Taking Retail Loss Prevention Strategies to a Whole New Industry

Chris McDonald is the senior vice president of loss prevention for Compass Group North America. He came to Compass Group in April 2012 after nearly four years leading the loss prevention strategies as senior director of loss preventionfor Dollar General. McDonald is a seasoned LP executive having held multiple positions with ToysRUs, BabiesRUs, Office Depot, and the Hartmarx Retail Group. He is also a member of the LP Magazine editorial board, and a board member of the International Associations of Interviewers. Over the years he has served on various industry committees making contributions to the NRF, RILA, ASIS, and the industry as a whole.

EDITOR: Yours is not a traditional retail company. Tell us about Compass Group.

McDONALD: In simple terms Compass Group is the worlds leading contract food and support services company. We do over $26 billion in worldwide sales in fifty countries. We serve more than six million meals a day in North America alone where we have over 20,000 different client locations and employ a little over 200,000 associates. Its an impressive organization to say the least.

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Just like any other corporation in America, we have leakage. We have shrinkage opportunities. My task from a strategic standpoint is to employ loss prevention strategies and disciplines that ensure our operators efforts make it to the bottom line, just like any other LP organization. The processes we employ may be different from the traditional retail perspective, but the goal is ultimately the same.

EDITOR: Did you say 20,000 client locations?

McDONALD: Yes, 20,000. Thats the fun part for us, and where it gets complex. For example, if were looking at one of our clients who is a university or a corporate campus, they might have a dozen or more different locations that we service. Additionally, there is the catering business, perhaps vending services, facility services, and more. It varies enormously from location to location. Our operations range in size from a cashierless convenience store or one-person kiosk to a full-scale restaurant operation, a concert venue, or even a sports stadium.

EDITOR: What different types of businesses do you operate in?

McDONALD: Were engaged in a variety of vertical markets. One is healthcare where we provide patient food service, patient transport, and facility services within a hospital, as well as, retail caf food service. That means whether you are a patient in a hospital eating the food brought to your room, or you are visiting someone there and you eat dinner at the retail caf, we are your host. We also service the education marketseverything from private to public K-12 clients to higher education universities, like Louisiana State University, Texas A&M University, the District of Columbia public schools, and many other great schools.

EDITOR: Are these cafeteria-type facilities?

McDONALD: Its much more than the traditional cafeteria concept. Its all kinds of dining and catering services. If youve been on any college campuses recently you find that like so many other areas, the food service is about an experience and environment. If there is a Starbucks or coffee shop on the premises, we would operate the coffee kiosk for you. We can also provide the catering for any events or meetings. Our objective is to provide you with great food and quality service wherever you might find the need for hospitalityofferings.

EDITOR: What are other markets?

McDONALD: Another of our vertical markets is the business and industry sector, which handles the caf, catering, and food service needs for a number of Fortune 500 companies, such as Microsoft, Caterpillar, IBM, United Technologies, and SAP.

We also provide hospitality at sporting events, entertainment venues, concerts, and operate many stand-alone restaurants as well. Spiaggia, Bar Toma, and Fultons on the River are a few in Chicago. The Fulton Crab House and Wolfgang Pucks Grand Caf in Orlando are two locations in Florida.

We operate in specialty venues, too, including various Smithsonian Museums, the Georgia Aquarium, and the Seattle Art Museum to name just a few.

EDITOR: With all the services you provide, is there any standard situation or do you mold your services to the situation?

McDONALD:Our services are entirely customizable, and what we do depends on the client. Thats both the fun part and the challenging part when implementing our loss prevention strategies. If someone is building a new hospital or new corporate headquarters and wants us there from day one, thats great, we would love to be your partner. We can design the kitchen, the retail front, and present you with a solution that fits your needs. Its your choice. In todays environment, were often taking over existing properties that have existing kitchen and dining facilities. In those cases we can take what you currently have and customize it to help you maximize your facility. The ultimate goal is to help you provide an end result of great service and delicious, healthy food for your customers, employees, patients, or students.

