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Remodeling Loss Prevention at The Home Depot

EDITORS NOTE: Tom Fricke (pictured to theleft) joined The Home Depot in November, 2005, asvice president of asset protection with responsibilityfor loss prevention, safety, environmentalprograms, and crisis management/businesscontinuity. Fricke came to The Home Depot fromGiant Eagle Inc., where he was chief administrativeofficer. Previously, he worked at PepsiCo for overeleven years in various leadership roles, includingmanaging director of Smiths Snack Foods inAustralia, vice president of strategic planning forFrito-Lay North America, and president of Frito-LaySnacks Caribbean. Fricke holds a bachelors degreefrom the U.S. Naval Academy and an MBA fromStanford University. He is a member of the editorialboard for LossPrevention magazine.

Mike Lamb (pictured to right) is senior directorof asset protection at The Home Depot where heis responsible for the execution of LP, safety, andenvironmental programs in the U.S., District ofColumbia, Puerto Rico, U.S. Virgin Islands, tenCanadian provinces, and Mexico. He directs afield staff of approximately 2,200 asset protectionassociates. With over 28 years of retail experience,Lamb began his LP career in 1979 with MillersDepartment Stores and worked for FederatedDepartment Stores prior to joining The HomeDepot in February, 1999. He holds a B.S. degree insecurity management. Lamb sits on the NRF LossPrevention Advisory Council and is a memberof the board of advisors for the Loss PreventionResearch Council.

E D I T O R : Tom, you came into this position without the traditionalloss prevention background. Whatwas involved in your decision tojoin The Home Depot?

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F R I C K E : I spent nearly twelveyears at PepsiCo primarilyas a general manager doinginternational turnarounds with thebulk of my time spent overseaswith organizations that werestruggling and needed redirection.I came here with sort of theWarren Buffet, Work where youlove attitude. As a customer, Ivealways been a fan of Home Depot.At the same time, Home Depot hasa great reputation in the industryas a great place to work and as atraining ground for executives. Theasset protection opportunity wasone presented to me as a generalmanagement opportunity with thedemonstrated potential to latertransition into a different role here.

E D I T O R : What business expertisedid you feel you brought to HomeDepot that matched the needs ofthe companys asset protectionleadership position?

F R I C K E : Organizationally, theywanted me to help transition fromwhat had been separate LP andsafety/environmental organizationsinto one asset protectionorganization. It was a great way forme to learn the organization andthe culture. Plus, I believe assetprotection is a critical function inany business. While the separatefunctions that were in place weresome of the best-performingwithin the company, when youlook at combining functions, therewill be organizational impactsand process changes that have tooccur. So, I think my turnaroundexperiences were extremelyrelevant for that.

Also with my operationsmanagement experience, I wasable to help position the safety,environmental, and hazardousmaterial work that was beingdone in a way the field managersthought about the business. Oneof the biggest challenges you faceas a function is presenting yourexpertise and what youre workingon to the general managers in away that they hear and understandit and appreciate its relevance.

E D I T O R : When you say combining areas, you are talking aboutbringing environmental, safety, and LP under one umbrella.Correct?

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F R I C K E : Right. Historically, we had field people who werefocused just on LP or safety/environmental. Our field operatorsare now responsible for all three, particularly at the districtand regional levels. So we had LP people who had to learn thebasics of safety and environmental, and safety/environmentalpeople who had to learn the basics of LP. Were not done withthat process, but were making great strides. Our biggest worrywas how to transition the new organization without impactingthe great work already in progress by our LP and safety/environmental organizations.

E D I T O R : Often in retail, safety takes a back seat to lossprevention in terms of managing the functions. I imagine thatsnot the case at The Home Depot.

F R I C K E : Thats one of the benefits we have in the combinedasset protection organization. Before we had one LP managerfor every district, yet in some parts of the country, only onesafety/environmental manager for every two to three districts.Now we have an asset protection manager for every district. Asa result, in many ways were talking safety/environmental morein the store now than we ever have. Even though people jugglemultiple functional responsibilities, theyre in the stores withgreater frequency talking about all three areas.

At the same time, we dont want our asset protection peopleto be viewed as the safety people. We have to have everybodylooking out for each other. So, weve focused on how to makesafety and environmental excellence part of the culture so thateverybody owns the areas.

