The Importance of Managing Shrink and Waste

An Interview with Mike Lamb of The Kroger Co.

Mike Lamb

EDITOR’S NOTE: Mike Lamb, LPC, is vice president of asset protection for The Kroger Co. Previously, he held senior loss prevention and safety roles with Walmart and The Home Depot. Lamb is very active in the industry sitting on the boards of advisors for the Loss Prevention Foundation, the Loss Prevention Research Council, the National Association for Shoplifting Prevention, and LP Magazine.

EDITOR: We’re here today in Cincinnati, Ohio, with Mike Lamb, vice president of asset protection with The Kroger Co. Thank you, Mike, for allowing us the privilege of conducting this interview with you today. Let’s start with you introducing our readers to Kroger.

LAMB: First of all, Jim, let me just say I greatly appreciate what the magazine has meant to our industry, and I’m humbled that you would want to conduct an interview with me.

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I’ve known Kroger as a grocery retailer for quite a while because there’s a family connection. My brother in law recently retired after thirty-eight years with Kroger. I’ve been married to his sister for thirty-three years, so I’ve had some insights into Kroger as a business during that time. I always admired Kroger in the years that I’ve worked elsewhere, and when the opportunity came for me to discuss their needs and my interest, I was delighted about that. Now some two-and-a-half-plus years later, I’m with this great company that’s steeped in heritage with a proud past history and even brighter future.

Kroger has been around for a long time originating when Barney Kroger opened the first store in 1883. In many ways, Kroger is a bit unique to other companies I’ve worked for. Their growth has not been wholly organic. There have been a lot of mergers and acquisitions of proud and historic brands, which I think add tremendous value to the company. At the same time, the work asset protection tries to accomplish, at times, can be more challenging to ensure that the very best at what we want to do, we’re able to do across all brands consistently.

EDITOR: Could you name a few of those brands that our readership might be familiar with?

LAMB: I’ll tell you, even for myself, onboarding with Kroger, I didn’t have the realization of all the banners that Kroger flies. For example, Fred Meyer based in the Portland, Oregon, area with its beautiful store environment and large footprint. Ralphs and Food 4 Less in California. Then as you move east across the country, there is Smith’s, which is based in Salt Lake City, King Soopers in Denver, and so on.

There are some twenty or so banners that make up Kroger, all with a proud history and tremendous market loyalty in those communities throughout the US. It really makes for a unique experience from a retail point of view.

EDITOR: Prior to your move to Kroger, you were the senior AP leader at Walmart and at The Home Depot, two substantial positions with major retailers and now a third. What prompted your decision to make this move at this point in your career?

LAMB: The experiences and learnings that I gained at both The Home Dept and Walmart were invaluable. They are outstanding organizations. I was privileged to have the opportunity to lead the asset protection and safety efforts for Walmart prior to joining Kroger. Honestly, at the time I first began discussions with Kroger, I certainly wasn’t looking for another opportunity. I was proud to be a part of the Walmart group, and proud of the accomplishments that we had made at Walmart, realizing of course there’s room for improvement. But there were a number of reasons that drove the decision to join Kroger.

One, there are things outside of just professional interests that matter to me. I have a lot of family that is situated in this area. I grew up in a small town just outside of Knoxville, which is roughly a three-hour drive from Cincinnati. My wife’s family is also situated in the greater East Tennessee area. So it wasn’t just a professional decision.

On the professional side, I was intrigued by the opportunity at Kroger. I was particularly impressed by the level of focus that Kroger intended to put on the importance of managing shrink and waste. I was humbled by the fact that they felt I would be a good fit to help lead that initiative. Despite it not being an easy decision, I’ve never looked back. It’s been a really good one for me. The people, support, and the leadership at Kroger are outstanding. I felt that way coming in as a first impression, and they have validated that for me since I’ve been here.

EDITOR: If I’m not mistaken, I think you’re another one of those senior executives who started his career as a store detective. Is that right?

