A vastly different internal audit environment requires a vastly different approach to staffing an internal audit department. Long gone are the days when a CAE could tap the local business college for a couple of accounting grads. As Tim Hird, executive director for Robert Half Management Resources in San Ramon, Calif., puts it, “It’s not just a question of finding and acquiring talent. It’s a question of finding and acquiring the modern day internal auditor.” The expanded scope of many internal audit departments’ operations brings with it a concomitant need for skills beyond the traditional range of auditor expertise.
Internal auditors with those ideal skills are getting more difficult to find, too. Hird points out that “those skills are in increasing demand. Indeed, there’s a supply and demand imbalance that’s growing by the day, and, as a result, candidate shortages are starting to appear.” CAEs are under pressure to “build robust talent management plans,” he emphasizes, “because they’re the key ingredient in successful hiring and talent retention.”
It’s a new reality that CAEs and directors of every internal audit department should be familiar with, not just those leading huge departments with far-flung service centers and a tremendous diversity of specialization. The demands on internal audit are simply too great, and are changing too fast, to rely on long-established hiring and retention tactics. Indeed, as Robert Berry, director of the Office of Internal Auditing at the University of North Florida in Jacksonville, says, “Specific talent management strategies must be undertaken by all audit departments, regardless of size.” That’s due, he adds, “to the complexity of the audit profession, the complexity of organizations, and changing stakeholder expectations.”
External factors make finding the right talent strategy particularly challenging for Berry. Jacksonville is an excellent market for auditors, with more than 30 well-known companies having an internal audit presence there. But it’s a tough market for a small department. “Competition for talent is stiff, which does not bode well for me, as higher education typically pays below market,” he explains. “Additionally, we are a small staff — two others and me. So, within my talent strategy, I have to remain very realistic about who I can afford and how long they will stay.”
On average, Berry adds, people stay in his department about two to three years, with pay cited as the reason for leaving. “I lost my entire staff in 2011,” he recounts, “hired one person early in 2012 and lost that person at the end of 2012. I hired two people toward the end of 2013 who are still here; however, neither has audit experience.” He says although these individuals aren’t likely to leave, he now has a “very junior department.” “This is the strategy necessary to keep people here,” he concedes.
Who Do We Need?
Few internal audit departments rely exclusively on campus recruiting and headhunting firms, and few rule them out entirely. Most use each tactic as needed. Allstate is one. About 30 percent of the company’s department are new hires, many of them straight out of college. The company is less enamored of search firms. “We try not to use them,” says Joe Raphael, an internal audit director. “We’ve built a recruiting engine ourselves, but we will use search firms in selected areas if there’s a special business skill that’s hard to come by like, say, an investment auditor.”
Campbell Soup Co. CAE Bethmara Kessler uses a blended approach, too. “One way to foster a culture of innovation is fresh, dynamic thinking,” she says. “We do hire direct undergrads.” She also relies on search firms, but given a choice, she says, “I prefer known entities and people who are referred by people I know and trust.” Peter Francis, managing director at ACEIA, doesn’t use search firms at all. “We recruit using our internal resources,” he says. “This is a lot of investment, and sometimes a recruitment firm may not see something in a candidate that we see.”
The approach to outside assistance in talent management likely depends on the size of the internal audit department. “We are a small shop and need as much experience as we can find in the market, given our price point,” says Joanne Prakapas, director of internal audit for Mecklenburg County, N.C., “so productivity is pretty high to start with and the person will not need a lot of training and handholding. We are all too busy to do that.”
One department that tried to systematize campus recruiting halted the program. “In 2007 and 2008, when the war for talent was heating up, we implemented an idea from our human resources director,” says N. G. Shankar, corporate president–audit at Aditya Birla Group. “We explored hiring graduates from a few select universities as part of an internship program, training them formally, both in the classroom and in field work, and then absorbing them into the mainstream internal audit function.”
His company charted a detailed program and reached out to about a half-dozen universities, netting a dozen recruits a year through 2012. The program also assisted recruits in pursuing courses toward achieving designations such as chartered accountant or cost and management accountant, a specialized certification conferred by India’s Institute of Cost Accountants. Although the program yielded good talent, the organization did not recruit on campus in 2013 and 2014 because of inadequate quality in successive years, an inability to retain graduates, and to ensure it didn’t have too many graduates overall. “If most graduates don’t work with us for three years, we have to rethink the program,” Shankar explains.