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E D I T O R : What were some of the initial objectives you felt werenecessary to achieve success in this transition?

F R I C K E : Organizationally, there was no mandate on what weneeded to do. The restructurings that we did were our attemptto make us as effective as we could be across all three areas, butat the same time being as efficient as possible. We wanted to seeimprovements in all areas, because as good as we had performedhistoricallyparticularly in the last three or four yearswethought there was room for more improvement. There is stillroom for improvement today. I want to see us continue toimprove performance within the organization.

E D I T O R : How have you organized the new asset protectionorganization?

F R I C K E : From a functional standpoint, I have loss prevention,safety, the environmental compliance piece around storeoperations including hazardous material and disposal, andbusiness continuity and crisis management.


E D I T O R : Do each of those have a director?

F R I C K E : Were set up a bit differently. We have one person responsible for the field and all the field programs. That personis Mike Lamb. So anything that happens in the stores from an APperspective comes through Mikes organization. At the corporatelevel, we have a single AP group managing the developmentand oversight of all LP and safety programming. That groupis headed by Chris Canoles. Because of its importance, wevebroken out environmental compliance. Today we have a separategroup that only works on environmental compliance programs.Finally I have a director who does our business continuity andcrisis management.

E D I T O R : So, Tom Fricke shows up one day as VP of assetprotection with a wonderful resume, but one that doesntinclude LP. Many of the tried-and-true LP professionals here musthave thought, Where are we headed? Does this person knowwhat hes talking about?

F R I C K E : I would imagine that was a concern.

E D I T O R : How did you go about proving to your leadership teamthat what you brought to the table was meaningful and that youcould manage the change?

F R I C K E : Ive been blessed to have a great relationship withMike from the beginning. Spending time with Mike and his teamhas been extremely beneficial for me in understanding the lossprevention challenges. Because of that relationship and theproven performance of his LP organization, Ive relied on Mike,which has allowed me to focus on some of the areas where wehad issues and concerns that needed to be addressed in theshort term.

E D I T O R : Mike, as a well-respected loss prevention professionalfor years in this business, you get a new boss. How did you adaptto that?

L A M B : I think we all feltcertainly I felt personallythat withall of the administrative needs that were in front of us, includinga reorganization, a new VP of asset protection with more generaladministrative and leadership skills would be very appropriatefor the organization. Tom was very upfront with the fact that heconsidered himself a general manager. He gave us a thoroughoverview of his background and made it clear that he wouldwork with us in terms of how he would map the future for theasset protection department. So, there was very little anxietyassociated with his coming on board.

E D I T O R : Prior to coming to Home Depot eight years ago, youwere in department store retailing. How are the departmentstore and home improvement businesses different?

L A M B : Coming from a segment of the industry where youreprimarily in the business of selling clothing and transitioning toa home improvement environment was certainly a significantchange. I find home improvement is a little less traditionalthan department stores because were a working warehouse.The operational things we have to get our arms around sothat we dont have shrink are uniquely different than theexperiences I had in the department store industry. Im notsaying that department store retailing from an LP perspectiveis one dimensional by any stretch of the imagination. But itseems like you flex more operational muscle working in a homeimprovement environment. Its more a balance between drivingoperational efficiencies in our stores and attacking the theft andfraud component that exists in our environment. But at the endof the day, there are a lot of similarities in the sense that retailingis about people. Its about establishing relationships, selling thevalue of an organization to a company, and putting togetherprograms that will ultimately drive and improve profitability.

E D I T O R : Talk about the transition of the asset protectionorganization from the LP perspective.

L A M B : Until the consolidation of our safety/environmental andloss prevention organizations, LP was strictly focused on shrinkmanagement. With the transition starting in January, 2006, weset about the task of identifying the right people as field leadersto fill the new roles. We needed to balance the importance ofensuring we have a safe, environmentally compliant workingenvironment for our associates and customers, and at the sametime managing the all-important business of shrink. It forced meto think differently and educate myself more thoroughly aboutsafety and what safety means to the organization.

E D I T O R : How did you get traditional-thinking LP people tounderstand and make a commitment to wearing the safety hat?

L A M B : We have tremendously talented men and women onboth our loss prevention and safety/environmental teams.So, as we merged the two teams, we were looking for afew key thingsa positive attitude about driving execution,understanding the importance of safety, environmentalcompliance, and loss prevention, and staying focused onbusiness results. The proof, as they say, is in the pudding. If youlook at our performance over the last fifteen months, were veryproud of the results weve achieved.

