Last week, I tried to make the case that all the metrics in
the world will not prove our value to our stakeholders. The resulting debates
on various social media platforms (particularly LinkedIn) seemed to support the
idea that measures were not the way to prove success to the board and the executives.
The consensus seemed to be that the only way to get those stakeholders on our
side is through open, honest, two-way communication.
That shouldn’t be too surprising. And I was glad the
community seemed to agree with that one.
However, the comments also contained resistance to the idea
of completely eliminating internal audit metrics. In one case, the comment was
made “If we abandon our metrics, can we expect (and accept) that from those we
A valid question. To which I responded “Maybe metrics aren't
the perfect answer in every situation and, perhaps, we demand ‘metrics’ in too
many situations.” In other words, to say we should have metrics because we
expect everyone else to have metrics evades the fundamental question — are metrics
You see, if we blanketly refuse to eliminate metrics just because
we think we need metrics, we are missing the fundamental questions. Why are we
using metrics and what are we going to do with them once we have them?
The two questions actually come to one answer. The only reason
for metrics is not to show how well we’ve done; it is to show how we will
Here’s a quote from Seth Godin. “Don’t measure anything
unless the data helps you make a better decision or change your action.”
Numbers for numbers’ sake (or numbers put together to do
nothing more than show our present situation) is a waste of our precious resources.
For all the numbers and measures and key performance indicators (KPIs) and recording of
positive things we do, far too much of it is merely an exercise in collection,
gathering, and reporting that, for all intents and purposes, does nothing more
than state “Well, here we are.” How often do we look at the final numbers —
good and bad — and make the commitment to actually use that information to
drive improvement in our departments? How often do our measures of success cause
us to do anything differently?
One of the failings of most balanced scorecards (an
approach I describe a few weeks ago) is that people see it as a snapshot that exists
to do nothing more than provide information on one moment in time. Such is not the
purpose of the tool. The real value of balanced scorecards is not the first measurement;
rather, it is the subsequent measures that show the advancement of the department.
And I would argue that few of us use our metrics to show
progress or (as Godin puts it) make better decisions or change our actions.
Let me give you an example by referencing a metric that seems
to be in common use. I should note up front that I loathe this particular
metric. But, just because I hate it — just because I had bad experiences with
it — is not a reason to believe it is a bad measure. Any good measure used
poorly becomes a bad measure. So, whether I think it is wonderful or think it
absolutely stinks, it will help prove the point I want to make.
Utilization: The percentage of auditors’ available time
spent on audit work.
Now, there are a lot of slippery curbs in this one, probably
the biggest one relating to how “audit work” is defined. Is relationship
management audit work? Is sitting in on committee meetings audit work? Or is
audit work strictly the time spent on an actual audit? But let’s pretend that
is all ironed out to everyone’s satisfaction. (However, this does offer the
opportunity for a quick aside and reminder that, before you can even measure,
you have to define.)
The main point relates to how most audit departments gain no
value from measuring this statistic. Let’s say the department is trying to
achieve 80 percent utilization. (Again, we’ll pretend this makes sense in the
theoretical environment we have established.)
So, with the goal set at 80 percent, the overall result for the department
turns out to be 75 percent. As Karl Malden once said, “What will you do?”
Seldom have I seen a department look at such results and ask
the real questions — the ones the internal audit departments would be asking if
they were doing a review of someone else’s department. Is 80 percent a reasonable rate
given the criteria and circumstances? If that is reasonable, then what in the
process is broken that does not allow people to reach the goal? What training,
support, etc. do people need in order to have a better chance of meeting such
goals? Is there an inherent flaw in the planning and assignment process that
will always lead to failure?
All valid, root-cause, critical-thinking questions.
However, invariably the response by internal audit
leadership is to sit down with every employee and let them know that these
results are unacceptable, that 80 percent is the commitment that has been made, and that
they need to try harder in the coming year. Rather than finding out what is
going wrong — rather than using the information to make a better decision or
change actions — the blame is placed on people.
Utilization is just one example. I find that the majority of
metrics (good and bad) are misused. They are compiled to heap praise or disdain,
not used to determine how to make things better.
If we have to measure something (and for all my previous
rants and raves, I believe there is an important role for metrics within an
internal audit department), then we better make absolutely sure we are going to
use those measurements for something more than building the colorful tail
feathers of a strutting peacock that screams “Look at me; look at me; look what
Use all those metrics you’ve been collecting (at least, the
ones that have some bearing on the work and results that are desired) to
actually develop and improve operations — improve to know where your opportunities
lie, improve to efficiently and effectively provide useful information, and
improve to better serve the customer.