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Why should auditors create short-term wins?

The Ohio Auditor of the State announced last week its “September Auditor of State Awards”. It appears each month that Keith Faber is creating short-term wins for a number of his stakeholders. He is pointing out to the people of Ohio where individual units within the State Government are meeting a set of criteria. I would ask internal audit training students: “Why is he doing this?”

The simple reason is the Ohio Auditor understands how to help an audited organization to change, and the Ohio Auditor knows one of the most important change agents is to create short-term wins for the audited organization. I am sure the Ohio Auditor is acting on a tactical basis within the long-term strategic plan for the Ohio Auditor function. It is using a proven methodology to foster organizational change within the agencies it is responsible for auditing.

The Ohio Auditor has within its mission statement…“makes Ohio government more efficient, effective and transparent”. These strategic goals for the Ohio Auditor require it to help the Ohio government agencies to have as one of its values continuous improvements. To accomplish the strategic goals of being more efficient, maintaining effectiveness and being transparent, the Ohio government agencies have to have explicit values that lead to continuous change and improvement.

How many accountants like the idea of changing?

Over sixty percent of the general population don’t like to leave their comfort zone or do so only occasionally. Having been in the professional accounting world for over fifty years, I think most members of the accounting industry are even more likely to resist change.

If your mission as an internal auditing organization is to help your organization to continuously improve, what do you have to do? You have to have a long-term strategic view that change is necessary. Next, you have to plan and execute all your short-term tactical activities to assist the organization after each audit engagement to make short steps on the change road to long term improvement.

Why do organizations need to continuously improve?

Each organization has a distinctive corporate culture. The elements that create a corporate culture are the organization’s mission statement, explicit values, and business model. These three elements of the corporate culture have developed since the beginning of the organization. There are always issues in any corporate culture.

Internal audits need to highlight the root causes for the issues that are reported within any audit report. These root causes have to be addressed and the culture changed any long lasting improvement to work.

Currently, there are numerous external forces that are challenges for all business models and explicit corporate values. An example is that last week PWC announced that its staff can live anywhere as long as the audit work gets done. That is a major change in its explicit values from back in the day. So as this pandemic plays out, the changing external factors will in turn have dramatic impact on all three principal elements of all corporate cultures.

A continuous improvement cultural value is one that challenges employees and leaders to go beyond their comfort zone. By having an explicate value of continuous improvement, organizations can challenge their members to improve their skills and knowledge. This will ultimately allow the organization to stay one step ahead of its challenges.

How do you get an organization to change?

Over the years there have been a number of methodologies suggested by experts to drive organizational change: Prosci ADKAR change model, Accelerating Implementation Methodology (AIM), John Kotter's Eight Steps to Change Model, Kübler-Ross' change curve, Bridges' transition model, and many more.

Dr. John Kotter, a Harvard Business School Professor, published in his book LEADING CHANGE an 8 Step Model of Change. Dr. Kotter is the one that I personally identify with based on my long-term commitment to changing things.

Dr. Kotter’s Eight Steps to Organization Change

The eight steps that Dr. Kotter has championed are:

- creating a sense of urgency,

- forming powerful guiding coalitions,

- developing a vision and a strategy,

- communicating the vision,

- removing obstacles and empowering employees for action,

- creating short-term wins,

- consolidating gains,

- strengthening change by anchoring change in the culture.

Dr. Kotter’s Step Six: Create Short-Term Wins

Dr. Kotter points out that nothing motivates more people than “Winning”. Throughout history people have always tried to create winners. A good example is: Why do we call a person who can only hit the baseball one time in three a “300 Hitter”? We want to make them out as a “Winner”!

Give your auditee organizations a taste of victory as many times as you can during any audit project. Emulate the Ohio Auditor by giving out wins! As the Ohio Auditor is doing within a short time frame, you will want to have some "Wins" that the entire auditee staff can see and hear. Without this, critics and negative thinkers might hurt an internal audit function’s progress to create a stronger and stronger explicit value of continuous improvement.

Internal auditors need to create within their audit planning short-term targets for improvements in the corporate culture – not just long-term goals. Each internal audit project needs to have small targets that can be achieved as the results of their audit work. An internal audit team may have to work very hard in the planning phase of an audit to come up with these targets. But remember each "win" that you produce within an audit can further motivate the entire organization.

In my teaching internal audit training events, I cover the following:

  • Look for sure-fire internal audits that can be accomplished without help from any strong critics of the change.

  • Choose the internal audit projects that can lead to achievable management action plans. You want to be the catalyst that leads management come up with management action plans that can be justify and create “wins” for management.

  • Thoroughly analyze the potential pros and cons of your target audits. I have found it takes several years to get an organization to embrace an active program of continuous improvement. If you don't succeed with an early internal audit project goal, it can hurt your entire change initiative.

  • Make sure that the internal audit function never takes credit for the implemented changes that create value. If the internal audit function is the catalyst to creating positive change, people will figure that out and reward internal audit for it.

Everyone loves to be a “Winner”

It’s simple. Everyone will always loves to be a winner. But, why is winning so important to us? Here are the three reasons why winning is so attractive:

- It Feels Good

- You Become Immortal

- The Perks

There is nothing like the sense of accomplishment for members of an organization. Positive reinforcement is the key to establishing new productive behaviors for members of an organization. It is always better to have other people recognize and celebrate a business units achievement. Each small group can build confidence with a win, and of course, get major bragging rights.

When a loser becomes a winner, they cash in on the “Underdog Effect.” A business function is suddenly someone who grabs the organization’s attention. At the same time, every other group within your organization can relate to these “Winners”. Any auditee seeing another functional group rise from the bottom and become a “Winner” causes the rest of the group to look for taking that same emotional journey.

The title of winner wouldn’t be complete without the “stuff,” tangible and intangible. Winners get a variety of perks that come with their titles. People even crave the feeling of getting noticed within the organization for being that “Winner”.

The Opportunity

The internal audit function must have as one of its goals to become a “Winner” by providing the catalyst for their auditees to become “Winners”. Each internal audit function has a chance to do something even greater for the organization: creating continuous improvement by embracing change.

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