E D I T O R : How did the safety team adapt to the transition?

LAMB: Very well. Chris Canoles, who formerly headed up the safetyside, has a unique background in the sense that he spent manyprofessional years working with Kmart in both safety and lossprevention. So Chris experience fit very well when Tom and theorganization were looking for someone who could help design andbuild our asset protection program. He is equally passionate aboutmanaging shrink to its lowest level and ensuring we operate a safeenvironment for our customers and associates.

E D I T O R : As you two look at your asset protection team in thefield, what are their primary objectives?

F R I C K E : We have straightforward metrics. In loss prevention,we have monthly store audits that we score and track. However,the key measure of success is ultimately the shrink that getscalculated out of their annual inventory. On the safety side,were looking at reportable employee incident and lost-timerates and customer incidents. With environmental compliance,there are various checks and balances that are regularlyreviewed and evaluated. Ultimately the most important objectivefor the entire team is to be valued business partners with thepeople who are running the stores.

L A M B : Were a firm believer in key performance indicators.As the business changes, we have to make sure we changeaccordingly. We have key performance indicators on shrink,safety, and environmental that day in, day out, week in and weekout, we measure in the stores. To the extent we are executingthose measurables, we have the confidence in delivering themain objectives in terms of business results.

E D I T O R : Isnt that difficult with the number of stores and assetprotection professionals you manage?

L A M B : One of the things were most proud of is thestandardization across our organization. You cant go into astore in California, look at an AP program, and measure it anydifferently than you do a store in New York or Florida. There is aconsistency of expectation.

F R I C K E : True, its hard to keep track of 2,200 stores. Weretrying to develop metrics that are predictive. If all you do iscome behind every incident and then address the issues, intheory, you never do any better. Were trying to develop metricsthat will not necessarily precisely tell us where the next accidentwill occur or the next bad shrink or the next shoplifter, but to bemore predictive so we can direct our resources to stores wherewe think the time will be better invested. We are constantlycorrelating our data to performance to see if they are showing usperformance issues. For the first time in safety, we have a safetyaudit that is predictive of safety performance in stores.

E D I T O R : You are now focusing on the relationships between keyperformance indicators and audits.

F R I C K E : One of the reasons LP has been so successful here inthe last four or five years has been those predictive measures.The opportunity was developing those predictive measures orcorrelations on the safety and environmental sides. We now arestarting to see those emerge, and its making us that much moreefficient and effective in those particular areas.

E D I T O R : When youre establishing KPIs and looking forpredictive data, how long does it take to actually learnsomething?

F R I C K E : It varies. On the environmental side, we were ableto gain some insight relatively quickly. On the safety side, afterwe tried for years, it took us about six months looking at onespecific metric before we started seeing relationships develop.We had to rewrite some of the data collection triggers andchange some of the things we did.

L A M B : Similarly with shrink. Shrink performance is a trailingindicator of the things youve done upstream to either manageit effectively or ineffectively. We do audit, which we call assetprotection reviews, either on a monthly or bimonthly basis,depending on performance within a given store. We continuallytrack the correlation of the audit score itself to that of the shrinkperformance for the respective store, district, region, or division.

We tweaked it as we have changed the business and asthe business has changed around us. But it is what we do tomeasure performance. It is the input of the field, both the assetprotection personnel and our store operators, that is helpingus design a tool that looks at core store execution. And to theextent we are executing it and its applied in that store, we haveseen the direct correlation to shrink performance. That suggeststo us that what we are measuring is making a difference.


F R I C K E : With safety this year, we looked at some of the morefrequent or serious incidents in our stores, and weve developedspecific training programs for our associates to help minimizeor reduce incidents in those areas. On a monthly basis, we lookat our actual performance against the incidents we addressed inthe training program so that we can understand the effectivenessof our programs.

E D I T O R : Tom, your move to Home Depot has given you anintimate look at the world of loss prevention. What have beenyour impressions of the asset protection world?

F R I C K E : I was struck by the complexity of what we do in thegroup and the operational difficulties and the things that wereworking through. The loss prevention group is successful herebecause it has integrated itself across the operation, and somuch of our shrink is actually occurring not because of theft, butbecause of our own operational issues. So to me, its been thebreadth and depth of what our teams do.