The operative word there is “strategy.” Managing internal audit talent requires audit leaders to have a focused program of resource assessment, search, onboarding, and ongoing professional education (see “Recruiting Tactics” at right). And although different internal audit departments will use different talent management strategies, with different emphases on different links in the talent management chain, they should all start with an assessment of the organization’s internal audit needs.
Jason Heiger, a director of internal audit at Allstate in Northbrook, Ill., with a 52-person internal audit staff, recommends “starting with where you want to go and what you are trying to achieve.” Evaluating the department from that perspective illuminates the gap between where it is now and where audit managers want it to go. “Then you have to focus your recruiting efforts on filling that gap,” he advises.
To identify this talent gap, audit leaders need to have a good idea of their current resources. “We do a team skills assessment, looking at our strengths and needs and where that fits in the overall corporate strategy and our departmental talent management strategy,” says Bethmara Kessler, CAE at Campbell Soup Co., in Camden, N.J., who heads a department of 18 auditors. She asks herself what positions she would need to be on rotation and what positions she’d need on a permanent basis.“Final decisions are based on the work we’re going to be doing, the skills that we will need to support where the risks to the enterprise are, and where the organization is headed,” she adds.
Once audit leaders know what they’re starting with, they should shore up internal resources and support to ensure they can acquire the kind of talent they need. They can increase their odds of getting the personnel they need by “being deliberate about spending money to build the talent of the team,” Kessler says. “Giving people across the company the opportunity to see your work firsthand can help attract great internal talent.” For example, her department conducts a guest auditor program, where employees from other business units can spend some time doing a scope of work or experiencing the audit function while staying in their current roles. “We provide opportunities for people to get to know the team,” she adds.
The Multifaceted Candidate
Before they post a help wanted ad, audit leaders should consider what type of individual they want to hire. Every organization will have a list of qualities the ideal candidate will possess, but CAEs shouldn’t let the need for firm processes keep them from recognizing the spark that makes a truly great internal audit hire. “We definitely look for people with the right skills — and that’s not necessarily internal audit skills — backed with the right degree,” says N. G. Shankar, corporate president–audit at Aditya Birla Group, in New Delhi, India, which fields an internal audit staff of about 75. “But in today’s volatile, uncertain, complex, and ambiguous times, we definitely need people who, in addition to functional skills, have learning agility and speed — and people who can rely on intuition and gut.”
Kessler puts it like this: “A really great audit team has a diverse set of skills and capabilities, and sometimes they’re found in folks who aren’t necessarily auditors. I can teach people how to audit, but teaching specialized skills is harder.”
In hiring new auditors at the University of North Florida, Berry looks for “someone who is curious by nature, can learn quickly, and has great interpersonal skills. With that, you can learn audit techniques.” He adds that small internal audit departments should try to have at least one or two people who are fairly experienced, although that’s been difficult for him to accomplish.
One of the biggest mistakes internal audit leaders can make is hiring people based on a long checklist of must-have traits or by taking a “cookie-cutter” approach, Kessler warns. Instead, she looks to determine which capabilities she needs to weave into her team, like a tapestry. “Somebody has to be able to audit,” she says, “but that doesn’t mean everybody is an accountant or auditor.”
CAEs recommend several tips for finding outstanding internal auditors:
- Look for any specialized expertise the department needs beyond the purely internal audit discipline. Many universities have auditors who are solely dedicated to investigations or financial aid reviews. “And some schools may need construction experience,” Berry explains. At Allstate, the company even has auditors with backgrounds in criminal justice and chemical engineering.
- Seek specific experience if possible. For staff auditors, Joanne Prakapas, director of internal audit for Mecklenburg County, N.C., wants candidates with at least two to three years’ internal audit experience and, for senior auditors, three to six years’ with some lead experience. “Whether the candidate has an accounting or finance degree is less important than the experiences he or she has had and accomplishments he or she can present,” she says. “Also, if they have external auditing, we consider that a translatable experience.”
- Don’t forget the basics. Allstate’s Heiger finds value in career auditors. “You need that spine,” he says. “You need that strength.” And Prakapas adds: “We would never hire an inexperienced internal auditor to be a senior auditor, because that person is supposed to be telling others how to audit.” A bachelor’s degree is a minimum requirement, and while a business degree in accounting or finance is typical, she’ll consider other majors if the candidate shows proven performance as an internal auditor. In fact, internal audit departments should emphasize the basics where merited. Allstate makes a point to look for good oral and written communication skills, for example.
