EDITOR’S NOTE: William M. “Bill” Titus is vice president of loss prevention, environmental health, and safety for Sears, Roebuck and Co. He is responsible for overseeing over 2,400 full-line department stores, off-mall specialty stores, plus their repair and logistics operations.

Titus has over thirty years of retail operations and loss prevention experience. Prior to going to Sears in 2003, he held vice president-level positions for OfficeMax and TJ Maxx. He began his career as a controller for Montgomery Ward in Chicago.

EDITOR: As a vice president of loss prevention, what is your view of the responsibility for the LP function in a corporation?

TITUS: I’ve always viewed loss prevention in a very broad context. I came up through the control and operations side of Montgomery Ward, so I’ve always seen loss prevention as contributing to effective operational controls, maximizing profitability, developing a team, and certainly reducing shrink.

EDITOR: Since your arrival at Sears two years ago, you’ve reorganized the loss prevention program. How did you begin that process?

TITUS: One of the first things we did was take a pretty deep dive into understanding our internal customers, including such things as their perception of the program at the time, how they felt LP was delivering the service, and the impact it was having. We did this using a “voice of the customer” survey. We sent the survey to half of the store general managers and operations managers, all of the field teams, and many product repair and logistics managers. The survey had about thirty questions that allowed the person to rate various aspects of the loss prevention organization and program, as well as some open-ended questions to solicit some straight comments. I was very pleased that we had an 85 to 88 percent response, which was unheard of at Sears. Plus, we received thirty-three pages of some very candid comments. This was a great tool for us as we developed our strategy, as well as a great benchmarking tool to use going forward to validate how we are serving our internal customer.

EDITOR: What about the program components?

TITUS: Certainly, we looked at the components, evaluated the existing strategy, and, importantly, the available resources. We not only looked at that from the corporate level, but we also went to our field LP and store teams to evaluate what they felt their priorities were, what their accountabilities were, and what the resources were they had available to them.

EDITOR: How long did this assessment take?

TITUS: About sixty days.

EDITOR: What did you find out?

TITUS: It became pretty clear that we needed to get back to basics...shortage control, detection and detention of shoplifters, resolution of dishonesty, and safety. At the store level, our loss prevention teams were focused on everything but that. They simply had too much on their plate. We had just twenty-four people handling 2,400 locations, including full-line stores, off-mall stores, as well as product repair and logistics facilities. They simply were unable to focus on developing the strong partnerships with the operations and store managers that are necessary to be effective.

EDITOR: That must have resulted in some significant organizational and personnel changes.

TITUS: It did. We knew we had to realign our loss prevention teams to support each one of the businesses. So, we developed separate organizations to support our full-line stores, our off-mall retail businesses, our product repair business, and our logistics operations. We first evaluated the existing team members and placed them into appropriate assignments. Then we went outside to bring in experienced, talented loss prevention professionals into the open positions. Once we were fully staffed, we went from having an average of forty-something stores per loss prevention professional down to sixteen. That has truly helped us develop the day-to-day store-level relationships that impact results.

EDITOR: How did the corporate team change?

TITUS: We’ve put together a fantastic corporate team of really great professionals who have helped us integrate the loss prevention function into each piece of the business like never before. We’re working with our merchant partners, our operators, facilities, financial, HR…in ways that have truly not happened in the past.

EDITOR: How did you set up the corporate structure to bring focus and clarity to the field organization?

TITUS: We now have a director of full-line stores that has regional loss prevention managers and their field organization reporting into it.

We have a director of operations who wears two big hats. One is all the off-mall businesses, which includes the hardware stores, The Great Indoors, Sears Grands, and our dealer network, as well as our product repair organization with over 10,000 technicians, and our logistics operation. Plus, that person wears the hat of our operational and administrative leader here corporately.

Thirdly, I have a director of systems and investigations who has proven invaluable in helping us get the system support and packages that we needed to help understand our shrink trends and conduct investigations.

Our other directors include a director of environmental, health, and safety and a director of shortage control.

EDITOR: Talk a little bit about some of the technology-related programs that you’ve put in place.

TITUS: One of the things that I found early on was that we were buying disparate technology, meaning technology that didn’t integrate with each other or was end-of-life-cycle. We had no strategy to deal with end-of-life-cycle technology. So, we were constantly having CCTV systems, EAS systems, alarm systems that were going down that couldn’t be fixed. We had to understand what technology we owned and where new technology was going to ensure that, as we started spending dollars, we were able to integrate and bring along our old technology as best we could.

EDITOR: Give me an example.

