Hop online and take a peek at a variety of different loss prevention job postings and you’ll find a fairly consistent description of expectations, all of which are essential to success in the retail industry. Typically, we can slice the accountabilities of LP professionals into four categories—managing LP teams, mitigating loss, conducting investigations, and auditing operational efficiencies. Subsets of these accountabilities often include developing business partnerships, risk management functions, physical security controls, workplace violence training, among others.
Our profession has become more complex, challenging, and rewarding than ever before. Our teams are essential to the success of retail, and our accomplishments have afforded us the opportunity to have a seat at the table, contributing to store, district, and company-level decisions.
As our roles have continued to evolve in the ever-changing world of retail, one of the areas that I believe requires a greater level of focus is the retention of outstanding leaders, more specifically, outstanding store managers. While this is and always will be the responsibility of our store operations and human resource departments, I’m confident that after seeing the below eye-popping data that you’ll want to add “store manager retention” to some of your LP key performance metrics.
This study showed that stores that had the position of store manager filled for the entire inventory cycle delivered shrink results 28 percent better than stores that had vacancies during the same time period.
Don’t get me wrong—I don’t believe that filling vacant store manager positions is something that LP professionals should be tasked with. I do, however, believe that it is exceptionally important that we support initiatives to retain great leadership, and furthermore, assist in developing and building bench strength to efficiently fill open positions. Many retail studies have demonstrated the exorbitant costs associated to hiring, on-boarding and training new employees. However, the studies don’t always tell the full story. Seldom, if ever, is there consideration of the impact that a vacant store manager position has on shrink.
Store Manager Study
In 2019 I completed a correlation study between store manager vacancies and shrink results in over 400 retail store locations, with the criteria that the store manager position needed to be filled with the same person for the entire duration of the inventory cycle (approximately one year). I separated any stores that had vacancies into three additional groupings:
- Control Group—No Vacancy
- Group 1—Store Manager Position Vacant for 5 Weeks or Less
- Group 2—Store Manager Position Vacant for 6–10 Weeks
- Group 3—Store Manager Position Vacant for 11-Plus Weeks
While I anticipated that the results would be most favorable in the control group, I was surprised to see the overall impact of the analysis. This study showed that stores that had the position of store manager filled for the entire inventory cycle delivered shrink results 28 percent better than stores that had vacancies during the same time period. The results were even more compelling at the individual group levels previously outlined.
Group 1—Store Manager Position Vacant for 5 Weeks or Less. 15.6 percent of the stores fit into this group, which included stores that had a vacancy of one day through five weeks. This group best represents a typical time frame for retailers to recruit, hire, and on-board new managers and is a good example of where district leaders are generally ready to fill positions via an internal promotion or have solid bench strength waiting in the wings. While this group is the quickest in filling the leadership position, it still requires new hires to be trained and/or acclimated to their new environment. This transition puts shrink mitigation controls in direct competition with all the demands that are put on a newly hired store manager. As such, stores in this group realized a 20.3 percent increase in their shrink vs. stores with no vacancies.
Group 2—Store Manager Position Vacant for 6–10 Weeks. We can occasionally be caught flat-footed when store leaders resign, even more so if they are terminated for cause as a result of theft, fraud, or misappropriation. In cases such as these, it’s often more challenging to find the right person to lead the store. In this study, only 6.5 percent of the stores took longer than six weeks to rehire the store manager position; however, the negative shrink results quickly compounded. This group of stores spiked, with a 35.6 percent increase vs. the control group. Some would argue that the shrink was on the rise before the store manager left, while others might argue that it was a result of the turn in management. Regardless of the timing of events, the duration of the vacancy became a clear indicator that the shrink was going to escalate dramatically.
Group 3—Store Manager Position Vacant for 11-Plus Weeks. Only 3.4 percent of the time during this study was there a cumulative vacancy in the store manager position of 11 weeks or longer. That’s the good news. Unfortunately, the data proved to be consistent and the proverbial wheels fell off the shrink controls. In this group, store leadership was in transition throughout much of the inventory cycle and filling the position became exceptionally challenging. The shrink percent-to-sales likewise became exceptionally challenging. These stores realized an increase of 64.8 percent in their shrink percentage.
If you’re keeping track, you’ll have concluded that while there were some alarming increases in the stores that required change in their leadership, there were 74.5 percent of the stores that had a store manager in place throughout the entire inventory cycle. These stores significantly outperformed their counterparts in delivering the lowest average shrink percent-to-sales. While the focus of this study was on the correlation between store manager vacancies and shrink percentage, it’s important to note that sales were also most favorable in locations where store managers were retained for the same time period.
The Role of Loss Prevention
As a result of this analysis, I began implementing meaningful strategies that would allow the loss prevention department to assist in either retaining talented store leaders or better mitigating losses in the event that this vitally important position became vacant. Below are a few examples of controls that can be implemented.
Shrink Target Store Criteria. Use the vacancy rate as part of your shrink/target store criteria. The shrink percentage in any given store may not have escalated to the point where it, in itself, suggests the need to put that store on the target store program. Adding the vacancy rate into the criteria may land a store on the program and help you prevent the shrink that is coming your way.
Operational/LP Audits. Create predictive modeling for shrink with store manager vacancies weighed in the algorithms according to the length of vacancy. There are exceptional solution providers in the industry, such as ThinkLP, Agilence, Zebra (formerly Profitect), and others that specialize in designing a predicative modeling analysis. I highly recommend partnering with these industry leaders. A well-produced operational audit can be your best training tool. Combined with predictive analytics, it will empower you to guide training towards the stores that need it most.
Exception-Based Reporting. Create or increase visibility of adverse behaviors in stores without store managers, using customized queries for these specific groups. Remember, the risk of increased shrink grows consistently with the length of a store manager vacancy. It is important to create exception reporting by each vacancy group. The population of each group is ever-changing and will need to be managed on a weekly basis.
General Reporting. Develop and share reporting. Your business partners in store operations and human resources are always focused on quickly and efficiently hiring top level talent. Nonetheless, prioritizing stores that are most likely to produce unfavorable shrink results (using your predictive modeling) can only help management in making informed decisions.
Conducting internal investigations, closing ORC cases, auditing operational standards—these are the core competencies and KPIs that will always contribute to the success of an LP team. While we maintain our efforts in these key areas of our job responsibilities, it is equally as important for store, district, and regional-level LP leaders to look for the red flags indicating that change in management is on its way. As previously mentioned, we put a lot of effort into creating shrink initiatives, training our leaders, auditing compliance, and driving improved results. The data speaks volumes—retaining great store managers will clearly be one of the keys to your success in loss prevention.
About the Author
Allan Watters, LPC is a seasoned veteran in the loss prevention industry with more than 30 years of experience as an industry leader. Over the course of his career he has led the LP programs as senior vice president of asset protection with both Stage Stores and The Sports Authority after beginning his LP career with T. Eaton Company in 1990 and progressively assuming positions with increased responsibility. Watters also serves on the board of directors for the Loss Prevention Foundation.