LAMB: That’s correct. It was a long, long time ago when I was attending the University of Tennessee. I had a close family member that was working for a department store called Miller’s at the time in the Knoxville area. He was selling suits in the men’s department. He asked me if I needed a part-time job to pick up some pocket change while I was going to school. So in January 1979, I joined Miller’s slapping price stickers on cosmetics. It wasn’t long after I had started that a gentleman approached me and asked if I had an interest in working in security. I didn’t know what security was at that point. But my first question was, will it pay me a little bit more per hour? The answer was yes, so that prompted my decision to enter the arena of loss prevention. That was in September of 1979. While I came into this industry quite by accident, I immediately had a passion for it and have been at it ever since.

EDITOR: I know you are a student of leadership and pay attention to outstanding C-level executives. Would you talk a little bit about some of the terrific leadership traits you’ve observed over your career?

LAMB: I do think as human beings we are somewhat creatures of habit. And for me, leadership essentials are qualities that I admire and try to emulate. I can tell you during my time at Home Depot, the CEO during that time was laser focused on the importance of supporting stores. He understood that the success of the business was through the customer experience, principally through great service, in-stock, product knowledge, and speed of checkout. He had a personal touch in the way he led the organization. One of the most significant qualities I thought he possessed was humility, but at the same time a fierce determination and confidence to ensure the company was successful, not for himself, but for all the associates that worked in the organization and for the shareholders of the company.

He would do something that I greatly admired—he would take the time to hand write personal notes to staff members for jobs well done. To know that a CEO for the world’s largest home improvement retailer would dedicate time to pen notes to individuals, I thought was just a remarkable personal touch. A lot of those same great qualities he possessed I also see with Kroger and our CEO, Rodney McMullen. It’s the realization that all things are possible through people who respect and admire the qualities of the leader.

EDITOR: Have you had personal mentors who have helped you with your career?

LAMB: I don’t know that I’ve ever had any mentor on a formal basis, but I have individuals that I call upon for guidance or as a sounding board, both inside and outside of retailing. The one thing I’ve come to realize, in this profession and perhaps any other, is you should never stop learning. It’s okay, I feel, to maintain a little bit of a “healthy paranoia.” What you did yesterday matters, what you do today is important, but what happens tomorrow is also critically important. As the old cliché goes, there’s not a finish line, and for me it’s really about constantly trying to build on the success you’ve had and learning from the mistakes you’ve made. Believe me, you will make mistakes, but recognize you won’t make any if you don’t try.

EDITOR: What are some of the things that you’ve truly enjoyed about this business and other things that you felt less excited about?

LAMB: As you reach the twilight of your career, you don’t reflect on the big meetings, the PowerPoint presentations, the business plans, or the best year or worst year you’ve had. What you remember and never forget are the people you’ve had the opportunity to work with. One of the most significant levels of satisfaction for me in this industry is just the fabulous people that I’ve met and the relationships I’ve created and sustained. When I go to industry events and see the colleagues and friends I’ve worked with now for twenty, thirty, or some cases forty years, it’s like the consummate family business reunion.

The other thing I like about this profession is it’s not easy. When you look at great organizations like Home Depot, Walmart, and Kroger and consider the forensics of problem-solving and delivering the expected shrink result, it takes a lot of effort. I’m not minimizing that we’re here to sell product. But when the buyer puts product on a shelf, you almost know instantly, is it a win or is it not a win? Shrink oftentimes has, as they say, the longer tail. In the initiatives we deploy, you have to have a degree of patience, to know the balance when to stay with something and when you walk away.

I enjoy the complexity of what we do to manage shrink. I think most all AP leaders like that pressure, don’t you think? The buck stops with you as an asset protection leader on delivering that expected shrink result. Either you take pride in that and it compels you to go out and make a difference, or you walk away. I’ve always enjoyed that challenge.

EDITOR: Talk a little bit about some of the changes you’ve made to enhance the Kroger organization in your battle of shrinkage in the almost three years you’ve been here.

LAMB: Kroger was not lost in its ability to manage shrink. One of the biggest opportunities was looking at all the things we were doing to determine what was working very well and what was not working so well, to take more of a standardized approach. If, for example, something was successful in three or four of our divisions or banners, it would likely be successful across the board.

