Reorganizing Loss Prevention through Talent and Technology

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EDITORS NOTE: Paul Jones is senior vice president of loss prevention for Limited Brands. He is responsible for overseeing the loss prevention, shortage control, and safety functions for over 4,000 specialty retail stores, the supply-chain function, call centers, headquarters, and sixteen world-wide offices. Limited Brands includes Express, The Limited, Victorias Secret, Victorias Secret direct and catalogue ,Bath & Body Works, Henri Bendel, and the White BarnCandle Company.

Jones has over twenty-one years experience as a loss prevention professional in senior positions at Sunglass Hut International, Luxottica Retail, Federated Department Stores, and Target Corporation. He has earned a record of accomplishment in shrinkage reduction, cost control,and innovative technology-based solutions. Loss Prevention magazine recognized Jones for outstanding achievement in technology for both 2002 and 2003.

Jones is a frequent speaker at national conferences as wellas member of the National Retail Federations loss prevention advisory board, the Retail Industry Leaders Association LP steering committee, and Loss Prevention magazine editorial board. His contributions to the LP industry include founding partner of LPjobs.com and StopShrink.com. Jones has been featured and quoted in numerous magazine articles, including Womens Wear Daily, STORES, Executive Technology, and Security Management.

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E D I T O R : Over the past eighteen months, Loss Prevention magazine has followed the transformation taking place at Limited Brands, including publishing an interview with Limiteds COO, Len Schlesinger, last May. When you were first approached by Limited Brands to consider the opportunity here a little over two years ago, what were the factors that caused you to have interest in coming to Limited Brands?

J O N E S : I think the biggest factor was the challenge. My perception of Limited Brands at that time was that it was deeply rooted in the 1970s philosophy of catch em loss prevention. The challenge and opportunity to change that and make a difference was certainly top of mind. Then, with the opportunity to meet with eighteen or so executives and look them in the eyes, I saw that they had the commitment, the energy, and the passion for building a world-class loss prevention team. That did it for me. They came across absolutely wanting a change and open to whatever that meant. They had no preconceived thoughts that it has to look like this.

E D I T O R : When you walked in the door in those first days, did you have a blueprint, a set of objectives in your mind, for what you would do?

J O N E S : No. I had a 30-60-90-day plan on how I would gather the right data and talk to the right people. I needed to get a good feeling for both the wins and opportunities of the LP function before I could develop a strategy.

E D I T O R : How long did it take before you set about reorganizing the department and the programs?

J O N E S : It took about five months to complete an analysis of what we had and to fully develop the strategy, and then about six to eight months to begin implementation. At about five months, we really thought that centralizing was the way to go. Thats when we began to address questions like How do we operationalize that? What does it look like by business? What are the differences, the pitfalls? How do we gain alignment?

This coincided with the holiday season, so we slowed the process a bit because we didnt want to change the process through the holidays. When we made the change, we really wanted to time it in a way that would be good for the team to learn and not be distracted.

We announced the changes in February, let the announcement set in, and then made it happen effective April 1. That allowed us a cross-training period, to take our time selling the program, get everybody comfortable with the concept, and win the hearts and minds of the store people so that they would be fully aligned with the strategy.

E D I T O R : You ended up centralizing the loss prevention function in an organization that had a number of decentralized brands. Talk about the organization you inherited.

J O N E S : Each brand had a decentralized loss prevention department as well as a safety service department with the main focus on catching dishonest associates and protecting our buildings. There was very little focus on reducing shrink and very little alignment with the stores division.

The LP directors in the majority of brands reported to a CEO, who had little time to spend with that person. As part of our analysis, we actually looked at how much time the CEOs had to spend with loss prevention directors, how much guidance, coaching, teaching had really occurred? There was very little, if any.

Part of our analysis found that the core customers should be the heads of stores and the people running the business, the operators. We had the least amount of contact and partnership with those people.

E D I T O R : Ive heard the term compelling argument, referring to how you convinced senior management to implement the change in loss prevention. What was that?

J O N E S : The compelling argument was the result of four or five months worth of work and analysis. It was a very deep dive: three years of shrink history; three years of target-store program history and performance; three years of performance appraisals of everybody on the team, up to and including what type of people we had from an experience and educational standpoint; surveys of the LP folks on how they felt about what they were doing and opportunities that they described; as well as feedback from our store partners on what they would like to see.

The compelling argument encompassed the general perception from almost every avenue of the company about loss prevention. What did the finance team think we did well and what our opportunities were? What did the HR team value and not value? What would they like to see in a future state?

