Compas Blog

Predictably Irrational - A Book Worth Your Time

Dan Ariely, an M.I.T. behavioral economist and now NY Times best-selling author, has thrown into question what were fundamental assumptions in economics - that we are all rational in our behavior. In his book, entitled ‘Predictably Irrational: The Hidden Forces That Shape Our Decisions’, Dan shows how emotions and social norms systematically shape our behavior: http://www.amazon.com/Predictably-Irrational-Hidden-Forces-Decisions/dp/006135323X.  

One particular human behavior experiment caught my attention. To understand how social situations impact honesty, he created tests that made it easy to cheat, then looked at what happened if they reminded people right before the test of a moral absolute. It turned out that being reminded of any moral code – whether it’s the corporate value system or even the Ten Commandments, caused cheating to plummet significantly. Another experiment revealed that people are more likely to consider non-currency theft much more palatable. For auditors and employee communication teams, here are two very important considerations when coaching your individual locations on remediation strategies to combat internal theft.

The Perception Gap – Loss Prevention Audit Reporting

In the third quarter of 2007, Protiviti conducted separate surveys of senior level retail executives, and loss prevention management, to provide benchmarks by which loss prevention departments can measure their skills and knowledge and identify gaps to be addressed. Respondents included C-level executives and corporate vice presidents, as well as a variety of field and corporate personnel responsible for loss prevention, including vice presidents, directors, corporate managers and field managers.

In the two surveys, executives and loss prevention management were asked to cite the areas that most need improvement in their company’s loss prevention programs. The findings revealed a notable disparity in the responses of executives and loss prevention management. In particular, as it relates to compliance audit reporting, mid-level management ranked their level of competency 2.36 (where 4 equals expert and 0 equals no knowledge) with 26% stating that this area needs improvement; executives ranked the same area 2.31 with 43% stating that this area needs improvement.

The question is – what is the root cause of this perception gap? And what role does technology play in reducing that gap?

Earlier this year, a research report profiled the technology landscape for Loss Prevention (LP) solutions. One of the key findings was that the current LP technology landscape is more fragmented compared to other store optimization technologies such as workforce management, inventory management or back-office applications. In particular, as you drill into the mobile audit space, organizations have been slow to embrace technology:

• 42% of best-in-class organizations have implemented mobile audit technology
• 31% of average organizations have implemented mobile audit technology
• 28% of laggard organizations have implemented mobile audit technology

Yes, the mobile audit technology space is fragmented. But, the Compas user community is growing. And, so is its impact on the operational audit world. The most recent stats provide a clear indicator of that trend:

• Number of Active Users: 21,935
• Number of Audit Programs: 492
• Number of Audits: 188,223
• Number of Measured Controls: 9,624,341

Compas Spring 2008 Version Release

It’s time for another round of updates to the Compas application. The latest version was released today, and will be deployed to most instances next week. We’ve made a few tweaks to enhance the overall experience. These new features will allow additional audit management control, more reporting options and increased audit scoring capabilities. There are also significant performance upgrades for faster reporting on the dashboard, scores by location, and audit exporter reports, in addition to a few bug fixes to improve the platform.

The specific features and enhancements in this release include:

• [feature] Critical violation scoring and reporting extensions to the location summary report
• [feature] Creation of the Audit History Report - users now have the ability to view recent audits conducted at all locations, to quickly review score and completion trends at each location
• [feature] Dashboard displays which are now configurable for both current and all periods
• [feature] Negative scoring options
• [feature] All Audit Category audit search feature
• [enhancement] All report definitions are now created during a new audit definition set-up
• [enhancement] Audit Exporter listing inactive audit categories for administrators
• [enhancement] Range Rank scoring graph updates
• [bug] Audit Exporter errors under certain circumstances
• [bug] Comparison by Location report fix
• [bug] Report by Location - location counts inaccurate when child location has been reassigned
• [bug] Deleting a pre-determined action item fix
• [bug] Deleting a pre-determined comment item fix
• [bug] Question Average Indicator on Comparison by Time report
• [bug] Report by Answer - now working with checklist question type
• [bug] Fixed error when switching question types from yes/no to dropdown

Best regards,

Compas Development Team

Connecting Store Audit with Sales and Profitability

Clearly, the economic realities of today are posing a challenge for those in the retail industry. And, in this type of environment, there is a growing need to demonstrate alignment between store audits and their impact on sales and profitability.

One of the first steps in aligning your audit program with sales and profitability is to ensure that you’re somehow capturing the store sales information during the audit. This may or may not be automated depending on your backend financial systems and the ease at which your audit vendor and technology teams can provide the information. Collecting the store sales information, including YTD actual and budgets, will allow for a direct correlation between sales variances and store audit results, including changes over time. Obtaining insight into this data should provide some level of comfort that your audit program relates positive audit results with positive sales and profitability levels, and vice versa.

If your audit results don’t align well with your sales and profitability variances, you may want to consider re-writing your audit to align more with your business operations. This can certainly be an in-depth project, but is nonetheless required to prove and demonstrate value within the organization and to your partners in operations. There is nothing worse than an audit that doesn’t accurately predict or reflect your operational results, which ultimately devalues the credibility of the audit program.

Consolidation of audit data with other operational results into a data warehouse is one step in series of moves designed to provide key performance metrics, predictive models, and key insights into the operations of your organization. Some very good work is going on in this area by a number of my industry colleagues that you may want to consider launching within your own environment.