In March I published my fourth book, Agents of Change: Internal Auditors in an Era of Disruption. Thanks to sponsor AuditBoard and publisher The Internal Audit Foundation, my coauthor, Robert Perez, and I were able to fully explore the concept of internal auditors as agents of change. With the input and insights of more than 600 chief audit executives from around the world, we constructed the profile of a powerful 21st century change agent in the internal audit profession.
From the outset, I wanted to build on the concepts I had explored in my earlier books – The Speed of Risk: Lessons Learned on the Audit Trail 2nd Edition and Trusted Advisors: Key Attributes of Outstanding Internal Auditors. I began the Agents of Change project by offering a definition of an internal audit change agent: men and women who are “catalysts for transformation that creates value within the organizations they serve.”
The first step in validating the definition was to survey the profession. As I mentioned, more than 600 CAEs weighed in, and an overwhelming 90 percent believe it is appropriate for internal auditors to be change agents. More than two-thirds of the respondents believe that internal audit should partner with executive management to drive change at every opportunity or use assurance and consulting to enhance value and advocate for change. The collective wisdom of the 600+ respondents also yielded four shared attributes of great internal audit change agents: strong business acumen; strategic thinking; relationship centricity, and an innovative mindset.
In the wake of the highly anticipated publication of Agents of Change, I have been asked “why now?” Why a book about “change agents” when the world is simply trying to hang on in the wake of a year and a half long pandemic? My answer is simple: the disruption the world is undergoing makes this precisely the right time to publish this book. It is much easier to drive innovative change in a highly volatile environment than in one that is staid and steady. I believe that the innovative spirit of internal audit change agents is fueled by disruption.
In the book, I discuss the innovative mindset when it comes to internal auditors:
Innovative thinking does not come naturally, especially for those of us in internal auditing. If you’re not an innovator, don’t feel badly; you are not alone. Traditional education systems focus on teaching through lecturing and learning by listening. They measure achievement in test scores rather than examination and debate. While such long-held, global teaching practices do not openly discourage innovation, they don’t do much to nurture it. But what would happen if we began with a different proposition? What if we could unleash the potential of anyone to innovate?
That is precisely what Ami Dror did when he and his partners began a company called LeapLearner in Shanghai, according to a recent Forbes article. The company taught children computer code and challenged them to create a video game. Dror’s central premise was that the trial-and-error process of writing lines of code and testing them by hitting “execute” would help break down barriers to innovation. We can take three valuable lessons from LeapLearner’s approach.
Free yourself from the fear of failure. Coding allows for almost instantaneous feedback, which creates a comfort level with asking and receiving feedback and direction. It also helps with developing critical thinking and problem-solving skills, all while teaching children to innovate.
Create a culture where innovation is rewarded. The LeapLearner process has a built-in reward. Successful innovation equals a cool new video game. In addition, Dror encourages innovation as an employer by rewarding employees who take risks.
Make risk-taking a more consistent behavior. This concept may be anathema to many in a profession centered on managing risk, but it is critical to breaking away from traditional approaches that often dissuade asking for feedback and rewarding risk taking and “outside-the-box” thinking.
Dror received a significant affirmation for his approach to innovation just three years after opening the doors at LeapLearner. He was awarded China’s prestigious Yicai Brilliant prize in 2018 as one of that nation’s top entrepreneurs.
I have long believed that for internal auditors, “innovation must start at home.” A major source of value we generate is the promotion of innovative change within our organizations — yet, paradoxically, as a profession we seem to struggle with innovation when it comes to doing our own jobs.
Despite the fact that almost all the processes we audit, regardless of the industry, have been transformed in recent decades, some internal auditors perform their work today in much the same way they did when I joined the internal audit profession more than 45 years ago.
Even as internal auditors enthusiastically talk up the benefits of positive change for their clients, they typically go about their business as creatures of habit, focused more on controls than on innovation. Controls are important, but a singularly controls-focused strategy does not add the most value to a company.
Internal audit currently operates in a global business environment of increasing competition, technological advances, and downsizing. As a result, demand for internal audit’s services is growing much more quickly than its capacity. Given these conditions, the profession’s traditional practices may not be adequate. To stay relevant, internal audit needs to at least match the speed of the organizations it serves.
Because the demands on internal audit grow faster than its resources, I am convinced one of the best opportunities for improvement is adding to internal audit’s capacity and ability to deliver value without busting the budget. I like to think of strategies in these areas as capacity multipliers that can elevate the level of value we deliver and enable us to exceed our stakeholders’ expectations.
Leading internal audit departments have been leveraging capacity multipliers in three main areas: 1) strategic staffing solutions, 2) transformed processes, and 3) technology applications.
Whether they choose to deploy their innovative mindsets in their own houses (the internal audit department) or on behalf of their clients, internal audit change agents have a hand in choosing what change should look like. That is a powerful and exciting thought, and why a disruptive environment is such a rich one within which to operate. Too often we think of disruption in terms of risks. Internal audit change agents also recognize disruption as a source of opportunity.