One of my initial steps when I took the role, which a lot of people have done I’m sure, was to do a SWOT analysis, where you look at the strengths of the AP department, the weaknesses or gaps, the opportunities that may not have been exploited, and the present and future threats that need to be addressed. With our team, we built a plan to address those things—continue to leverage the strengths, course correct on weaknesses, identify the opportunities, and lastly minimize the threats. As we went through that analysis and built our game plan, we’ve not wavered much. If you dust off what that game plan looked like in 2017, and what we said we had to accomplish, some of which were short-term wins and other were longer term wins, I’m very proud of the fact that we’ve not deviated. Certainly, you need to measure and evaluate the plan when it’s necessary, but sticking to a strategy matters, particularly in the area of managing shrink.

I will also say this—I have had unwavering senior leadership support since onboarding at Kroger. Candidly, one of the reasons I decided to join the organization was their belief early on that I could help guide the organization from a shrink management point of view. Now, with that comes pressure because if you’re writing your own plan and your plan is supported, that plan needs to deliver. And I’m very proud of the fact that as of this writing, we have now achieved ten consecutive quarters of year-over-year shrink improvement. And that’s not a Mike Lamb commercial; that is a Kroger testament to the level of leadership support and engagement focus that has been applied to the ever-important element of managing shrink.

EDITOR: One of the things I suspect has attributed to that success has been the changes you made in the organization reporting structure. Talk about that.

LAMB: Going back to the SWOT analysis, I felt like we had a tremendous opportunity at Kroger to partner more effectively with our merchants. When you think about a grocery environment, about ordering and production and the things that allow us to have fresh product for the customer, there’s a delicate balance between having too little or having too much. So one of the first things that I did was put in a director of asset protection and merchandising. We were fortunate to identify a very talented gentleman who assumed that role for us. He has carved solid, effective, collaborative relationships with our merchants in a way that matters. And it’s really not just about reducing shrink as much as it is selling more and losing less.

Secondly, as a bit of a data junkie, we added significant resources to our data analytics and reporting team. It’s important in my mind to look at what’s happened previously to suggest what might happen or needs to happen in the future. That group has been very instrumental in developing reports that drive behaviors. A report that doesn’t influence or drive a different behavior is just another piece of paper. That team has been focused on making sure that the value we add to the business through the work they do, not only complements shrink reduction, but it complements the overall business.

An example is, we built a fresh days’ supply report, which is important to the customer because in a grocery environment, obviously, you want the freshest product possible. To the extent you’re over producing, or under producing, either it’s not fresh or you don’t have it for the customer. It’s not only allowed us to better manage shrink in our fresh departments; it’s also been healthy for the business from a customer standpoint.

Those were two areas structurally that we built out, and then we put on a couple of director roles to help support the field. These roles aren’t designed to dictate activity in the field as much as they are to support the divisions through the tactics and the strategy that we’ve established. So that has driven better consistency and standardization in a way that really helped the business in reducing shrink.

EDITOR: You’ve already pointed out a most impressive statistic of having ten straight quarters of shrink reduction. How have the division presidents reacted to those results?

LAMB: I would say very favorably! Our division presidents and their leadership teams in those divisions, truly care about every aspect of the business, including shrink. They have embraced what we’re doing, and I think the results reflect that.

EDITOR: You’ve enhanced or put in new types of technology and specific programs to support your goals. Are there some that you’re most proud of?

LAMB: I forever have been fascinated and interested in how one can leverage technology in a way that simplifies the work within the stores and takes shrink out of the environment. We have continually pressed the envelope to exploit technology in every way possible. It is often test, learn, fail, then succeed, because not everything you try is going to work. But if you don’t try, you’ll never know. So we’ve looked at low-tech initiatives such as public-view monitoring to other higher-tech initiatives that allow for the identification of mis-scans at both staffed and self-checkout registers. We continually assess how to better protect the exit doors because you can protect the item, you can protect the aisle, but in most cases, it’s going out the front door. Therefore, we’ve really put a lot of focus on the front end as a key initiative.

