Apple Declares Retail Store Theft Is ‘Not A Priority’

March 5, 2014

The world’s most valuable company isn’t worried that employees might be stealing Apple gear from their retail stores, and a security bag check that is the subject of a employee lawsuit is used inconsistently “at best.” What’s more, the company hasn’t audited the bag check program to determine if it’s effective at reducing employee theft, and considers loss prevention to be a low priority endeavor. That picture was painted by an employee designated by Apple to provide expert testimony in depositions taken earlier this year. The testimony also provided previously-secret insights into the operation of the stores, including the percentage of part-time U.S. employees and the chain’s employee turn-over rate. The new information comes from Carol Monkowski, Sr. Director of Store Operations, who appeared as Apple’s designated witness for the topics covered by the lawsuit. She was deposed by the plaintiffs’ lawyers on January 8th in San Jose (Calif.) and a transcript of her testimony has been filed with the court. The lawsuit contends that all store employees are required to undergo a bag check every time he/she leaves the store, and while they are off-the-clock. It also claims employees must frequently wait in long waiting lines for the bag check and are entitled to substantial back pay for the uncompensated time. The lawsuit is still in the discovery phase, and both sides are taking depositions and trading documents.

Apple deposed the plaintiffs late last year, and then in January the plaintiffs’ attorney had the opportunity to question Apple in accordance with Federal Rules of Civil Procedure. Under the so-called Rule 30(b)(6), a corporation designates a witness to testify on its behalf about information “known or reasonably available to the organization.”

For reasons of longevity, convenience or something else, Apple selected Monkowski as its designated witness. She began her Apple retail career in 2001, the first year of Apple’s retail stores, and has risen through the ranks from a manager’s position. Under the Civil Procedure rules, her answers reflect Apple’s corporate answer to the attorney’s questions (testimony transcript, pdf).

First, in response to a question from the plaintiffs’ lawyer, Monkowski downplayed the mandatory aspect of the bag check policy. “In a written way it says the bag should be checked. In practice across the 250 stores in the states, we well know that the execution of it varies by store.”

She explained, “Things like bag and personal Apple technology checks are not a priority.” In fact, she added, “We also don’t monitor or audit to see if stores are conducting bag or technology checks, which we recognize leads to inconsistent practices as a practical matter.”

In response to specific questions, Monkowski said the bag check procedure, “is not written. I cannot say Apple has a point of view on how the bag check is to be conducted.” She said there’s no policy on whether bag checks should be performed before or after an employee clocks out, and Apple hasn’t performed any analysis on whether employees should be paid for bag checks.

As for bag check waiting lines, Monkowski flatly stated, “I’ve never experienced or seen a line.”

She also has never heard of anyone refusing a bag check, or anyone being disciplined or terminated as a result. Monkowski said she has never heard of any employee stealing an iPhone, but conceded, “If I was to guess, I’m sure it has happened.”

Monkowski also has never heard of an employee requesting compensation for undergoing a back check. As a result, she didn’t know the policy for either granting or denying the pay request.

When the attorney’s questions turned to security policies and procedures, Monkowski offered a startling perspective—loss prevention isn’t a high priority, despite Apple operating a retail chain containing some of the highest-valued products in the world.

Instead, Monkowski testified, the company expects the stores to, “focus on high priorities like the customer experience, fostering a culture of positive intent with both employees and customers, making sure employees can take their breaks and keeping their theft rates low using the tools that work best for them.”

During questioning, plaintiffs’ attorney Lee Shalov asked Monkowski, “Is it correct from Apple’s perspective that keeping theft rates low is a high priority?” Monkowski replied, “No.”

Shalov then pointed to her declaration (pdf), which mentioned that “keeping theft rates low” was a company priority. “Is that accurate or not?” he asked. “We don’t—have, never had a shrink problem or theft internal/external as a—as the highest priority, right?” she answered. She did say that the back-of-house team focuses on inventory counts, and that is a high priority.

But when when it comes to the bag check policies, “They do not—we do not believe it contributes either way, so that’s why we don’t insist or have a way to audit or figure out if they’re doing it or not or insist on compliance,” Monkowski testified.

“Is loss prevention very important to Apple?” Monkowski asked herself. “I don’t know that I can answer for Apple. Is it something we talk about every day? No, because we don’t have high shrink, and we don’t have high loss.”

And just for clarity, Shalov asked again if Apple stores keep statistics about internal shrinkage. “No,” Monkowski said. However, she did say the company keeps statistics on overall shrinkage rates, but only related to twice-yearly inventory counts.