TITUS: RFID is a great example. You need to understand what RFID is going to look like as you are buying new POS or EAS technology. That has proven to be invaluable to us in being able to integrate new systems and technology to allow us to spread our infrastructure dollars to have much broader impact.

EDITOR: That’s a very interesting point. Doesn’t that need to understand technology integration speak to the value of good vendor relationships?

TITUS: It does in a number of ways. Let me put it like this. Vendors are like bees. They get to go around to all the different flowers and observe not only what is happening in the industry from a technology development viewpoint, but also how it’s being applied in other retailers. So, they bring an invaluable perspective to you when you’re talking about growth of your technology, its impact, and return on investment. Emerging trends, who’s playing with RFID, what does that look like, what are the learnings from a systems development standpoint...all of that type of information tends to come from a vendor partner who is working with you, not necessarily selling you a product, but talking to you about how technological changes can help improve your impact. They also tend to bring some of the best practices to you. I’ve never been one to turn away a best practice. I have no pride in authorship. If somebody’s doing something better than I am, I want to learn what that is.

EDITOR: What are some of those programs that you are most proud of that have allowed you to improve the effectiveness of your LP team and bring down shrinkage.

TITUS: It’s truly about focusing the company...not just loss prevention...on the priorities for reducing shrink. That, quite honestly, has been the most effective thing we have accomplished. We have made the whole company understand that shrink is a priority issue, as well as is good customer service, driving revenue, and profit.

The second impact has been developing teamwork. The loss prevention team here has done just a phenomenal job in training and developing the store management teams, the loss prevention teams, on what we call “the four plays” and getting execution of those metrics. For the first time, this company now has a score card that actually rates those four plays on a monthly basis, which allows us to analyze and understand what’s working and what’s not working, so we can focus on those stores and those components that are not moving in the right direction.

I think the third piece has been that we’ve been allowed to repair our infrastructure. We’ve made a significant investment in fixing and adding EAS and CCTV systems that have paid back in spades. We’ve gotten phenomenal productivity back in it.

Fourth is we’ve invested in systems. We implemented a point-of-sale exception-reporting system. We are running 100 to 200 percent increases in dishonest associate cases just because we now have this technology in the field to provide this data to initiate or expand cases.

I feel very good about what we’ve accomplished from a program standpoint, from a team standpoint, and from a partnership standpoint. It’s exciting to see the movement and to see the impact. In the last three inventory rounds, we’ve had a huge success in reducing shrink and all of the metrics that surround shrink.

EDITOR: Shrinkage reduction never rests with just the loss prevention team. There are two management issues I’d like you to speak about. One is the role of senior management and how you and your team influenced support from senior management. The other is the acceptance of shrinkage reduction as a responsibility and accountability at the store level.

TITUS: That was one of the change-management principles we identified—how to sell the senior management team on the importance of shrink and what we need to do to drive it down. We have an opportunity on a monthly basis to meet with the senior management team and give them updates on what we’re doing and where we’re going. For example, when I first joined Sears, I found out that we had 870 camera systems, so we put together a “best of” tape that actually highlighted all of the different shrink issues we were driving. I played the tape at the first meeting I had with the senior management team, which included everybody from the chairman and the chief executive officer to the executive VP of stores. It probably was the most impactful thing that I’ve ever done. In fifteen minutes I had absolute support and commitment for capital. I continue reinforcing to them the impact of the investment that they’re making and the return that they’re getting on the bottom line. It’s pretty simple.

EDITOR: What about at the store level?

TITUS: I think the change is probably more difficult at the store level when you have a significant change. We were starting with an organization that didn’t do the basic things that you would typically think of in loss prevention. Getting the store management team to understand the benefit of moving to these four plays and having the loss prevention teams focused on these four items was difficult. We had to show them the benefit. When you come into our stores, if I’m not catching shoplifters, if I have a liberal refund policy, and I don’t manage my EAS systems, I’m inviting loss. When I start focusing on those things, you’re going to see the change in the customers, the refunds, your in-stock positions, and, ultimately, in your sales and profitability. Over the last two years, the store managers have seen that, and it’s been a pretty dramatic transition.

EDITOR: With the success that you’ve had with the shrinkage reduction, as you look at 2005, what are some of the new initiatives that you’ve put on your team’s plate to continue those reductions or to continue the improvement of the LP Team?

TITUS: There are a number of things. One, we’re going to roll out our exception-reporting system to store level so our store-level LP managers will be able to conduct investigations or to reinforce understandings of cases that they have already initiated by other means.

Two, we’re going to implement a refund management system mid-year that we’re very excited about. We think it has huge gross margin and profitability implications.