One of the things I’m proud of is how we have standardized our way of working. We created something called “every store every time.” Across every Kroger location or banner, the asset protection teams have continuity and standardization with the tasks that we ask them to complete on a daily, weekly, and monthly basis. It allows us to take key measures of what’s working to continue to ensure we’re doing those things. We implemented a program called “Quick Wins,” which addresses basics of the business, particularly related to malicious loss. That can be anything from ensuring that our non-staffed register lanes were cordoned off to validating that we meet Kroger standards in our back rooms. It’s hard to point to one or two things that have materially moved the direction for shrink; it’s the culmination of a lot of things.

EDITOR: There have been companies in your background that were far more theft focused. I sense at Kroger, you’re more involved in the operational issues and how you can reduce shrink through non-theft areas. Is that accurate?

LAMB: That’s absolutely true. It’s been a learning curve for me, Jim, in many respects. I started my career in apparel, then migrated to home improvement, then mass merchandising, and now more pure, traditional grocery retailing. What I’ve learned is, you really have to be good at both process improvement and operational rigor as well as mitigating theft risks. With issues like Proposition 47 in California and the number of states that have increased felony thresholds, theft remains a major issue. Effectiveness and efficiency in both areas are very critical in my opinion as you pursue best-in-class shrink results.

EDITOR: Let’s talk a little bit about the big picture of retail loss prevention and your involvement in different aspects of our industry. First, talk about your involvement with the Loss Prevention Foundation and what that’s meant to you and the industry.

LAMB: I couldn’t be happier to be a board member for the Loss Prevention Foundation, because at its core, it is really about accelerating the value and growing the industry of loss prevention and asset protection. The key learnings that I’ve gained from participating and being a foundation member are instrumental to how we shape our strategy and future direction at Kroger. I’m a firm believer in the LPC certification. Recently at Kroger, we have engaged a number of our asset protection team members to continue to extend and broaden their knowledge through that certification process. I’m very proud to be a part of the foundation and very appreciative for what it’s been able to do for the industry.

EDITOR: You also have a leadership role with the Loss Prevention Research Council (LPRC) and a long relationship with them. Talk about that.

LAMB: It’s been a wonderful relationship working with Read Hayes and the LPRC team that goes back years. It allows us the opportunity to take a scientific, behavioral approach to a lot of the things we try to bring to market that help us mitigate against loss. I can tell you years ago back in my Home Depot days, we were toying with a notion of public-view monitoring. I think at the time, it was really in its infancy. The work we did with the LPRC’s offender research, where you ask the bad guy why he or she steals, and what they see, get, and fear are tremendous enablers as you market for capital dollars for your company. I’m a big fan of the LPRC. They are grounded with tons of credibility, and I’m very pleased to be a part of the organization.

EDITOR: Recently, you’ve jumped in with both feet in your support of the National Association of Shoplifting Prevention (NASP), specifically, as it pertains to their new coalition initiative. What is the coalition, and why have you been so eager to support it?

LAMB: Well, there are a number of reasons. First, I would begin by saying that as we think about the problem of shoplifting, you have to segment it a bit. The organized retail crime groups and the habitual shoplifters require a different treatment and approach. But as I step back after forty-two years and look at low-level, first-time offenders against the backdrop of a judicial system that is overcrowded, overtaxed, and the many states increasing the felony thresholds, what we’re doing today is simply not working. The coalition that now is comprised of a number of major retailers that represent, in my opinion, the collective best thinking on a go-forward strategy.

I recently made a decision to join the advisory committee for NASP, simply because I believe that statistics don’t lie. If you look at the statistics from NASP, and you look at recidivism, which is a problem for retailing, we know the judicial system is not necessarily the answer for first-time offenders. I have a very passionate view of the importance of getting this coalition up on its feet, educating those around us that there’s got to be a better solution that looks at education versus criminal prosecution.

I would also add that NASP is rich with data. They’ve been around for a long, long time. I think they serve as a great underpinning for a program that would allow us to take a different approach. And lastly, I would say—and I’m guilty of this—we put a lot of money in capital expenditures for the purpose of theft detection or prevention. We’ve done very little with education. I think that’s where the transition needs to begin.