Monkowski explained that loss prevention is just a 30-minute presentation during each employee’s 80-hour core training class, indicating how little emphasis the company puts on the subject of loss prevention.

Managers Agree

Eight other Apple managers provided written declarations (pdf) to the plaintiffs’ attorney, agreeing precisely with Monkowski on the major points of her testimony: bag and technology card checks are implemented inconsistently depending upon the store, take just seconds, and lines are nearly non-existent. In fact, some of the managers’ testimony used nearly identical language to Monkowski’s.

The testimony included information on Apple’s security procedures by Steve Smith, Sr. Manager of Global Loss Prevention Operations. He noted that security cameras may or may not have captured bag checks at the various involved stores in order to verify wait times or the presence of lines. He said surveillance video is kept for between 60 and 120 days, depending upon the each store’s installation, which use recorders and software provided by Exacq Technologies Inc.

Interestingly, Smith said Apple has suspended its practice of overwriting older surveillance video for the 12 stores where the lawsuit plaintiffs worked. “Apple has implemented special procedures specifically for this case to retain security video,” Smith wrote, adding that it was done “at significant expense” to Apple (the cost and other details were redacted from the court filings for security reasons). He included a “video montage” of surveillance video from three retail stores with selected examples of bag checks, apparently intended to help prove Apple’s case. The video was withheld from the public records and marked as “Confidential.”

Nine other Apple employees provided declarations, including Store Leaders, Market Leaders, and a Flag Leader. The employees described the arrangement of their stores, including the location of the employee break rooms, computers used for time-clock purposes, the retail floor and the employee entrance-exit doors.

The employees also revealed publicly for the first time the staffing levels of several retail stores, including The Grove (188, 12 managers), Lincoln Park (160/10), Green Hills (105/7) and The Forum Shops (90). (see full chart below)

As for the security bag check rules, Jeanne Brock, Store Leader for the Green Hills (Tenn.) store, summed it up most succinctly. “The Green Hills Store rarely conducts bag checks,” she testified. Bag checks were done on a more regular basis four to five years ago, she said, “But the frequency of the checks has decreased such that we probably do them only 5-10% of the time an employee leaves the store.”

Bolstering Monkowski’s claim, Brock wrote, “Bag checks are a low priority in the Green Hills Store. There is very little theft in our store, so we do not rely on bag checks to deter theft and try to assume positive intent for our employees.”

Furthermore, “In the rare instance where a bag check does happen, it can be done by any manager and anywhere in the store—on the sales floor, in the back of the house, or in the manager’s office which is located in the back of the house.” She described the bag checks as “a quick visual check of the inside of someone’s bag,” and take “just a few seconds.”

Like several other managers, Brock said she doesn’t agree with the plaintiffs’ specific allegations, in her case Brandon Fisher, an employee at her store. “I have never seen any employees, including Mr. Fisher, waiting around for a manager to conduct a bag or personal Apple technology check for any longer than a few seconds.”

Megan Melcher, Flag Leader for The Grove (S. Calif.) store, downplayed theft at her store. It “had had very little theft even without the bag and personal technology checks,” she testified. Therefore, there is little incentive to use the checks as a theft deterrent.

But at least some of the managers’ credibility is marred by identical wording in several of the declarations, suggesting consultation among the managers, or even assistance by Apple’s attorneys. For example, here are full paragraphs from declarations by Monkowski and three managers:

Carol Monkowski, Sr. Director of Store Operations

Bag and technology check practices are inconsistent at best, both between stores and even within the same store. Practices vary over time, based on the store and break room layout, management preferences and other factors. We expect our stores to focus on high priorities like the customer experience, fostering a culture of positive intent with both employees and customers, making sure employees can take their breaks and keeping their theft rates low using the tools that work best for them. Things like bag and personal Apple technology checks are not a priority. We also don’t monitor or audit to see if stores are conducting bag or technology checks, which we recognize leads to inconsistent practices as a practical matter.

James Knopf, Market Leader for Chicago

Given all of the other things the store leadership team needs to focus on, I don’t personally see bag and technology checks as a priority. My stores have bag and technology checks far down on the priority list. Things like making sure customers have the best possible experience at the store, dealing with customer complaints, addressing employee problems and making sure employees have a chance to take all their breaks every day are much more important and take priority over bag or technology checks. Focusing on those items just doesn’t leave managers much room to monitor bag or Apple personal technology checks and so stores do not conduct them far more often than they conduct them.