So, gathering all that, we developed a document that made some statements on where we were and where we would like to go. The term compelling argument probably came from our chief stores officer, who is a former general counsel at Burger King and a lawyer by training. We wanted to make it compelling enough to gain alignment throughout the stores and throughout the brands, including those naysayers who didnt feel we should centralize.

When we looked at the data of where we were spending our money versus the results we were getting, plus the frustration of the people that LP should have been servicing, it really supported an argument for change.We didnt want to just say, Hey, this is what were doing like it or not. We truly wanted to paint a picture of a better state of business. One where we benchmarked other organizations, where we looked at cost-to-result ratios that would be compelling even for those people who had no other points of reference.

E D I T O R : You now are over a year in this new organization. What would you say have been the biggest changes to date?

J O N E S : I would list talent, talent, and talent. We focused on talent in building brands…LP being a brand…and talent for building capabilities of both our team and the store teams. Talent for building all operational disciplines of the company as well as loss prevention. Talent for integration of loss prevention into the company at all stages, from how we select and source product to how we build stores.The other thing I would say is reallocation of resources. Under the talent agenda, it was critical for us to reallocate how we were spending our money and time.

E D I T O R : Utilizing your present resources is really critical to a lot of LP teams. Talk about how and why you reallocated resources.

J O N E S : Perhaps the clearest piece of direction, and one of the only non-negotiables, was that we had to do this reorganization within the existing cost structure. We looked at where we were spending our spend. In our company, it was appropriated in a way that didnt drive retail results. We spent two to three times more guarding the buildings than we did our stores. We didnt spend enough on store loss prevention from either a training, awareness, or people standpoint to effectively have a loss prevention presence or program.

As we compared ourselves against the industry, it was clearwe needed more LP professionals and not as many people guarding our buildings. We made a material shift in dollars from how we protect our buildings by leveraging technology that existed, like card access systems and cameras, and added to the loss prevention team. That gave us a unique opportunity to be able to upgrade talent, with a focus on both inclusion and diversity. That became the beginning of building a world-class team.

E D I T O R : Talk a little bit more about the guard situation.

J O N E S : We had a habit of putting guards any place we had a complaint, and didnt have a very good habit of going back and taking them out. So over a period of time, we had a spend on store security guards that was much larger than our spend on loss prevention. So, we reallocated that spend back into technology and people, into processes and training both for the stores teams as well as the loss prevention team. We were able to effectively double the size of the regional loss prevention team, add a training and audit team, and add a component of organized retail crime professionals, without costing the company any more money, inclusive of the timing and shift of the change. We actually were able to do it spending less.

That really took deep analysis of, Do these guards add value from a shrink standpoint? If its for the protection of our associates, our own study suggested that a public-view monitor was just as good, if not better. If we implemented an intelligent public-view monitor, we could add on a training component that we could never get from the guards. It took a lot of convincing and training of the store team and the decision makers on what that vision looked like. But effectively, thats what we did.

By doing this, we were able to build a foundation that would allow us to gain shrink reduction, deliver on great partnerships, and give us a world-class team, at less money. Thats where we aretoday, and where were on track for tomorrow.

E D I T O R : You mentioned organized retail theft. Has your view of organized theft changed since you came to Limited Brands? Youve allocated a great deal of resources to it. What specifically are some of the things youve done to tackle that problem?

J O N E S : Ive probably done a 180 degree turn on organized retail theft (ORT). I always knew it was there, but I thought it was a much smaller component in my previous lives. I was with Mervyns when King Rogers decided to embark on his ORT initiative. Frankly, I had raised eyebrows. I didnt quite know if that was the way to go.

Here at Limited Brands, I quickly learned that organized retail theft in fashion apparel was a much larger component of our loss than I would have ever thought. I did a lot of proving and disproving to myself that this was an area we needed to play in.

We have a front-line approach to organized retail theft where we work closely on the investigation side with law enforcement in key cities. We have a secondary approach to the law enforcement community where we spend a good deal of time and effort educating law enforcement with marketing materials and our time to get them to truly understand the difference between the day-to-day shoplifter and the organized shoplifter. My colleagues and I both at RILA (Retail Industry Leaders Association) and the NRF(National Retail Federation) are pushing their legislative groups to help us get laws changed to more effectively combat organized retail theft.

I think as the world changes this has become a bigger component of loss for one of the first times. Ive increased the external theft level on the University of Florida study from a traditional 20 to 25 percent to probably more like 35 percent of our losses coming from organized retail theft.

E D I T O R : One of the items you mentioned that I know is important to you is diversity within the organization and the commitment to women and minorities. How have you gone about making that happen within your department?

