Watch as our intrepid blogger makes a point, defends it mightily, and then finally catches on that something else is going on here.
Two weeks ago, I raised a question about the goals and measures of success internal auditors are using in this year of impossibly stupid change. My point was that the goals established before all this quarantining broke out had no relation to our current existence.
But buried within that post was something else — something I think I was thinking about but didn't know I was thinking about it. Think about that for a second.
To sort this out, let's climb into the Wayback Machine and see how annual plans were established in what we call "The Before Times."
At first, something known as "the cycle of audits" ruled the land. (The less said about that approach, the better. So, less will be said.) Eventually, the risk assessment approach challenged this thinking and became the dominant species. Risk assessments would be completed, potential areas for audit would be established, and budgets (time and dollar) would be developed. Because such budgeting had to be coordinated with the organization's budget process — an event usually occurring in the third quarter — internal audit's annual plan was often completed in the third quarter, also.
It took a while for the profession to catch on. But, as the world moved faster and faster, we realized the folly of spending the end of the year completing audits that had been identified as potential risk areas in the middle of the prior year.
Anything identified 18 months ago had either already blown up or just didn't matter anymore.
Enter the advent of the rolling quarterly plan. The concept was that only part of the year's schedule would be completed or, if the entire year was scheduled, everyone agreed it could be changed as needed.
Why is he telling us this? Why the history lesson? We all know; we've all moved on; we've all gotten better.
Well, first, I'm not sure we've all gotten better. I still see many internal audit shops that plan well in advance and then, except for some special projects, stick to that plan. Even worse, I've talked with shops that plan out the entire year, explain that they and the board know it will be adjusted in response to changing situations, and then never make a change. Nothing but lip service.
But the real reason for looking back at this change in approach is because I'm wondering if we need to apply these same principles in other areas. As mentioned earlier, I've talked about the need to change goals and measures of success. And this is a strange enough year that such changes make sense. But might that be true in even the calmest of years? As things progress and the world changes, might it make sense for us to review our measures? Of course, a review of the department's progress should be ongoing. But should there also be a quarterly adjustment, a stop-and-go approach, a constant reassessment based on the realization that goals established in prior times might no longer apply to current situations? Should the goals themselves be adjusted to reflect what the department needs to be doing right now?
I am not suggesting changing goals midstream with no other purpose than to ensure the department meets its goals. I am talking about changes that are rooted in the current conditions of the organization and the world. In fact, if this is an honest appraisal of potential changes, it could result in goals that are harder to meet than the existing ones.
I can't really tell you if this makes sense or not; it is just an idea I'm throwing out there. But sitting in my ivory tower (or, as anyone who has met me knows, my dingy, tchotchke-filled office), I think the concept is based on questions every audit department should be asking itself: Where did the department think it was going, is that trip still the right one, and does the department need to change its mileposts?
And, in the initial drafts of this piece, the preceding was the final paragraph. I began to polish everything (because, trust me, you do not want to see my rough drafts) and eventually realized I'd alluded to but missed an important concept. And it has to do with the whole evaluation of where the department is and how it has gotten there.
I still believe we need to be willing to reevaluate and potentially change our measures when it is the right thing to do. But I got to thinking about the situations that might cause us to make those changes. And, as I came up with examples, I was hard-pressed to believe such situations would actually necessitate such change. And I realized that the situations I was hypothesizing pointed out the failing most people have with goals and measures.
When goals are not met, there is inadequate evaluation of that failure's root cause.
Let's look at a not-too-far-fetched example. Imagine a department is plagued by a series of unexpected absences — people out sick, people taking family and medical leave, people who had vacations planned at the same time things began falling apart, and life just getting in the way of a well-run audit department. It's mid-year (maybe even first quarter) and the goals and measures are already a shambles. Should you then adjust them to better reflect what is going on?
I'm guessing almost everyone is answering with a resounding "No!" And I would join that choir. Because, while much of this is outside the control of the department (theoretically), the department still must get its work done. And success in getting that work done is reflected in meeting (or not meeting) those previously established goals.
So, what does the board hear? ""Geez. A bunch of people were gone so we didn't do all we wanted to. What's a poor audit department to do? We'll do better next time, honest." OK, maybe not those exact words. But something that says the same thing while sounding a bit more professional. "We experienced a higher than expected absenteeism in the department. Next year we will focus on ensuring we have the resources to complete the scheduled audits." Sounds really nice and businessy, doesn't it? But it is nothing more than "What's a poor audit department to do?" because there is no evidence the department has dug in to determine why the goals were not met.
Were sufficient contingencies built in for absences? Was their sufficient coordination of vacation times? What is the morale in the department? How does that morale affect the ability of the department to get its work done?
Notice the transition occurring in that list of questions — a transition from surface solutions (how we will schedule better in the future) to true root cause (determining if there is something underlying those absences.)
Looking closely at what is occurring with goals and measures is an ongoing and important role for the department. In our current situation, there is ample reason to make changes. But, even in this situation, have you actually investigated what is going on and why there are failures?
Whether or not there are black swans swimming across your path, when goals and measures are not being met, a change must be made. On rare occasions, that may include changing the goals and measures. But, in all situations, those changes should be within the department itself.