Vincent Policelli, Market Leader for Oregon/Idaho

I don’t personally see bag and technology checks as a high priority. My stores have bag and technology checks far down on the priority list. Things like making sure customers have the best possible experience at the store, dealing with customer complaints, addressing employee problems and making sure employees have a chance to take all their breaks every day are much more important and take priority over bag or technology checks.

Michael Hatfield, Store Leader, The Forum Shops

My management team at The Forum Shops store conducts bag and personal technology checks only inconsistently at best. We have very low levels of inventory theft and, in my experience, bag and personal technology checks aren’t a key factor in deterring theft of Apple products. We also have a lot of other key focuses, including making sure that customers have the best possible experience at the store, maintaining employee morale and making sure employees are able to take breaks, for example. As a Store Leader, I rarely, if ever, talk to managers or non- management employees about bag and personal technology checks.

Interesting Numbers

Inside Monkowski’s prepared declaration for the bag check lawsuit, there were several facts about the retail store operations that have never been previously revealed to the public—or for that matter, to the retail store employees themselves.

First, there are 18,245 employees below management or corporate working at the United States stores. That represents about 42% of the total 43,700 retail segment employees, which includes international store staffers and the headquarters team in Cupertino.

Of those U.S. non-management employees, 11,237 are considered part-time, which is working fewer than 28 hours a week. That represents about 62 percent of the U.S. retail store team, making the chain truly carried by part-time employees. That figure is highly-guarded by other large American employers such as Target and Wal-Mart. Consequently, it’s impossible to tell how Apple’s part-time staffing compares with other employers.

Monkowski revealed that there are 779 employees at the Fifth Avenue (NYC) store, a impressive number required to keep the store open 24 hours-a-day, every day of the week. At the other end, Apple’s smallest store—unnamed—has just 47 employees. The U.S. stores have from five to 40 managers, Monkowski said in her declaration.

Former Sr. VP Retail Ron Johnson used to say Apple’s retail stores had the lowest turn-over rate in the industry, but now that rate compares to the industry average, according to numbers provided by Monkowski. The retail store turn-over averages from 29% to 33% per year, she testified. What’s more, that rate has remained the same since July 2010. Industry figures put full-time retail employee turnover at 24 percent (2012), but for part-time employees it’s a whopping 67 percent.

Monkowski’s testimony was accompanied by several exhibits, mostly pages from Apple’s policy and procedure manuals related to bag checks, clocking in-out and security matters. But some of the pages covered personal phone calls while at work, nursing mothers, employee donations and volunteering, and social media policies. The manual pages have been previously revealed in postings by Apple-focused bloggers, and generally contain no surprises.

In another section of testimony, Monkowski reveals that Apple employs the firm Medallia Inc. to conduct its employees and customer surveys. The results are used to calculate Net Promoter Scores (NPS) that indicate a level of customer satisfaction with their service and the company.

In declarations filed in connection with the lawsuit, several Apple retail store managers provided staffing information for their assigned stores. The Fifth Avenue (NYC) store has the most employees of any store in the chain.

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{ 4 comments… read them below or add one }

ex-Apple March 5, 2014 at 1220

Doesn’t sound like the SF store is part of this but when I worked there, there were definitely times when bag check lines got long. Usually after store meetings, where you could wait 5-10 minutes for the security guard to check you out. Not an issue on a regular basis, but sometimes you couldn’t find the guard to check you out at the front door and you’d stand around a minute or two. I remember years ago when I temped at Macy’s, you could only bring a small clear plastic zip bag to work with your essentials. Things could be worse…

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Throw that ham March 5, 2014 at 1547

If theft isn’t a concern, than why are there signs in back of house with an 800 number asking you to report?

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ex-Apple March 8, 2014 at 0859

Every retail place I’ve worked has signs like that. Theft is a concern but not a big one. Cycle counts weekly let them know if items on the floor are disappearing due to customer theft; if it’s bad, they just move stock to the stockroom and make staff get it for customers (depending on the cost). Internal theft is rampant in retail but with all the cameras BOH someone would have to really work at it to steal stuff. You can’t pick your nose in my old store without someone seeing it. The biggest theft issue for my old store was always related to cash, people thinking they were really smart and skimming the tills. Got caught every single time.

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Annie Mouse March 27, 2014 at 1957

i can absolutely guarantee that an employee has been terminated as a result of a bag check.

keep on circling the wagons managers.

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