If you’ve ever traveled to another country where English is not widely spoken, you have probably experienced the difficulty and frustration of being unable to effectively communicate basic needs, much less hold fluid conversations and exchange ideas. And, while one might be able to expect residents of the United States to speak English, it is certainly hard to be upset with those in other countries who do not speak our language since we are in their country.
In a previous post, we discussed the problem of some senior retail executives not believing there is a cause-and-effect relationship between investing in the loss prevention function and the organization’s shortage results. If the senior leadership of an organization believes that shortage is subject to nearly uncontrollable, external winds and forces and that spending money on loss prevention investments does not necessarily result in lower numbers, there is a serious failing on our part in showing the cause-and-effect relationship and making an effective case for budget dollars.
In this post, we will begin to look at some opportunities we may have to change that mindset and be more effective in communicating our value, our business case and the reasons that organizations will benefit from funding our business proposals and programs. First, we will look at the issue of how we communicate with senior executives.
Just as different cultures and countries have different languages, companies have different languages too. Think of all the acronyms and abbreviations that you use in your workgroup that sound completely foreign when a new employee joins the team. Or, think of all of the special lingo that we use in our industry – LP, AP, DE, BOB, POS, LERPnet, RILA, CFI, CCTV, DVR, ORC, BOLO, and the list goes on and on and on.
Senior executives are no different. The terms, language, and references they use can range from somewhat unfamiliar to completely foreign. If we expect to communicate effectively with them, we had better be prepared to spend some time studying them, their language, and the issues that resonate with them. Let me give an example that illustrates the point.
Most of us in the loss prevention world have spent our entire careers talking about shrinkage and, when we do, I would venture that the vast majority of us talk about it in terms of the retail value of shrinkage as a percent of retail sales. This makes a lot of sense, especially when speaking with store employees and managers as it has good clarity since most of their focus is on retail price. Retail reporting is also used by the seminal study in our industry, the National Retail Security Survey, as the “benchmark” number for us to compare against.
However, in working with a number of retail companies over the years, I have consistently found that CFO’s and CEO’s look at shrinkage (and a whole range of other metrics) in terms of cost. This is an extremely important point. If you go in to a meeting with senior executives who are used to speaking in terms of shrinkage at cost and you talk about retail shrinkage, you run a real risk. At best, they will view you as financially unsophisticated. At worst, they will perceive that you are trying to inflate or overstate the size of the problem to support your budget requests.
For instance, one of the age-old illustrations many of us have used in our industry to illustrate the impact of shrinkage is the idea that “for every item that we lose, we have to sell 20 more items just to break even.” Have you heard that before? Have you used that before? It can be an effective way to discuss the impact of shrinkage when talking to hourly associates. Of course, it is predicated on a particular net margin that may or may not be applicable to your business. But, more importantly, it is unlikely to resonate with CFO’s as they will look only at the loss of the item at cost which, depending on your gross margin, may differ dramatically in terms of impact.
I’m not arguing for a cost number or retail number per se. Rather, I’m arguing for the importance of understanding the way that you senior executives look at the figures. What works for them? How do they speak about the issue? What will have credibility for them? If we do not start with learning their “language,” we will have as much success in communicating with them as most of us would have in ordering dinner in a restaurant in rural Japan.
In future posts, we will further explore how we need to assess the senior executives in our organizations to determine how we can best frame our business case in a manner that will get their attention, their support and their sign-off on budget dollars. As always, I welcome your views, thoughts and insights into this issue.
Originally published in RILA Report – Asset Protection – September 2008