Three, we’re enhancing our training and our talent management. One of the things that we haven’t done a great job of is providing a clear career path for our store loss prevention managers. We’re just finishing a training continuum that takes a person from store detective up through vice president of loss prevention. We have identified the core competencies, the training, and all of the different resources for each step along the way. So now, not only do we have a roadmap, but we can communicate that roadmap to our store and field teams, which let them take responsibility for their professional development.

EDITOR: How has your organization responded to that?

TITUS: They are absolutely ecstatic. One of the things that they have found out is that as they create impact and deliver value...and that value is truly determined in bottom-line profitability and the metrics that go along with that...they are getting more resources. The company understands that it is one of the best places for them to make an investment because they are getting a fantastic internal rate of return on that investment.

EDITOR: As you look at a LP manager to determine if he or she is someone you could promote to the next level, what are those qualities that you consider important?

TITUS: It would probably surprise people that we don’t look so much at the technical things. We look for good managers, good leaders, who are able to assess, problem solve, and develop solutions and then can implement them to get impact. You certainly have to have some degree of technical accomplishment...how to investigate, how to catch shoplifters, that kind of thing. But that is actually a small part of what we look for as we are developing talent.

EDITOR: You are one of the active leaders in the loss prevention industry. For the young person starting their career, what are some of the benefits that young person can look forward to with a career in retail loss prevention?

TITUS: I think retail in general is very exciting. It is probably one of the only places I know of that is both physically and mentally demanding. Things are changing all the time. It’s an opportunity to get to a significant leadership role in a very short period of time. It is a profession that is constantly in change, both from a technology and a competitive basis. It is absolutely exciting. And the great thing today is that loss prevention is now seen as an integral part of that retail landscape.

EDITOR: Clearly in the past, it’s been shown that people can move from the loss prevention discipline into other areas of the company. How do you approach someone in your organization who may want to transition to other areas in the company?

TITUS: From a personal standpoint, I always try to support a person’s career aspirations. From a loss prevention standpoint, it tends to be very productive. If you move people into operations or merchandising, you now have an advocate for effective shortage control on your side. It’s also helps create a great feeling of opportunity within your organization because your teammates start seeing their career path in a much broader context. On the other side, when people move into other positions within the company and then come back into LP, they’ve greatly expanded their horizons. Whether it’s operations, finance, human resources, whatever; that is invaluable experience that can only help your organization and program.

EDITOR: Like so many other executives in retail loss prevention, you came up through Montgomery Ward. What was it about the Montgomery Ward experience that resulted in so many successful LP executives?

TITUS: One of the things Montgomery Ward did so well was recruit quality people. Plus, they had a great training program. The company forced you to understanding retail operations and accounting, so that as a professional, you truly had a broad-based understanding of how retail worked. I constantly go back to some of the basic things I learned at Ward’s. As a matter of fact, just last week I opened up the training binder that I had, which included all of the P&L documents I had to learn, the backroom receiving, and all of the different accounting processes.

I also believe the loss prevention department was well respected and supported, and we did a lot of our own training; not just technical training, but broad-based managerial, leadership-type training. I don’t know that there’s as much of that happening nowadays in the industry as companies are constantly trying to reduce costs. One of the things that we’re trying to do here at Sears is make that investment in people.

EDITOR: So many young people think that you have to be a workaholic to be successful. With the hectic schedule of managing an organization the size of Sears, how do you find time to balance your life, and is it an important factor for you as an executive?

TITUS: Working hard is necessary to drive your career, but finding balance between your work and your personal life is one of the most important things you can do to be successful; because if you don’t, you’re generally not effective on either side of the equation. I am always conscience of making sure I invest time with my family, while balancing it with the priorities of the company. So, you’ll find me going to watch my son’s lacrosse game or one of my daughter’s concerts during the week. That doesn’t mean I’m not here at night or on the weekend. At times, balancing your life really takes courageous leadership. But I look at it this way—if you are a successful leader; you’re creating impact; you’re getting results; what manager out there is going to criticize you for finding that balance.

EDITOR: Finally, as you look into your crystal ball, what changes or new challenges might you see for the retailer in fighting the shrinkage battle?

TITUS: First of all, I think that the causes of shrink are probably going to stay the same for the foreseeable future. However, I think RFID is going to have a significant change on operational or administrative shrink. We’re going to truly be able to follow merchandise flow from point A to B to C, and know where any weaknesses are. That technology will require the loss prevention profession to make some adjustments to how we operate.

The second thing I see are analytical tools that will allow us to predict the validity of trends in the components that make up shrink. These tools will allow us to be further ahead of the curve instead of waiting for high shrink. Being able to identify shrink very early on in the life cycle will have a major impact on how we manage loss.