Talent management – make internal audit cool again A&R magazine May Jun 22

 

was excited when the offer we made to a talented Nigerian-born recently qualified internal auditor was accepted. I thought she would make a great addition to our team. I was therefore disappointed when the big four audit firm she was currently with made her a counter-offer that she couldn’t refuse and we couldn’t match.

I was again disappointed when, having hired an outstanding qualified accountant with a first-class degree in economics, he was offered a salary that we could not afford to pay to help on a temporary assignment with a big four firm.

And when a recent bilingual recruit with international experience in Germany asked if he could live 800km away from our Munich office in Rostock, I had little choice but to agree.

These stories are likely to be familiar to anyone responsible for hiring a world-class internal audit team. What is going on? Why is it suddenly so hard to hire and retain the right talent? And what can we do about it?

One answer comes from Bradley Alexander at European global specialist Internal Audit & Risk recruitment firm Hanami International.  According to Alexander, audit used to be “cool”, but “it isn’t any more”. He believes that 80 per cent of the target audience doesn’t realise that internal audit could be a great stepping stone to a senior executive role, as well as offering opportunities to see the world, grow your network, and progress internally.

However, the main challenge faced by every recruiter today is a shortage of great candidates. All chief audit executives (CAEs) are looking for strong candidates with good English (and, preferably, a second or third language) and experience in a relevant industry, who are also a good “fit”. There are simply not enough to go around.

On the plus side, he says that Generation Z (and increasingly Generations X and Y) expect flexibility and variety, so many will enjoy being able to control their own schedule, working from home a few days each week and the wide mix of work offered by an internal audit role.

Craig Longland, global director at The Audit & Risk Recruitment Company, sees similar challenges. “Recently qualified internal auditors are acutely aware that their skills are in high demand and that it’s a ‘sellers’ market’,” he says. He points to increasing expectations that a job will offer flexibility and a good work-life balance, and stresses the importance of an employer’s culture.

In addition, he focuses on candidates’ development opportunities. “Recently qualified candidates are ambitious and think about the long term,” he says. It’s vital for employers to show candidates how they will be able to learn and progress
using real examples of how previous team members have developed in their careers, either in internal audit or in other areas of the business.

Perhaps the most telling change is to the interview process itself. In Longland’s view, “the successful interviewer is the one who takes time to explore and understand all the candidate’s motivations and can match these to the opportunity”.
The strongest potential internal auditors no longer ask “can I have a job?”, but want to know “why do you think I should work here?”.

How did we get here?

Why has this happened? For a start, there is an ever-shrinking pool of candidates with ever higher expectations. This is a problem currently affecting many professions, sectors and geographies. However, there are some issues specific to internal audit, where a shrinking pool of candidates is matched by an increasing list of risks and expectations from boards and audit committees.

First, consider the comment that internal audit is not “cool”.  There is probably some truth to this, at least in the UK. 

Business Secretary Kwasi Kwarteng recently said: “When big companies go bust, the effects are felt far and wide. It’s clear from large-scale collapses like Thomas Cook, Carillion and BHS that Britain’s audit regime needs to be modernised.” He was talking predominantly about external audit, but this is where much of the internal audit talent pool starts out. The blame apportioned to auditors (internal or external) in these failures makes it hard to sell audit as the “cool job you always wanted” to bright 20-somethings fresh out of university courses.

Second, if we’ve learnt one thing from Covid it is that we can achieve a lot more virtually than we thought possible. In a post-Covid world, many Zoom-literate employees find it harder to accept travelling to an office every day.

Third, talented recently qualified professionals are acutely aware of their potential, and this makes them more ambitious and career-orientated – and very cautious about making the right moves (this may have always been true, but it has been exacerbated by the previous two changes).

These candidates are being invited to enter our profession at a time when boards and audit committees are navigating a world that is more volatile than any of us have seen before. We are bombarded daily with new existential risks to our businesses – global supply chain disruption, extreme cost volatility, fraud and theft made even easier by remote working, data privacy, cyber disruption, labour shortages and war.

So, while we cannot find teams to audit our risks satisfactorily, the risks are growing and metamorphising in ways that we didn’t imagine two years ago. 

What can we do about it?

It is better to focus on what can be changed, than on what cannot. The world around us is out of our hands, as is the pool of talent available. Instead, we should focus on our teams and make the internal audit environment a compelling place to work. To achieve this, I believe there are three main elements:  the “Social Contract”, the “New Normal” and the “Human Element”.

The Social Contract should focus on what we represent as a company, how we treat our employees, our customers and society. These are as important now as the corporate brand, and it is crucial to ensure these factors are repeated frequently and often to the team, highlighting the positive aspects wherever possible. 

For example, at LKQ we are proud that we recycle more cars than any other business, so we repeat this message frequently to the team. This is the “why” for our work.

The New Normal is the “how”. A couple of decades ago, internal audit teams had relatively fixed locations. Internal auditors might travel 30-40 per cent of the time, but would go to an office every day while not travelling. Projects tended to be large and long, perhaps up to two months. And, until recently, the hierarchy of the team was rigid – audits were conducted according to a plan defined by the CAE with the audit committee based on the risk assessment with little direct contribution from the team.

All this has changed. Modern audit teams should huddle nimbly, alighting like a flock of birds in different groups on different topics. Instead of a sequential long-project approach, the team should provide an agile spotlight on various areas of the business that matter in the moment, offer advice, and then move on. The voices of all team members should count, and projects should be run by different people in a fluid-leadership model so that everyone gets a turn to lead while the rest support them.

Last, the Human Element. These new working styles require trust. If internal audit managers worry about what the team does at home, or where they are, then it won’t work. Teams need to be at a high level of maturity and need to offer innovative personal development benefits such as earned sabbaticals and guaranteed training support. An open dialogue starts with “how are you feeling today?” rather than “what are you doing today?”.

So, although it may feel as if internal audit senior managers and their recruiters are enduring a perfect storm of diminishing interest in the profession, a fight for talent, an increasing and fluid risk environment, and rising expectations, we have a real opportunity to change. By focusing on what really matters – the why and the how and the human element, demonstrating genuine care about teams and their lives – we can achieve three things. We can turn internal audit into a compelling career choice, we can demonstrate a new highly effective model of working to other parts of the organisation, and, I hope, we can make internal audit “cool” again. 


Richard Brasher is vice-president, corporate audit, at specialist automotive parts organisation LKQ Corporation, which operates in the US, Europe and Asia.

 

This article was first published in May 2022.