If I have issues with inventory and product going out the back door through theft or waste, then I have food cost issues, which impact my margin. If I have front-of-house issues, such as cashier integrity or fraudulent POS transactions, then I have reduced sales and margin. If I find a solution on either one of those ends, my food costs go down, which makes my sales and profitability go up. We see virtually an immediate impact.

EDITOR: Why does the Compass Group need a senior VP like you?

McDONALD:

Just like any other corporation in America, we have leakage. We have shrinkage opportunities. My task from a strategic standpoint is to employ loss prevention strategies and disciplines that ensure our operators efforts make it to the bottom line, just like any other LP organization. The processes we employ may be different from the traditional retail perspective, but the goal is ultimately the same.

EDITOR: How do you employ loss prevention strategies at Compass based on your custom model? How is it different from your past roles?

McDONALD: The loss prevention strategies and ideals that led me to a senior-level position is what continues to drive me today, and that is the simple realization that the loss prevention industry is fundamentally a support function. My accountability is driven through my customers the operators and frontline people who run our day-to-day business. Those are the people who I have to support and make successful in order to make the company successful and ultimately my department successful. If it wasnt for all these other people working so hard, there would be no reason for us to be here to support them. I remind myself and my team of that regularly. We exist to service them.

As far as whats different, retail enjoys a great deal of standardization. You have a prototype of store types, you have consistent operating standards as the box is the same from store to store, and generally you have a single system or process structure across your portfolio. In our world such standardization is non-existent because we customize ourselves to provide for our clients for whatever the need. What works in operation A may not work in operation B or C. I may have a hundred different versions of some process, but its necessary to serve our clients. So, the challenging part for me is being able to deliver some degree of consistency and develop loss prevention strategies, programs, and philosophies that can be applied across the matrix of the businesses, whether its a two-person operation or an operation with hundreds of people.

EDITOR: With all the different business models, are there measurements back to a specific location?

McDONALD: Yes, and that entails another interesting part of my job. As Ive said, one of Compass Groups strong points is our ability to provide customization. When you look at a restaurant chain, which produces standard menu offerings, they have consistent average food costs. They are able to determine production, output, and waste in consistent manners. But for Compass, determining those factors in our various business lines is much more difficult because one caf produces a totally different menu than another caf. Therefore, the comparisons are much more complex. We have measurements, algorithms, and many great people helping to manage the business, but clearly its not as clear-cut as most chain organizations or retailers.

EDITOR: How does your role differ from a typical LP executives?

McDONALD: There are many differences, but one that I think is very interesting is the fact that I sit on both sides of the table nownot only as a loss prevention practitioner, but also as a representative or a salesperson of our industry. For example, if we are working with a new client who may not be familiar with the world of loss prevention and risk, we will spend time to help educate them about loss prevention strategies and market our function as a benefit they receive in working with Compass. The message is not only that we are going to cook you a great meal and make sure were providing you with the service levels you expect, but we are also doing internal due-diligence using training and technology to monitor our employees, making certain everything is accounted for, and otherwise limiting risk and loss.

EDITOR: How is your team organized?

McDONALD: Our team is organized in a regional or zone structure based on geography with regional LP managers supporting the field operations and reporting into a senior director. Additionally, we have a corporate staff of systems managers who help lead our focus through data mining and business intelligence. I then report to the CFO. It gives us a different perspective as were closely tied to both finance and operations. The dynamic is great and allows us a very balanced perspective of our business.

EDITOR: What are the typical duties of the regional managers, and what are they spending their time doing?

McDONALD:There are three main loss prevention strategies associated with the regional job function. Number one is training and awareness. Because we are still a maturing LP organization, we spend a large amount of our time teaching and training our operations and finance teams as to what loss prevention is about and its impact on them. We teach the pitfalls of not following policies, of not holding people accountable, and our mantra is to inspect what you expect. Id say the regional managers spend almost 50 percent of their time training. The second piece of their job is a little more traditional in the form of investigating and problem solving, and then thirdly, audits and compliance measurements complete the circle.

