By Charles D. Schrock, CPA, CIA, CRMA
Charles (Bud) is a retired Chief Audit Executive, former Chief Risk Officer, and has led large, global IT projects. He is currently the publisher of The Audit Explainer (theauditexplainer.com). He’s also in the process of introducing a new team effectiveness and organizational governance model … and its impact on the profession of Internal Audit. Connect with Bud at https://www.linkedin.com/in/cdschrock/
Adding value is the key to an auditor’s effectiveness
Charles D. Schrock
I believe that the biggest fundamental challenge for internal audit leadership is simply demonstrating value.
More than ignored audit reports.
More than the challenges of recruiting staff.
More than annual budget battles.
Yes – more than these.
Albert Einstein is quoted as saying “Strive not to be a success, but rather to be of value.”
It’s so essential, but we sometimes forget how important this is. And it’s not about you. it’s not enough to feel confident that you are delivering value. More importantly, the value that you deliver must be sufficiently tangible, obvious, and welcomed so that others will recognize it.
If you’re part of the internal audit leadership team, this should be your primary focus. Every day. With every interaction.
If you’re not convinced, then consider this. Executives, universally, support those who are the biggest contributors to the organization’s success. Think of the sales leaders and the innovators who propel their organizations. Think of the leaders with the reputation for “getting things done”. These individuals are perceived as adding value. That perception is incredibly important. It’s the reason they get the resources and accolades.
And the flip side is true. There’s an unattributed quote that’s a bit rough, but essentially on the mark – “If your presence can’t add value to my life, your absence will make no difference.”
Of course, this isn’t an indictment of anyone or any profession. Maybe you’re already recognized as being a huge value-creator for your organization. Or, maybe your successes are often appreciated but not widely known. But if you want to make a difference in your organization’s success, focus on creating value.
And the good news is — you can get there.
You start with Positioning
Positioning is about deciding what value you want to provide.
This isn’t specific to Internal Audit. But it definitely applies. So bear with me while we address a few generalities.
If you want to make a difference or be influential, you must add value to … someone.
You add value when you are able to solve a problem or deliver some type of clear and obvious benefit. And this value is amplified when you are perceived as being the best person to handle this particular problem or the best person to deliver this particular benefit. Ideally, you’re perceived as being the only reasonable option.
People want easy solutions.
They want to know who to call when problem “X” arises. And they want to know this person will deliver great results. Every time.
The starting point is always finding an unmet need – something that will be an important outcome to someone else. Ideally, it’s a need that you can uniquely resolve.
But to be sustainable, It also needs to be something that interests you.
Simply being able to solve a particular unmet need isn’t enough. Sure, you may have the skills. But you also need to have an interest. Here’s a general example.
Let’s say that you’re a woodworker. As a hobbyist, you’ve built this beautiful chair for your house. It took dozens of hours and a lot of effort but it turned out wonderfully. Friends admire it. One of these friends says that her brother owns a furniture store and really needs 500 chairs within 90 days for his inventory. Yours would be great! Can you provide them?
Well, maybe you could. But do you see yourself being committed to solving this problem? Building one chair was personally rewarding and fun. Being responsible for delivering 500 chairs would place your life on a wholly different trajectory. To make a reasonable profit, you would be forced to start competing with large-scale furniture manufacturers. You probably could create 500 chairs. But when you think about it, it would take you in a direction that you really don’t want to go. It’s just not who you are.
The point is – don’t allow others to define your positioning.
It’s as much about saying “no” to things that you could do but would take you in the wrong direction.
Instead, consider what you like to do, professionally. Intersect that with what you’re actually pretty good at. When you have an interest in something it’s also very likely that your interest has turned you into an authority on the subject. And maybe you have developed the skills to operate at a very high level.
Positioning is about intersecting your interests and skills with the important needs of others. With luck, it also means you’ve found your purpose.
Yes, that sounds pretty vague. Here’s something more tangible.
Positioning is often associated with a simple 4-quadrant graph.
Each axis represents one of your most cherished skills or interests. They are the things that personally interest you.
