It seems like every organization spouts it at one time or another. "People are our No. 1 priority!" Then, when the annual ceremony of announcing the organization's new and improved objectives takes place, a focus on support and development of employees winds up somewhere at the bottom of the list (That is, if it shows up at all). Organizations give a lot of lip service to the importance of their employees. Yet, very few follow through with any real support to the ideal. Dollars, stockholders, customers, executives — organizational focus will be placed on any of these before the objective-makers remember "Oh yeah, let's hear it for our employees."
And don't feed me any of that "We saved the best for last" rhetoric. When it comes to objectives and measures of success for organizations, employees are an afterthought — a last minute addition, an "Oh, by the way" remembrance, a "We better throw the dog a bone" covering, an "I feel like we forgot something" panic response.
Internal audit falls into the same trap. Last week, I was talking about how internal audit departments measure their success — in particular, how we put too much emphasis on financial and procedural factors with almost no reference to the department's employees.
The opposite should be true. It is possible that more emphasis should be placed on employee-based metrics because there is no other department where it is quite so obvious that employees are the No. 1 asset. It isn't workpapers; it isn't audit reports; it isn't policies and procedures; it isn't desks, pens, and computers; it isn't even back issues of Internal Auditor magazine. No, it is the people.
What brought this all to mind was an article from Inc. titled "11 Essential HR Metrics That Every Organization Should Know." The metrics within this article are meant to show how human resource departments can measure their success in helping the organization. But, with a little tweaking, they can be just as valuable a set of metrics for the internal audit department.
Let's take a look at a few of them.
Time-to-Start — The average time it takes to fill a position. How hard do you work ensuring you have a pipeline of potential applicants ready in case an opening occurs? Yes, the filling of open positions is a human resources role — they are the ones who generally scour external sources for potential candidates. But do you take an active role in recruiting well before that next opening occurs? Here's just one excellent example. Are you recruiting when you are working in other departments? Are you evaluating the talent pool at the same time you are evaluating controls? Are you keeping your eyes open for individuals who have the makings of a good auditor — people who are critical, innovative, inquisitive thinkers? Think about how much you already know about the subjects of your reviews. And think about how many of them might have the wherewithal to be talented auditors. Your next superstar may be looking you right in the face during your next audit interview.
Time-to-Productivity — Number of days from hire to satisfactory productivity. My guess is that no one — no one — has ever used this as a measure in their internal audit department. And, I'll also guess that, if you think about what this measure really means, its importance becomes immediately obvious. The quicker a new employee becomes a competent, productive member of the staff, the quicker the department can provide the value it promises. However, there is a nasty little landmine buried within this metric. To effectively measure our success in this area, we have to understand and be able to articulate what we mean by "satisfactory productivity." Most (if not all) audit departments have job descriptions. But how well has your audit department translated those words into defining what the actual work is, as well as how someone shows they are doing that work well? (As a side note, if you are constantly hearing internal auditors complain that they are treated unfairly or that there is no clear career path within the department, this may be part of the explanation.)
Turnover — Rate at which employees leave the department. There's a good chance you already have this as a metric. And, even if you don't, it is probably being measured at the organizational level. But, the thing many groups miss when it comes to turnover is digging in and finding true root causes. I recently talked with a group of people (not internal auditors) where the department was struggling with high turnover. They talked about how this was a sign of an improving job market, the growing opportunities in other organizations, and their inability to match some of the benefits being offered. They also talked a lot about disgruntled employees who were better off working somewhere else. Notice that all of those reasons/excuses were externally focused — the fault of other organizations and the employees — with no analysis of what the organization or department might be doing wrong. They just accepted the turnover as a cost of doing business, never once digging to find the root cause of the issue. (By the way, if they had asked me, they might not have liked the answer. I had talked with enough people in the organization to be able to succinctly tell them that the biggest root cause was, surprise, surprise, tone at the top. Then again, maybe there's a reason they didn't ask.)
Readiness — How ready is the department, from a human capital perspective, to execute its business strategy. This is a very important measure because it hits a number of critical success factors for any department — strategy, human capital, and execution. It asks the crucial question, is the department ready to even begin executing its strategy. And there is a lot of very important stuff to unpack in this simple little statement. In particular, this means that internal audit (audit leadership and all departmental employees) must understand the department's strategy, understand how it will be achieved, and understand how employees will support achievement of the strategy. It also means determining the skills and competencies necessary to achieve that strategy and ensuring that all employees have at least a minimum competency in those skill levels. As I say, a lot packed into this one.
Employee Engagement — Degree to which employees are engaged with and committed to the strategy and objectives of the department. As the article notes, this is a tough one to measure. Your organization probably uses employee surveys and other methods to get a handle on this. So, go out and find out what the numbers are for your group. But that is really just the beginning. There are a whole host of intangibles that you can observe, monitor, and record. Maybe these won't be the purely objective measures we'd all prefer to see — but they will provide some assurance that individuals are genuinely engaged. For example, observe how well people participate in meetings. That doesn't mean forced participation; it means seeing people actively interested and excited about what is occurring in those meetings. (Which, of course, puts an extra burden on those who run those meetings — making the meetings worth being engaged in.) Another area to observe is how closely people are watching the clock. Do they arrive right on time? Do they leave right on time? Are breaks and lunches always at the perfect time and length? Don't get me wrong. I'm not talking about micromanaging time or insisting on overtime; this is not about ensuring adherence to a specific work schedule. No, it is about looking for people who are genuinely glad to be a part of the team to the point where the clock is unimportant — to the point that what counts is being there. (Again, an added burden to those in charge to make an environment worth wanting to be a part of.) And one more to consider — can every employee not only quote the department's mission/vision statement, but also explain what it means and how the work they are doing impacts it. (Another measure that puts the onus of responsibility on leadership — making the mission/vision statement important and real in the lives of all employees.)
Training Participation Rates — Percentage of employees participating in development opportunities. Boy, have I got a lot to say about this one. So much that I think it is best if we take another break.
So, for today, let me finish by noting that I'm not saying you should use every single one of the measures listed above. Some may work in your situation; some may not. But they are food for thought. Because if employees are the most important asset — and please tell me we don't have to argue about that one — then everyone in the department must act like everyone in the department is actually important. And success for the department must be focused in that direction.
Join me again next Friday when we talk about the far-reaching ramifications of good, and bad, training.