EDITOR: Does your staff also come from a traditional retail LP background like you?

McDONALD: We have a good mix on the team. Some of the staff came from retail LP backgrounds, with others who have food service and hospitality loss prevention experience on their resume. From my perspective, this has been a great complement as we are able to leverage our loss prevention strategies off one another. Additionally, one of my strategies is to employ or customize many of the successful tactics we have used in retail loss prevention for many years and make them successful in our environment. Were constantly striving to learn and leverage the teams experience base truly using the best of the best ideas.

EDITOR: How do you measure performance in terms of the objectives and the goals that youve set for them?

McDONALD: The big piece of the pie in the retail world revolves around that quarterly or annual shrink number. Unfortunately, we dont have that litmus test in our world. On one hand, we do rely on investigation and case production output. Its a traditional measurement thats black and white and shows an immediate ROI. On the other hand we monitor sales. We are starting to look more closely at how resolving an issue can impact sales, customer satisfaction, and other efficiencies.

EDITOR: Explain that.

McDONALD: If I have issues with inventory and product going out the back door through theft or waste, then I have food cost issues, which impact my margin. If I have front-of-house issues, such as cashier integrity or fraudulent POS transactions, then I have reduced sales and margin. If I find a solution on either one of those ends, my food costs go down, which makes my sales and profitability go up. We see virtually an immediate impact. Thats a measurement thats really interesting in this environment. When we address an issue in any given location, often within a matter of weeks well see an impact on sales. I dont have to wait for a year-endinventory.

EDITOR: As you look a few years down the road, what types of things are you contemplating that will enhance the LP function within the company?

McDONALD: One of our strategic plans is to continue to take advantage of technology, especially our growing access to big data. This will obviously help direct us. One of the questions becomes how can we leverage data across the business to help drive our loss prevention strategies over the coming three to five years? Frankly, I dont know what it should look like yet. The data will tell us where we need to go and where we should focus. Do I need to be driven more toward the cash and retail finance operations? Is there an opportunity in inventory controls? The viewpoint right now is to get the information and let it help build the business plan.

A second major emphasis is technology implementation. Before I came on board, the company had already identified that as an opportunity and started down that road. Were continuing to develop technologies such as POS exception reporting and the implementation of CCTV in both traditional and non-traditional manners.

EDITOR: If one of your LP managers wanted to look at exception-type information to identify a problem in a particular facility or with a particular person, do you have that capability?

McDONALD: Yes, in many cases that type of detail is available. Additionally, we also partner with our finance folks to identify anomalies in food cost, overall sales, or production statistics that will help guide us. Were also able to not only compare an individual cashier against his/her peers within their operation, were comparing them at large against similar operations, so we get a broad spectrum to work from and identify potential issues.

EDITOR: Is there any one particular business model that is more challenging than another?

McDONALD: They all have their own benefits and challenges. In healthcare cafs you have a more retail-like exposure as they are open to the public and open for longer hours. In contrast, in the school environment you have less risk because most meals are transacted via student meal plans to repeat customers; the students. The same is true in our business and industrial environment.

However, one unique opportunity we have noticed is that serving our regular customer can produce risk. For example, if we have a corporate office employee who visits for lunch regularly during the week, they establish a familiarity with the Compass employee. Because people are fairly habitual, its easy for a dishonest employee to take advantage of that situation because they dont have to predict what the customer is going to purchase. They know that every day, Joe orders a chicken wrap with a fruit salad and drink that costs $6. He also always pays with cash. If Joe is in a hurry, he just gives us the money and heads to the dining area or back to his office. He has no need for a receipt. I think the concern speaks for itself. It makes for an interesting people-watching studyare we as diligent with our receipts when we buy a meal as when we buy a product from a retailer? Its taught me to pay more attention when Im buying my lunch.

