Ponce De Leon had the Fountain of Youth and Sir Walter Raleigh had El Dorado. In loss prevention we have “Shrink Correlators.” Those elusive indicators that will finally and forever accurately predict loss. It would be helpful to find such indicators. To be able to say with both belief and fact that when X equals Y then Shrink equals Z. Before we consider if it is possible, we must first decide if it is a worthy endeavor. Leon never found his famed fountain of youth, but he did find St Augustine, Florida. Raleigh never found the lost city of gold, but he was sentenced to beheading…okay perhaps that last lends no support to a search. It does however address the idea that one takes a big risk when predicting shrink results - if you’re wrong it can infringe upon your credibility. It is far easier and safer to explain the results afterwards, than to predict them in advance; much like the argument that it is better to ask forgiveness than permission.
Still, it is a tempting quest where the benefits of achievement would improve every aspect of our loss prevention efforts. We would have red flags to determine where we place our efforts and our resources. We could do more with less. Ultimately we could have a set of data that could be used to achieve our shrink goal. No more hoping, no more waiting, no more guessing and no more “disaster” reaction. Imagine “Target” store programs that prevent instead of correct shrink issues. Viewed in those terms it seems a justified search for those elusive correlations, so the question remains - how does one find them? The answer is over simplistic of the work involved, but it remains - Test, Test, Measure.
What we do know
How losses occur and we know that the more “hows” the higher the shrink. The more mistakes, shoplifting and employee theft in a location, the more loss and consequently the higher the shrink.
Mistakes, shoplifting and internal theft issues all have “discoverable” indicators or “red flags.”
How to partially track these indicators and how to resolve discovered issues.
What we don’t know
Exactly how many mistakes, how much shoplifting or how much employee theft has occurred.
Specifically, how much loss was caused by the undiscovered events.
Given a specific location how these incidents, both discovered and missed, will impact that location’s specific result.
Testing and Measuring for Correlations
A correlation for one company may not be the same correlation for another. Within a company, correlations are a combination of factors that when weighted and viewed, in total, tell us the range of our shrink. The answer then is that the discovery of correlations is a process that evaluates several factors in a given year and compares those factors to results. If a set of things always occurs with an event then we can start to predict that those things, as a group, have a relationship to the event. The factors are the things we can see and can measure. Here, I am referring to Key Performance Indicators.
KPI’s are your best first step in finding the City of Gold. The more you track, the better your chances of discovering and forecasting your shrink range. Certainly internal theft, audit performance and shoplifting will play a role. The answers however lie a bit deeper. What questions within the audit are forecasting - certainly not questions about emergency exits - well unless that reflects a lack of concern by associates, which translates to no attention to detail, which leads to mistakes and thus shrink.
The point is that the search for correlations is a process. I reiterate only to convey the importance. It is a long process that requires a several years (or inventory cycles) of data to begin forming theories. And those theories aren’t valid until they are tested. If correlations are your goal - you’re Holy Grail, then you must begin with tracking as many things as possible. From tardy store openings ( a function of professionalism and commitment) to employee turnover percent ( a function of hiring and management). At the end of the journey you may be only able to answer questions relevant to your specific business or there may be no answer at all. But just as Ponce de Leon never found the Fountain of Youth, he did discover a great place to spend retirement. So the journey may still have value, it just might not be the value you were hoping to discover.
Written By Raymond Esposito