EDITOR: The two national associations, both the Retail Industry Leaders Association (RILA) and the National Retail Federation (NRF), have been blessed to have your leadership and your participation. The value that comes from both of those is something that is passed on to young people. Why have you been so encouraging of those two national associations?

LAMB: First of all, they’re great associations. Secondly, there’s nothing quite like the synergy of having a large group of asset protection and loss prevention professionals assembled together. The best ideas I have found are seldom my own, and they come from others. And I think one of the significant benefits of both RILA and the NRF is it’s all about advancing our industry through the sharing of ideas. That’s why I’m always willing to present when asked. But let me tell you, I get more from it than I contribute.

EDITOR: The solution providers and vendors are very critical to the success of an asset protection program. You’ve had relationships with many of them. What’s the value of a strong vendor relationship to your overall program?

LAMB: There’s one word that underpins that and its “partnership.” I think the best-in-class solution providers balance listening, perhaps more so than telling. The solution provider that sits down in a forum where I can convey the challenges I’m facing that may or may not be unique, where we can have a collaborative partnership, benefits both the retailer and the solution provider. I’ve never taken a view that it shouldn’t be a mutually value-added relationship for both parties.

We live in an era in retailing where the volume and velocity of change is almost unimaginable. I think the best-in-class solution providers are not looking at what they did yesterday, but what they are going to have to do tomorrow. Those are the ones that I pay more attention to. We can hang on to some of the things that have been around for a while, but most importantly, we have to embrace what’s new. Back to your question about RILA and NRF, the solution providers that attend those sessions, I believe, offer a wonderful opportunity to further explore and understand how they can help our business.

EDITOR: You mentioned how our industry has changed. How has it changed for you personally, and what do you spend your time thinking about today as opposed to what you might have done fifteen years ago?

LAMB: Great question, Jim. There’s a lot of talk about this in retailing today. It’s “anything, anytime, anywhere” to quote our CEO. And those retailers that are creating avenues to deliver on that are the ones that are going to be most relevant in my opinion. I know our company is laser focused on delivering on that commitment.

EDITOR: You speak about your wife and son from time to time. Often, we might see Donna arm in arm with you at an event. But we don’t see much of your son. Speak to what he’s been able to accomplish.

LAMB: He’s an outstanding young man. He currently resides in New York and works in investment banking. He has a drive and a motivation about him that is only exceeded by his genuine, sincere personality. He’s a young man that people like to be around. He is our pride and joy, and we’re most proud of him for the person he is, the personality that he possesses, and the many things that we probably don’t have time in this interview to go over. He’s our only child, and it has been fun to watch his career development.

EDITOR: You talked about being from Tennessee. We know that you spent a lot of time in Georgia, Arkansas, and now Ohio. But you now have a second home in Florida. What are the plans for the future?

LAMB: My wife and I have been property owners in Florida for quite a few years, dating back to my time with Home Depot when I was based in Tampa. A few years back, we bought a home that ultimately, whenever this asset protection career comes to an end, will likely be where we wind up. Cincinnati has been a great city. We’ve really enjoyed our time here. It’s been a fabulous place for us to live. But ultimately, the home in Florida is where we’ll be living. I’ve always had a passion for warmer weather. There was an old friend of mine who I used to work with in Florida who told me to “live where you don’t need a coat.” I like that comment and aspire to be in that situation.

EDITOR: Ultimately, when retirement comes, I don’t sense, and certainly the industry hopes, that you will not fade away, but stay involved in the thought-leadership of this business. Have you given much thought about how you might stay involved?

LAMB: It would probably be hard not to stay involved to some extent simply because of the passion that I have for this industry and the sense of fulfillment and satisfaction I’ve gained over the years being a part of it. But that’s one of those things you don’t get to until you get to it. I’m having an absolutely fabulous time working for an outstanding company with an outstanding supervisor here at Kroger. When that day comes, we’ll see. It would be hard to walk away completely. There are too many relationships that I admire so much, and too much of an interest in the business to completely step away. But we’ll see, Jim, one day at a time, right?

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