E D I T O R : Let me change directions for a minute. If I am ayoung person and want to work for The Home Depot in assetprotection, what do I need in terms of experience or education?

L A M B : In terms of background for an entry-level position, weare less concerned about professional experience in LP and moreconcerned about attitude and solid work ethic. The Home Depotis very reciprocal, based on my experience, from the standpointthat the organization has given back to me everything Ive givento it. So, the exciting thing to me about offering an individuala career at The Home Depot is the fact that you can make of itwhat you want to make of it in terms of upward mobility.

F R I C K E : One of the things we offer people coming into ourorganization, because of the cross-functionality of our assetprotection people, you will gain broader experience than at justabout any other retail company today. If someone wants to makea career of asset protection, thats great. We have a great careerpath here. If somebody wants to get into store operations, theywill understand store operations extremely well, and its an easytransition. Some of our people are running stores now becausethey wanted to get into store management.

E D I T O R : At the magazine we often get emails and letters fromyoung people asking if they should get a degree in criminaljustice, business, or some other discipline. What would you tellsomeone about choosing a major if they eventually wanted tojoin your organization?

L A M B : The main objective is just to have that college education.It doesnt necessarily have to be in the field of criminal justice,although, certainly, theres no disadvantage to that given thatloss prevention and criminal justice travel similar paths.

F R I C K E : Ive also seen people who are tremendously successfulwho do not have a college degree. When Im looking at differentcandidates, I ask, Can they think critically? Do they have agood work ethic? Will they be able to grasp the concepts thatare presented to them as they go through their developmentover the years? You can make a strong argument for gettinga criminal justice, business, or even a history degree. Butultimately, its all about the quality of their critical thinking.

E D I T O R : Mike, you have seen many changes in loss preventionthroughout your career. What are some of the challenges youfaced in your career?

L A M B : One of the biggest challenges that I face as an LP or anAP executive is strategic thinking. Its one thing to be reactiveto the business and forecast what youll do next week or nextquarter. But as we look at the business three, five, ten years fromnow, what changes will come about and will you, as a leader, beon the forefront of that, or will you be trailing behind in termsof creativity or identifying the next big thing. Its all aboutstrategic thinking and continuing to evolve and change. For me,thats the biggest challenge.

E D I T O R : How has managements view of loss preventionchanged over your career?

L A M B : Ten to fifteen years ago, I think loss preventionwas viewed as a necessary evil. You had to have it becauseyou needed to manage shrink in order to run a profitablebusiness. Today, as you look at The Home Depot and othersuccessful retail businesses, the associates that make up ourasset protection team in the field are truly viewed as businesspartners. They interchangeably manage the store from lookingat the things that are important from an asset protectionpoint-of-view and from the total business perspective,whether its level of service that were providing to thecustomer, in-stock condition in a store, or ensuring that theasset protection programs are being executed on a regular basis.

As I said earlier, retailing is a people business. If you look atthe individuals that are most successful with The Home Depot,they understand that. They view the business holistically, andthey have become a more valued team member within that store,that district, that region. As they walk a store, they look at thatstore through the eyes of the business operator, not through theeyes of a loss prevention or asset protection person.

E D I T O R : In todays business world, executives like the twoof you work many, many hours a week. How do you bringbalance to your life, and how do you manage the people in yourorganization to understand the value of bringing balance of workand home to their role?

F R I C K E : I work very hard to be sensitive to it. You see toomany examples of people who demand that somethingbe done over the weekend, but then dont look at it untilWednesday. You see far too many people who travel andexpect they will be entertained in the evening by whoeverhappens to be there in the field. Those local individuals mayvery well have personal issues or things that they need todeal with on that particular evening when you are visiting.Dont have unreasonable expectations. Be flexible with them.No doubt retail is demanding and can be 24/7. There aretimes in my own life where I have enough sense to turnoff the Blackberry.

L A M B : I would say that while I passionately enjoy what I do, Idont live to work; I work to live, to support and provide for myfamily. For me, its not how many hours you put in a week, butwhat is the quality of work you put into a given week. Ive seenindividuals that can get far more done in 40 hours than somepeople can get done in 60 or 70 hours. I think you have to forceyourself to carve out quality personal time, and you have toencourage your direct reports to do the same.

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