EDITOR: Is there a background screening program for your employees?

McDONALD: We have a very complex background screening program. The complexity is that were doing business under the clients roof or on the clients campus, so my employees have to meet their standards. In the healthcare industry we have to follow one set of rules and regulations. If were servicing a government contractor, there may be another. In the education environment, still another. Everyone has their custom set, so were actually very dynamic in that our background screening processes are dependent upon the needs of the client. Again, its our job to meet the clientsneeds.

EDITOR: How was it that you decided early in your life to get into loss prevention as a profession?

McDONALD: Candidly, like many of my peers, I fell into it. When I graduated from college I was working for a local bank in Atlanta. It was right around the time of the savings-and-loan scandals of the late 1980s. Obviously, as I looked toward banking as a career, it just did not seem to be a place I wanted to be. So, I answered a blind ad in the newspaper that turned out to be Kuppenheimer Mens Clothiers, a division of the Hartmarx organization. They had a one-person LP department and wanted to add an auditor what today would be an analyst. It turned out to be one of the greatest jobs I could ask for. I reported to the director of LP who reported to the CFO. So, literally, I was one step away from the CFO and had regular access to him. Here I was, straight out of college, direct access to a CFO, in a small retail company doing a couple hundred million dollars in sales and learning all about loss prevention strategies, auditing, and finance. I learned more in my first year than I probably ever learned in college.

I then moved to Office Depots LP team at a time of great growth for the company where I was able to learn about big-box retail. The next move was to a recently IPOd company called Baby Superstore. They didnt have an LP department and were looking to start one. We were just beginning to solidify a program when we were bought out by ToysRUs and became BabiesRUs. I spent twelve years at BabiesRUs, moving up the LP ladder to eventually become the director.

I then moved to Dollar General as the senior director of LP. After about four years, I received a call from Compass Group and made not only a company move, but an industry transition. Looking back I can truly say Ive had a blessed career working with many great industry leaders, great LP teams, and some truly interesting organizations.

EDITOR: When you got the call from Compass and recognized that it was far different than youd been exposed to before, what was the attraction that caused you to make the change?

McDONALD: What interested me most was the idea of taking what Id learned over the past twenty years and putting it into a different environment. Not that LP programs are ever easy, but taking loss prevention strategies from one retailer to another retailer is much different than taking that same knowledge into a completely different environment and deciding what will work and what wont. Here at Compass, our operations vary in things ranging from the POS systems to the awareness level of our employees, to even include the cultural differences of the hospitality industry. Add to that the idea of getting into a different industry at a senior level, pardon the pun, but it was a recipe for an exciting move. Im never one to shy away from a challenge, so to me it was game on, lets play.

EDITOR: Looking back over your career, who are those people who have been special supporters and mentors for you?

McDONALD: Let me reach outside of the LP world for a moment. The first person is a gentleman by the name of Dave Schoenbeck. Dave was the senior vice president of operations for BabiesRUs virtually the entire time I was there. He and I had an initial meeting when Baby Superstore was purchased by BabiesRUs that resulted in me wanting to ensure I was on his team. He is one of those leaders that you just naturally gravitate toward. I think our bonding originated in the fact that he had come from an LP family as his father had been in loss prevention. Even though he was in operations, he had a very clear understanding of what loss prevention strategies could bring to an organization, and he let us contribute as partners in the business. We were never separate from operations, but truly part of the operations team. His management style in leading people and growing an organization was great to work under. He excelled in giving people opportunities to succeed, or fail in some cases, and in recognizing the team that he had under him.