- Find as much salary money as possible. “You have to pay competitively,” Hird warns, noting that the unemployment rate in internal audit hovers at about 2.5 percent, compared to about 6.5 percent overall. “Money does talk to a certain extent,” he says.
- Be aware that money isn’t everything — but that something tangible should replace it. Berry doesn’t have a lot of money to spend, so, he says, “I hire people with ties to the university.” One of his staff members has been with the school for 16 years. The other began his association with the university as a student on a work visa a decade ago. That means “their motivation for staying or leaving is more than money,” he says.
- Go with your gut. “I look for employees who are the right fit for our team and the organizations we perform work for,” says Peter Francis, managing director at ACEIA in Melbourne, Australia. “If I can’t picture someone blending in with both of these, then regardless of other technical skills and abilities, there’s a strong likelihood that person won’t work out.”
Finding the Right Balance
Talent management begins with finding the right candidates, but the hard part starts once the hire has been made. For many internal audit departments, a key aspect of the onboarding stage is rotating new hires into different audit assignments. For example, Allstate has a resource team that teaches entry-level associates how to audit, as well as information about the company. In their first two years, new internal auditors work on different teams that enable them to see different parts of the business. In their second or third year, they declare a preference to join a specialized team within the business, such as auto, homeowners, or investments.
Additional tips for training and retaining modern day auditors include:
- Focus on how the business works. “Immerse new internal auditors in as much technology-based training as possible to stay ahead of the regulatory changes that affect your industry,” Hird advises.
- Emphasize soft skills, too. “Provide opportunities that allow new hires to move away from an assurance-only, or audit-only, function into an advisory role,” Hird suggests. A good way to do that is placing internal auditors on special projects and task forces within the organization. “That way, the internal audit department is represented in business transformation,” he says. “It also endows the internal auditor with the softer skills — like broader strategic thinking and a better customer focus — that he or she won’t get in the technical training.”
- Provide a clear path for promotions. The IIA Research Foundation’s recent report, Job Satisfaction for Internal Auditors: How to Retain Top Talent, notes that “a higher sense of job satisfaction and a lower turnover intention are associated with organizations that use internal audit as a training ground for management.”
- Don’t forget the human touches. Prakapas says her department uses team-building events, birthday lunches, and awards and recognition to foster engagement. “It does cut into productivity,” she says, “but people like working here and like each other and that helps productivity, so the two offset each other.”
Of course, “talent” is in the eyes of the beholder, and many beholders in internal audit are looking for traditional internal auditors. “Many internal auditors don’t want to be CAE,” Hird explains. Nor do they want to conduct detailed investigations into tightly focused subject-matter areas that require specialized expertise. “Some are quite happy doing internal audit,” he says, and aspects such as work-life balance or an office close to home are more important to those individuals than a traditional career trajectory. “Sometimes the mistake companies make is assuming the only career path is upward,” he says.
The bottom line is finding exactly the right internal audit hire requires a combination of a traditional focus on just-plain internal audit and a recognition that such skills may not be enough for a particular department or organization. Finding the right balance in hiring talent is part of the art of a CAE’s job. When that balance is struck, an internal audit department can meet stakeholders’ expectations while nurturing the career development of its auditors.
Smart People for Small Departments
Small internal audit departments face the same mandate to hire smart people that large departments have, they just don't have the resources to go about it like the big guys. But there are tricks small departments can use, notes Peter Francis of ACEIA. For one thing, departmental headcount probably reflects the volume of work to be done, and not the complexity of that work, he says, so don't make hiring decisions based on outdated perceptions of "size." A department might have 20 auditors all performing the same routine audits with no complexity, he explains, or "you may have a team of three auditors with an audit plan that requires many and varied projects."
Francis advises expanding staff members' skills as much as possible. "Give them new and varied audit projects that challenge their existing skills," Francis says. "This requires the manager to be brave enough to suggest audit projects that may be out of the comfort zone for some team members, but it can prove to be fruitful."
In a pinch, consider bringing in guest auditors — if management buys into the concept. "If you're a small shop, you may not have all the kinds of talent you need," Allstate's Joe Raphael says. "But if you can get temps for specific areas, it might be a good strategy to get talent into the department." If none of that works, Robert Half's Hird says, outsourcing the entire internal audit function may be an option.