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Is Internal Audit a Want or a Need?​

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In a post titled "Price, Wants, Needs, and the Perils of Urgent," Seth Godin provided the matrix shown above. It is deceptively simple, but there is a lot underlying those two lines.

The four quadrants help determine what kind of product/service you are selling — how your product/service fits in and is perceived by the customer. You can get more details about this by visiting the link above (as well as learning what Wrigley's gum, Hermes handbags, web services, and pacemakers have to do with all this.) But it also contains some important questions for internal auditors.

Now, before going into those questions, let me take a moment to preach a sermon I've preached on more than a lot of occasions. All internal auditors are marketers. In every interaction, in every audit, in every correspondence, in every walkthrough, in every test, in every interview, in every meeting, in every casual stroll down the office hallway, in everything we do we are selling ourselves, our value, and our core service of assurance.

And to successfully sell we have to know three things — our product/service, our customers, and our competitors. This provides the information and basis for the constant marketing of the department.

But, within this matrix and the accompanying blog post are embedded two more questions — deeper questions than the previous three — that relate to our understanding of what we sell and the value others think we provide. And they are questions we seldom, if ever, ask ourselves.

Is the price of our service high or low and, in our client's eyes, is that service a want or a need?

Let's start with price first. I could be wrong on this one, but in the realm of organizational expenses I'm guessing internal audit is pretty darned cheap. What percentage of the organization's budget goes to internal audit? Compare that with operations, marketing, production, research and development, purchasing, customer service, and even training. I'll bet internal audit is a mere drop in the bucket compared to any one of those.

For once, I tried to do some research (yes, sometimes I try and research these things; it's not all made up on the fly) and, interestingly, I could find only one study regarding the relative cost of internal audit services. (I say "interestingly" because I believe this shows that, as noted above, we are not asking these two questions.) That study showed that organizations spend from 0.04% to 0.3% of their overall budget on internal audit. At the most, less than half a percent

This is not to say that more needs to be spent on internal audit services. But, if we are providing the value we are supposed to provide — the value we claim to provide — then we are working cheap.

But note that handy little caveat, "If we are providing the value we are supposed to provide." Because, even with internal audit representing such a small part of the budget, we still find ourselves under constant pressure to cut costs/take one for the team/tighten our belts/do more with less/insert your favorite aphorism here. And I would argue it is because we have either not provided the value we should be providing, or we have not sold our clients on that value.

Which actually leads to the next question — is our service a want or a need? You and I both know that internal audit services are as far down the road of need as it is possible to get. Maybe even 11 on a scale of 10.

But what would your clients say? Do they know they need you? Or are you something they see as a want? Are you something they don't think they need, but are forced to have because a law or good governance or a little birdie told them they want an internal audit function? And have they even forgotten that they ever wanted or needed you in the first place? Are we on a third dimension of this matrix, one that goes from "I care" to "I couldn't care less"?

Godin goes on to make conclusions about what it means for individuals and organizations in each of the quadrants and, again, I think it is worth your time to take a look at what he has to say. It will provide insights into how we might better sell ourselves.

But, as we explore the ramifications of the underlying questions, we may find that we need to move the needle on this chart. We may have to help our clients recognize that our cost is minimal for our value, and our value is such that they don't just want us, they need us.

Matrix image appears with permission of Seth Godin.

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