J O N E S : Acquisition of talent has always been a favorite piece of the job for me. We made a bold statement that we were going to strategically target people from an inclusion standpoint not only in gender and ethnicity, but also in thoughts. If you look at my senior leadership team, they are complete opposites. Many of them have great points of view that are totally opposite to mine, which is good. I think it makes for a better decision when we get there.

It was an intentional decision to hire people not only with different thoughts, but from different retailers. Thats part of our inclusion strategy as well. We didnt just go to our main competitors. In fact, we hired very few people from our competitors. We went out looking for the most talented individuals that had the ability to assist us in the overall building of a world-class team.

I think weve really succeeded in that. Limited Brands loss prevention team today is a compilation of the best and brightest LP talent in the industry. All of the progress that we have made is directly attributed to their dedication and hard work.

E D I T O R : How hard was that?

J O N E S : We probably spent the first seven months, seven days a week on the acquisition of talent. We made it our first and most important objective, and it is something that we work on 365 days a year. We built the talent first, and then we built the program. Weve designed entry-level positions at the LP manager level, which is one of the ways of being able to get in a talent pool of females and minorities and people with real inclusive and different thoughts, so that we cultivate them. Today, I think were set up with two and three levels of bench strength for those positions.

If you look at us today, we would like to believe that we are one of the leaders in diversity and inclusion in loss prevention in the country. Were doing it because its the best thing to do. Its a competitive advantage to have a diverse and inclusive team, and we continue to make it a critical piece of our talent agenda.

E D I T O R : If you look at the results side of the initiatives youve put in place, have you won the battle in terms of your shrinkage objectives?

J O N E S : Id hate to ever say that weve won the battle. But I would say that weve made material progress with shrinkage reduction in the company. To us, shrink is a zero sum number. We need to get to zero. Weve made huge progress, much quicker and faster than the company had expected, spending less money and delivering great service to the stores. But we reset the clock with every inventory. Thats part of the profile we hire to, one of continuous improvement. We feel that were well on track to what the industry would consider world-class results.

E D I T O R : If you look at the shrink age initiatives and programs here, is there a single, driving theme for the philosophy of your organization?

J O N E S : I would say data centric. Everything we do, including our own performance, is measured. Were not measuring from a negative standpoint, were measuring for results. If we have an awareness program, for example, were measuring the effectiveness so that we can get better at the next one. So, were deeply rooted in data, from our shrink numbers to our sales numbers, what our shrink and payroll ratios mean, how the cost of a program relates to the shrink, and re-engineering where we need to be based on that.

We are also deeply rooted in training and awareness. Like most specialty retailers, our training is focused on the linchpin of the organization, the district manager. We have all kinds of programs in place today to educate that district manager.

Our audit program is also very data driven. It paints a very clear picture. There are all kinds of correlations to shrink. But, we dont use audit in a sense that many use it. We use it as a piece of the training tool. For us, the data allows us to have the platform to speak intelligently and factually about driving shrink down and driving sales up. The data is the beginning and the overarching fact. The training and awareness platform becomes what we do with that data.

I think we are seen today as a division thats customer focused, fact-based, and results-oriented, using a model of data and not forgetting about driving top-line sales. In the past in the majority of our businesses, you would hear, Lets drive top-line sales. But today, I think you will hear our store leadership saying, Lets drive top-line sales profitably. I think that is because we have made a compelling case with the data in connecting all of the variables related to driving profitable businesses.

E D I T O R : Many other loss prevention organizations dont have the resources, either in people or money, to implement some of the programs that you have. Where do you think someone should start in terms of major initiatives?

J O N E S : The first thing I would recommend is to build a data warehouse. From a case management standpoint, you need a system where you can add in the variables that drive shrink: things like historical data, sku-level data, the LP enterprise portal. That is the most important first step because it gives you the data to influence the company to spend where they need to spend to get the results they want.

After you have the data, next would be training and awareness. The data tells me X, so now I train all of the people in the organization on what the data says. I dont think that you can intelligently manage a loss prevention program without being able to capture data in a meaningful, easy way that allows you to sell your programs.

E D I T O R : We noticed at last years NRFLP conference that Limited Brands was represented by probably twenty of your people. We just came back from the RILA loss prevention convention, where you also had a number of executives. Why do you feel the importance of involving your people in these events?

J O N E S : At RILA, we not only had a good presence there, but we also participated in some great sessions, including building a loss prevention program from scratch and telephone interviewing. I feel that to be successful, we have to be committed to the professional development of our people. I believe people work harder for someone that they know is committed to their own professional development.

