What is the one characteristic that every CAE should possess and why?
Rudloff There are many characteristics that a good CAE should have, but to me, the most important is integrity. There is nothing that can undermine the CAE’s — or internal audit’s — credibility faster than having his or her integrity challenged. All the best technical skills, people skills, analytical skills, and so forth are worthless if executive management and our clients feel that our motivations or intent are tainted in any way.
Hook The most important characteristics for a CAE are good business judgment combined with good communication skills. CAEs must have the judgment to be able to put all issues in the context of what matters to shareholders, customers, and employees, and we must be able to articulate why it matters in that context. Leading our teams to develop the same characteristics is critical.
What is the one behavior/trait that can derail a CAE’s career and why?
Hook Being a poor communicator will quickly derail a CAE’s career. The way the CAE communicates issues and bad news, along with the timing of the communication, is critical. CAEs should be as proactive as possible, provide context for an issue, and be willing to listen to others — yet stand their ground when necessary.
Rudloff CAEs must have courage. If a CAE is unwilling to step forward in the face of adversity, he or she could face a very short career. Management demands that internal audit be candid and deliver the bad news when — not if — it arises. It takes courage to come forward, because the CAE can very possibly be the one who derails someone’s career. Internal audit also has to be strong, because we could become the target of attack when management doesn’t want to hear the message and takes it out on us, rather than addressing the challenge. We must have a thick skin, because without it we are of no value to the organization.
What do you do to ensure you continue to grow and develop as a leader?
Rudloff While leaders are good at being critical of others, we are sometimes less open to criticism of ourselves. To grow as a leader, the internal auditor must be willing to take others’ criticisms, internalize them, and then act on them. I have been in a CAE position for more than 20 years, and for the first time, I am receiving professional coaching. My company engaged with a firm to provide coaching to all of its senior leaders. I had to be open to the experience and willing to accept others’ critiques, but it has been truly eye opening to see myself as others see me. Whether through formal coaching — meaning it’s paid for by the organization — or informal with a trusted mentor, any CAE would grow as a leader from a one-on-one coaching experience.
Hook Constantly seeking and hiring new talent helps me grow and develop as a leader, because it gives me the opportunity to learn from the fresh perspectives of new team members. I also try to get into the field when possible to experience the business operations and associated issues first hand. I try to interact with my peers at other companies to learn from their best practices and even from the areas in which they are struggling. Lastly, I always get something great out of the various leadership learning and training events I attend.
How do you encourage creative thinking within the audit function?
Hook We encourage staff to think creatively and try to give them the opportunity to do so. As part of our planning process, we have a meeting called “Think Out Loud,” which gives everyone the opportunity to brainstorm about an engagement and its scope and approach, even if they’re not assigned to that engagement. We also push pretty hard on the concept of root-cause analysis and drive our teams to peel back the onion. This type of root cause focus can take some creative thinking, or at least the ability to let go of preconceived notions.
Rudloff I like hiring people who have come through parts of the business not associated with auditing. Their experience leads to great discussions that turn into sparks of ideas that turn into creative solutions. Also, we added a group of auditors and senior auditors, who work together and represent the entire department, to bring new and creative ideas to me. It is their responsibility to identify the opportunities and schedule time to meet with me. My job is to never say “no” as my first response. I must give the idea time to germinate. An immediate “no” could actually become a “yes.”
How do you prepare staff for future leadership positions?
Rudloff When I started with my company in 2003, I immediately implemented a talent-review program that provides formal performance assessments twice a year, as well as the opportunity for team members to provide upward feedback (anonymously, of course) for people who supervised them during the year. Sometimes the more valuable feedback comes from below. We also have an annual talent review process whereby we assess each person based on two dimensions: performance and potential. We have used this process to identify the strong performers, but even more importantly, the misplaced performers — those who we have assigned to the wrong tasks. We also strongly encourage certification and advanced degrees. Two years ago, we had an initiative to obtain a professional certification, and we have now reached the level where our team members hold more than 70 certifications, with two dozen more in progress. Finally, we encourage participation in company-provided and third-party training programs — programs that will help individuals not only improve over the next 12 months, but also develop skills that will take them further down their career path.
Hook We focus on building the characteristics of curiosity, courage, confidence, collaboration, and communication. These are all important leadership qualities, and the nature of the work exercises these qualities. Folks get a lot of feedback at the end of every engagement, as well as midyear and at the end of the year. Often, our team members are interacting and presenting issues and recommendations to members of management who are many levels above them in the organization. This teaches the auditors to have their facts straight, be confident, and communicate clearly, which helps them to be better leaders in the future. We also give folks the opportunity to work up to managing a scope area, then part of an engagement, and then, if they are progressing well, an entire engagement.
What advice would you give someone going into an internal audit leadership position for the first time?
Hook I would encourage him or her to ask a lot of questions to get the most out of every engagement, learn from the internal audit team, and learn from the personnel in the business. Listening is critical and helps build credibility if folks in the business, and internal audit team members, know the CAE is listening and incorporating what he or she is learning. CAEs should definitely ask questions about the areas they are covering, as that is part of their job, but they also should learn about the parts of the business as much as possible. They should ensure that all issues get framed in the context of what matters to shareholders, customers, and employees. Internal audit provides a great opportunity to see many parts of the business, learn about a wide variety of processes, and network with many different people at all levels of the company. Internal audit leaders who keep to themselves and only focus on their function are missing a huge opportunity.
Rudloff Being an internal audit leader is not easy. Leaders must be willing to deliver bad news and take the pains of managers who want to punish the messenger. They must be willing to crawl out on a limb to take a position that will not be well received. They must be willing to invest their time in their people much more so than in their own careers. They must be willing to give credit to others, because there is no way to do it alone. They must be humble, too, allowing others’ ideas to form before saying “no” and accepting defeat when their team is wrong. And they must have a thick skin. We are the professional skeptics, the critics. The best internal audit leaders take the good with the bad, and they handle the criticisms of others even better than they hope others will accept theirs.