Here’s a scenario. You’ve been thinking it would be fun to open a candy store. But not just any type of store. You’re interested in two specific ideas: a) natural, healthy ingredients and b) creating unique new offerings that change weekly. These are your purpose. And, you believe, they represent an unmet need.
So your chart looks like this:
You chose these axes because they interest you.
If you’re the only offering in this upper-right quadrant, you’ve found a way to uniquely position your candy store. You have a niche solution. And customers interested in that niche solution will come to you. And only you.
Yes, there are a lot of other competitors who are somewhere on this same chart. Some provide delicious but unhealthy candy (A). Sure, most competitors will have a reliable, unchanging mix of candies (B). Maybe even some that are healthy (C). But no one else can provide what you provide. You’re unique.
Remember that you get to decide the axes. There are other axes that you could have chosen. You could have chosen an axis about pricing (where you could choose to be low-cost or high-cost). Or you could have chosen an axis about the speed of shipping your candies. Or, lots of other potential axes. These are perfectly reasonable considerations. But they’re just not what interests you. That means that they will not be your primary strategic drivers. Your strategic drivers are clear – natural, healthy ingredients and unique new weekly offerings.
But what if you’re unclear on exactly how to define your position? What if you don’t know what axes to choose? How do you decide?
One technique is SWOT. This stands for Strengths, Weaknesses, Opportunities, and Threats. The technique is to honestly evaluate yourself using these four criteria. By spending time and deeply considering these four topics, your axes may emerge. Regardless of technique, it’s ultimately about finding your “why”. The axes you choose need to matter to you.
And, of course, it has to actually meet a need. If your brilliant, unique offering doesn’t actually meet anyone’s needs, it won’t be sustainable.
So, find someone who has a need that aligns with your “why”. That’s your potential niche.
When you do that, you’ll have a unique purpose that satisfies your “why” and fulfills their need.
That’s the starting point for success.
Internal Auditors need positioning, too
Yes. Your job is to perform audits. Without question.
But there are a lot of potential ways to go about that. It’s not all carved into stone.
For instance, internal audit may review compliance with laws and regulations. Or maybe that’s handled by a separate compliance group. Maybe internal audit helps the external anditors. But it’s certainly not required. Maybe internal audit provides a monthly dashboard of control effectiveness. Other organizations might view that as crossing over the line for objectivity. The point is – there is no single “right” view of exactly what internal audit is expected to do.
As mentioned above, positioning is about finding your niche. It’s that intersection where your own skills and interests align with someone else’s need for help in solving a problem or achieving a goal.
Let’s consider your internal audit role. What interests you?
We will make one very basic assumption. As an internal auditor, you want to help make things better, more effective, or more efficient. And to achieve that, you ultimately need to convince others that they should take action based on your recommendations.
In other words, internal auditors need to be influential.
But influential how? And with whom?
These are the key questions that you’ll answer by finding your niche.
Relative to internal audit, what do you fundamentally believe in? What’s the most fun about helping others? What excites you when it goes well? And what sustains you when things get tough? These can help you find your “why”.
Or maybe it’s easier to try a SWOT analysis. As an auditor (or an internal audit department) what are your Strengths? Weaknesses? Opportunities? Threats?
Ultimately, you need to answer two questions:
- What meaningful problems do you want to help solve (or what meaningful goals do you want to help facilitate)?
- What meaningful problems are you uniquely able to help solve (or what meaningful goals are you uniquely able to help facilitate)?
The question of “which meaningful problems” clearly depends on who you’re trying to help. For example, the Chairman of the Board will have different “meaningful problems” than a divisional CFO. The Chairman is probably interested in organizational governance and strategy. Is that what you’re interested in? The CFO is probably more interested in accounting issues. Maybe that’s more in line with your interests. Or, maybe you love technology. So maybe the CTO has the types of problems that get you excited.
You shouldn’t assume that you must always aim for influence with the Chief Executive. Be realistic about who you are and what you want. Maybe helping (influencing) the CTO is where you want to be, today. Of course, it’s fine to continue improving your skills and knowledge. Perhaps, in the future, you’ll be in that position to be able to help solve problems for your Chief Executive.
And then, there’s the issue of “your unique ability” to help.
