company. Otherwise, they should be followed.

There is always the possibility that there may be certain issues revealed through the audit process that were misunderstood, neglected, or otherwise mismanaged that may result in unfortunate revelations. However, an audit is not the proper vehicle to introduce new standards or information. The dynamic and competitive nature of the retail industry has enough challenges without stoking unnecessary and unwarranted fires. The audit should support the mission of the company. We want to reinforce goals and objectives that enrich performance, and achieve this in ways that echo support and cooperation.

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The loss prevention audit should provide certain benchmarks for success, but must also apply a process for continuing improvement. Such benchmarks should provide a known reference point that identifies targeted knowledge, strategies and skills as well as the breadth and depth of compliance. Performance indicators should be selected that will help determine whether success has been achieved or whether improvements need to be made. It is much easier for everyone involved to have a clear understanding of how things are going if there are well defined benchmarks to serve as guidelines.

Grading Audit Results

Regardless of the particular scale that we use, the purpose of an audit “grade” is certainly dependent on what the grading system is designed to measure and report. But just as importantly, we must establish what the grade means and what purpose it will serve. Ultimately, we want to measure and communicate:

  • The overall performance when measured against the various compliance standards.
  • A general understanding of the methods and purposes behind the compliance standards.
  • The quality of the effort put forth when completing tasks and assignments.
  • How much progress/improvement has been made since the last audit performance.
  • How that performance compares to other stores or facilities

Certainly there is an organizational/administrative value tied to the audit score. But more importantly, the loss prevention audit should provide feedback regarding progress and achievement. It should be a tool for providing guidance to the stores on how to improve performance. It should provide motivation to improve, continue or renew effort and results. We have to see the audit and our role in the proper light if we expect to see the desired outcomes.

Some audit questions may suffice with a simple “yes or no” answer. This type of question is acceptable when our intension is to provide an objective view of specific compliance issues that require full conformity. Such straight forward “Pass” or “Fail” ratings are typically most effective in areas where there is a significant exposure to high risk or liability (For example: “Is the safe door secured and locked when not in use?”), or in situations where there is no variance in the degree of performance that needs to be documented—either a certain program or process is in compliance, or it is not.

Often audits will measure the degree to which a certain process or program is found to be in compliance, offering a view typically assessed based on a scale (For example: 1-5 or 1-10). Sliding point scales might be used to evaluate an area that requires larger sample sizes, and where immediate risk and loss is not as imminent.

For example, suppose we are assessing merchandise protection standards where our company requires that all inventory over a set price point be secured with an inventory control tag. While performing an E.A.S. Tagging audit, we check 200 items, and find that 5 items were not properly tagged. Is a “Pass” or “Fail” score the best way to measure compliance? Does a “Pass” score show too much leniency? Does a “Fail” score show too little perspective? How would either score help the store improve? How do we distinguish between human error and operational neglect? Suppose we had another store that had 30 items that were not properly tagged—How do we fairly assess and compare the two? In these types of situations, the sliding scale is often seen as providing more options and greater value. This method of assessment would serve several purposes:

  • By approaching the assessment on a sliding scale, we can thereby recognize effort and the relative degree of compliance beyond simply “right” or “wrong”.
  • By distinguishing a window of progressing performance, a sliding scale can serve to emphasize opportunities for additional improvement and enhanced results.
  • Scaled questions can present opportunities for more detailed comparisons of past and current performances, allowing for more effective assessment and review. It allows us to gauge the weight of the issue and the potential exposure level we are facing as a result.
  • Scaled answers help to both define and underscore those areas of review that require the most need for attention and follow-up. (For example: “1out of 5″ vs. “4 out of 5″ rather than “Pass” vs. “Fail” highlights the disparity in performance and clarifies the need for improvement.) This allows us to place our efforts and resources where they are most needed.
  • Scaled answers allow us to correct what we may consider minor compliance issues while they are still minor issues. For example, we may not want to impose a “Fail” score for missing 5 E.A.S. tags out of 200 checked, and give the store a passing grade. The scaled audit provides clear opportunity to identify and document our findings and address the issue.
  • This approach may open opportunities for additional discussions that promote awareness and training.
  • This type of approach shows greater flexibility (Ex: 8 of 10) rather than rigid bias (Ex: “right” or “wrong’) and can be used to emphasize cooperation and growth, accentuating the value of the business partnership as a means to build performance.

There are also many audits that combine these styles; identifying and in fact underscoring certain topics that need to be viewed as “right” or “wrong” while allowing for a degree of flexibility and a forum to provide further training opportunities in other areas. Other methodologies may be employed that fit best in specific environments.

Regardless of the style utilized, we want to provide the best indicators or measures of performance. We need to maintain consistency when applying the standards by which any specific criteria will be judged, and look for the methods and approaches that best serve our objectives. We have to discover and apply methods that lead to that end, search for creative ways to communicate our message, and find the most constructive methods to reach our employees and achieve productive results.

LPF LogoBy capitalizing on opportunities to enhance our knowledge and education, we are making an investment in our own future. To learn more about the loss prevention audit process and LP certification, visit losspreventionfoundation.org.

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