Theres also a second piece. I worked for some great people who spent the time to educate me, allowed me to go to conferences where I developed relationships and benefited from shared learnings. Having had that opportunity, I want to make sure that I provide that to everybody that works with us.

Additionally, if we want to move our industry to the next level, we have to be willing to invest our time, energy, and people in making a difference. For example, we have people who sit on the newly formed NRF women in LP caucus, as well as participate in the International Organization of Black Security Executives. Its an important subject and if we dont allow our people to spend the time and resources to be a part of it, we wont make the changes needed in our industry.

We will have a strong representation at the NRF conference in June. Im hoping some of our human resource people go. My partner in internal audit is presenting a session this year. To me, its one of the best things about this profession. Between NRF and RILA, you can network with probably 90 percent of the people in all of retail. Its a wonderful way to network. I think that sharing with my colleagues at The Gap, Wal-Mart, Target, Home Depot, Lowes, and others, makes us all better. I dont hesitate to call them, and I take their calls. Ive always benefited from this sharing, and I want to make sure my folks benefit from it as well.

E D I T O R : If you would, look into the future for us. What are some things coming in the next three to five years that loss prevention executives will need to be prepared for?

J O N E S : I think the loss prevention executive of the future absolutely needs to be in touch with the safety of the associates. Our world has changed so much since September 11th. A component of our role will continue to be, How do we read the landscape to ensure that we have the right protection for our associates?

From a shrinkage perspective, I think that we need to be even more deeply rooted in technology in order to fully understand how technology can help us, what the relative savings are by implementing technology, and how do we embrace things like RFID without over-committing? You can only do that, I believe, if you have a very good understanding of technology and an appetite for learning and sharing with other LP professionals.

Another piece that I think is really critical is understanding shrinkage in all the various retail channels today. Retailers are selling through e-commerce, internationally, through catalogs, in joint ventures. How does this all apply to shrinkage and how do you fix it before you enter those channels.

Technology continues to move at an accelerated pace. We are working with some outside vendors to continue to build on our internally developed shrink predictor model.

We are involved in a program with a company called The Return Exchange ,which I liken to the original concept of TeleCheck, SCAN, and credit card authorization programs. It provides us with the data to refuse problematic refunders. So far the data suggests that we are touching a very small percentage of our customers who are refunding a large number of dollars, so there is very little downside and a tremendous upside. My belief is that sharing negative refund information will become as common place as sharing bad check and credit card data.

E D I T O R : A year ago, we had the privilege of sitting with your boss, Len Schlesinger, the COO, who is absolutely a very impressive executive. Incidentally, we received many, many positive comments and great feedback on that interview [Managing Change at the Worlds Most Admired Specialty Retailer May/June 2003]. Having said that, what is it like to work for a Harvard professor?

J O N E S : At first, it was intimidating. But I will tell you now, it really has become a part of the value of the company. Today we refer to ourselves in the leadership role as a teaching organization. It’s a fabulous relationship and one thats deeply rooted in his teaching me the value of whatever piece of the business were talking about. From a personality standpoint, Len has the appetite for enormous amounts of information and moves a million miles an hour, which works just fine for me. I couldnt expect a better experience. I feel like every day Im learning, which keeps me very interested in the business. His mode of teaching all the time was interesting at first, but now its refreshing, because Im always learning something new.

Not only with Len, but with Mark Giresi, our chief stores officer, as well as the partnerships we have built with our stores leaders, and other functions, such as HR, IS, legal, internal audit, and logistics. Everyone has taken ownership and participated in the loss prevention initiative. It truly is a team win.

E D I T O R : One last question. Its a follow up to your use of the word partner and your strong belief in partnerships. You have two children and a wife, Tina, who is in fact a partner of yours. How does that relationship influence your personal as well as professional growth?

J O N E S : My relationship with my wife is absolutely one of the reasons why Im able to be working today. My wife is my biggest supporter…as well as my biggest critic. She is not short on opinions. She truly has supported me in the five or six different relocations weve made. She is there to be the voice of reason through times of uncertainty. If I see the glass half empty, she sees it half full. But, at the same time, she is one of my biggest critics. Its great to be able to get that kind of feedback from her. Its a team. I think the other piece is your family gives you a reason to want to succeed. My work ethic comes from my father and my mother. I actually come from a pretty humble upbringing and was continuously taught the value of hard, honest work. At one point my dad was working three jobs to support our family. Id like to have the ability to put my children through Harvard or whatever university they want to go to. Family, in general, gives us the motivation to do what we do. Yes, this job is fun and challenging and self-fulfilling. But family is one of the driving forces behind what is in it for me.

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