One factor is the unique skills that you (and your team) possess. But also important is the unique organizational role of the internal audit function. As you consider your positioning, take both of these into account. For example, many different consultants could help a division streamline its operations. But only internal audit (typically) has the power to obtain whatever records they desire. And only internal audit will (typically) present their report and recommendations directly to the Audit Committee. That type of visibility is unique and should be factored into your positioning.
Is there an ideal position for the internal audit function?
I think so.
It revolves around helping the Board and the Executives with independent and objective insights about the organization’s key strategic initiatives. But that’s not the only way to provide value. And this approach may not even be practical for every auditor, simply because their organization’s underlying governance structure may not be sufficiently mature.
So if the optimal is a little out of reach, let’s focus on what’s practical. The important thing is to determine how you can best provide value – and be influential – within your particular organization today while working toward the ideal position.
Just decide what makes you and your team unique. Always remember that you have that internal audit charter. It’s important. But also consider who you want to help. And consider what types of problems you can (and want to) help solve.
Some examples might be good.
Let’s assume that you (or your team) have a finance and accounting background. Data analysis is comfortable for you. Others come to you for advice on how to gather and interpret operational data. Naturally, you will use these skills during your audits to gather relevant evidence. These skills might further imply that a valuable niche would revolve around assuring that the critical data presented to executives for strategic decision-making is true and relevant. In your organization, this might be very important. Your independent assessment of this data would add value.
Or, let’s assume that you (or your team) have deep industry expertise. You’ve seen many problems over the years and you know what works and what doesn’t. Maybe this implies that, beyond performing regular audits, your niche is helping line supervisors solve practical day-to-day problems. In your organization, this might add value to these supervisors as well as their managers.
And one final example. Let’s assume that you (or your team) have very broad experience across many industries. Every potential strategy for your organization is familiar. You’ve probably seen it (or some variation) elsewhere. This might be very helpful to the executive leadership team. Not that you would be directly involved in deciding on strategies. But, as an experienced sounding board, you could definitely provide value.
Are any of these right or best? Not for everyone, certainly. But they might be best for you.
These examples show how an auditor’s interests, skills, and backgrounds could impact how they might best provide value and who might benefit the most.
Once your positioning is established, the next step is to develop your brand to communicate it.
Everyone has a brand.
It’s what others think about you. And it’s how they might describe you to strangers.
Every time you meet with someone, you give a glimpse of who you are and what you believe in. You can allow your image to evolve by happenstance. Or you can be a bit more organized and proactive.
Branding is simply being intentional about how others perceive you. It’s about deciding, in advance, how you will consistently display the proper image of who you are and what you value.
If positioning is about deciding how you want to provide value, then branding is about communicating and delivering on that decision.
Branding is not about pretending to be something that you’re not. It’s not about puffing yourself up and optimistically proclaiming that you’re the best at “this” or “that”. It’s the opposite of “fake it till you make it”. Fakes are usually found out – with disastrous results.
Branding is simply about telling your truth in a coordinated and consistent way so that others will see the real you.
Think about often-mentioned top brands like Apple, Coca-Cola, BMW, or Ritz-Carlton. There’s clarity around what they do, who they serve, and how they actually deliver value to their targeted consumers. Will they always be perfect in delivering on that image? Maybe not. But they work hard to demonstrate and preserve that sense of what they believe in. And they make sure that others see it, too. If they make a mistake, they are usually given the benefit of the doubt with the belief that the mistake was a one-off aberration.
These brands aren’t aimed at everyone. Maybe you don’t use these particular brands. At least not today. But a strong brand is always clear about who they serve and how its customers will benefit. Maybe someday you will need an elegant computer, a refreshing beverage, a high-performance sedan, or a luxury hotel room. Branding assures that you’ll know how to fulfill your need.
And a strong brand generates value in some manner. For a consumer product, maybe it’s the ability to charge higher prices than competitors (think SONY). For a consultant, maybe it’s the ability to compete and win new business based simply on the strength of its reputation (think IBM).
You can either let your brand evolve haphazardly, or you can take steps to manage it and assure that it aligns with your desired positioning.
Internal Auditors need a clear brand – maybe more than anyone else.