Under the loss prevention umbrella, I would have to say both Walter Palmer and Bob Serenson, who I came to know through my time with BabiesRUs as well. Bob was overseeing the LP efforts at BabiesRUs when we met. The program was being managed through the KidsRUs organization, where Walter was the director. One of the great things I learned from Walter was to look at things in different ways. Walter always had a great way of opening a problem or opportunity and making you dissect it so you could understand it better. With Bob I think I learned much more about the value of true partnerships. For many years we worked together in a supervisor-subordinate relationship that felt much more like a partnership. We leveraged our strengths and weaknesses over many years to develop a great relationship, team, and friendship. I still employ that same management styletoday.

EDITOR: Is there anybody else?

McDONALD: Being such a tight knit industry I could name quite a few more people who Ive watched and learned from over the years, but Im afraid I would leave someone out. I would say thats another key benefit an up-and-coming leader can leverage in our world. Ive made quite a few partners and mentors over the years that I can leverage with just a phone call, and, without exception, the industry leaders always reciprocate with each other. There are quite a few senior leaders on the vendor side of our world who have also been key partners in my career successes as well. If I may offer a piece of advice to an up-and-coming young person in the industry, its thisfind a mentor that you can rely on, someone you can watch, partner with, and build a relationship with. Its not about an assigned mentor relationship, but the development over time with people you trust and are willing to listen to. Despite our tendencies to be very type A personalities, we dont know everything and all of us have lots to learn. A mentor who has been there, done that is a great asset to havearound.

EDITOR: Finally, you know of course that you are a rare breed in LP, at least in one respectyouve never relocated from Atlanta despite your career path. Thats pretty rare in the LP world.

McDONALD: Thats true, Ive been fortunate to stay in Atlanta through all of my transitions. It certainly has helped to be near a major airport where I can get virtually anywhere in the country. While I havent formally relocated, I have spent a lot of time away from the family. I will candidly admit that I owe more than 50 percent of my success to my wife, Rebekah, who kept everything at home going so I could go out and advance my career. She put her career on the backburner and made a lot of sacrifices to make sure we had a stable home environment for the family while I was commuting and doing the things needed on the career and business side.

EDITOR: How long have you beenmarried?

McDONALD: Weve been married for 22 years. We married out of college. She was a retailer at the time working for Helzberg Diamonds and had a successful career. We decided to start a family, which is a story that would make its own article, and she put her career on hold so I could focus on mine. We were fortunate enough to make some sacrifices early on and she was able to stay at home and raise our boysJohn Morgan who is now fourteen and Brock who is eight. That was another key decision that has helped us succeed. Ive never worried about the home front, and she is really my best friend and partner in crime.

EDITOR: Loss prevention and the business world are very intense. How do you get away from it?

McDONALD: We live on about 13 acres outside of Athens, Georgia, which puts us a bit out in the country. Unlike a lot of people in business, Im not a golfer. In fact, I look at a golf course and think, What a waste of land. I wonder how many cattle I could raise on 18 holes? I have a small gentlemans hobby farm that keeps me busy. At any given time, youll find me sitting on top of a John Deere tractor where I do my best thinking. We have a rule that my cell phone stays on the kitchen counter when Im out on the tractor. Rebekah will pick it up if there is an emergency. But most of my friends know that If Chris is on the tractor, he is thinking. Dont bother him.

My second hobby is a love of anything with an engine. So aside from my working tractor, I have a 1937 John Deere A that we take out and play with. I also have several classic cars that we work on and show. So, when we finish the farm work, were out showing classic cars or going to hunt down another one. Its not too uncommon to see me on a Monday with a little grease still under myfingernails.

EDITOR: You obviously have a rewarding personal and professional life.

McDONALD: Its been fun and I certainly havent followed any script I could have imagined. Weve been very blessed not only professionally, but as a family. I owe a lot of my success to learning from others. I have learned through my career that success is about the people that you bring together around you. Its about building great teams and relationships. Ive been fortunate to both work on and build some great teams. I owe my success to many other great people. Whether its personal or professional, Im looking forward to what the next twenty years has to offer just as much as I enjoy looking back over the last twenty.

This article was first published in 2013 and updated in March 2016.

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