Even though we know we provide value, it’s often hard to explain it to others.
Just to refresh your memory, your brand is what others think about you. It’s how they might describe you to a stranger. And “branding” refers to the decisions and actions that you take to develop and deliver your brand.
So, if you’re an internal auditor – what’s your brand?
Your brand flows from your position. How do you provide value? How are you unique? Whom do you serve? What problems do you help solve? What goals do you help deliver? These are questions that surround positioning.
Whatever position you choose, branding helps you convey those decisions to others, including the executives, line managers, your Board, your Audit Committee, external auditors, regulators, and others.
Almost everything that others observe or perceive about you (or your team) intersects with your brand.
What do you want them to perceive? First, of course, is competence. And you want them to also perceive your niche. You want to be perceived as the only person with the skills to solve problem “X”.
Fundamentally, you should assure that your position is coherently displayed. I simply mean that others will observe you in many different contexts. On a personal level, it includes the decisions that you make about personal grooming, how you dress, the type of language that you use, how you engage others in conversation, and a thousand other ways.
This applies to your professional team leadership decisions as well.
For example, there are discernable options for your team’s staffing. Maybe your chosen positioning should emphasize staff consistency. Or, alternatively, maybe your staffing should emphasize “up and out” turnover to provide new and changing points of view. Is that part of your positioning?
Or maybe you encourage a standard lateral rotation through internal audit for promising young executives across the organization. Or maybe your department takes pride in deep familiarity with the organization and industry. Perhaps you prefer to have a broad set of skills on staff. Or maybe you prefer to broadly outsource in order to access specific technical skills as needed. These are branding decisions in support of your positioning.
Your team’s approach to collaboration is also important. It should convey your decisions around teamwork versus formal independence. Do you set aside time for your staff to collaborate with line management? Do your audits focus on interpersonal discussions over data analysis? Do you discuss potential audit findings, one-on-one, in order to develop shared understanding and solutions? Or maybe you prefer to discuss audit findings at a formal meeting with the executive team. Nothing is right or wrong. It just needs to be consistent with your positioning.
Your audit report content and layout should reflect your desire to add value. Do you prioritize your constituents’ needs? Perhaps you choose to issue lengthy and complete reports that provide details surrounding your audit objectives, scope, approach, risk assessment, business background, findings, and recommendations. Or do you provide one-page reports, focusing only on strategic issues? Do your audit reports focus on exceptions? Or do they focus on management resolution to findings? Are they aimed at executives? Or line management? Or maybe they are primarily intended to document your competency for regulators and external auditors.
Similarly, your audit planning might demonstrate a focus on consistency versus agility. Is your audit plan virtually the same from year to year? Do your audit steps carry over, without change, from one audit to the next? Are audits performed in isolation? Or do your lead auditors collaborate, share findings, and gather insights from other auditors?
Most of these considerations are neither right nor wrong. But they are all visible signs that hint at your approach to providing internal audit services. These are components of your brand. They help show others who you are and what you believe in.
Accuracy and consistency are key. You don’t want to proclaim one thing but do something different. And you don’t want discrete aspects of your brand to seemingly contradict one another.
Enhancing and protecting your brand
This has been touched on throughout this article.
It’s important to retain a focus on your brand over time. There are only a handful of ways to build it. But there are a million ways to destroy it.
To recap – your brand is worthless if you’re not really adding value … to someone. So, stay focused on who you’re serving. Talk to them. Assure that you know the types of problems (or opportunities) that are important. Don’t assume anything.
Second, always be differentiating yourself. What is your unique positioning? Why are you the best option to solve certain problems?
Third, keep revisiting your brand symbols. These are the specific things that are visible to others. This might include your audit reports, your follow-up to outstanding audit issues, your summary reports to the Board, your budget requests, and the tone of your (and your team’s) emails. Are you maintaining consistency? Are you adhering to your chosen positioning?
Summary
So, that’s it. Find your positioning. Create your brand.
To reach their potential, internal auditors must understand their unique value potential, be able to communicate this value to others, and (most importantly) demonstrate this value through their work – every day.
Do these things and your influence will be huge.
