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Mind of Jacka: Flocking and the Value of Internal Audit

Blogs Mike Jacka, CIA, CPA, CPCU, CLU Nov 24, 2020

I have been known to incessantly rail on about the need for internal audit to be a part of the team.

Snippets of such railings can be found as recently as last week and last month. This issue of being part of the team becomes problematic for some internal audit departments because they feel the need to set themselves apart, clinging to the idea of independence as though they had published their own personal declaration of independence.

Independence and objectivity are what differentiates us from other departments in the organization. But that does not mean we build secret audit reports, cloistered like monks in our slightly scuffed and worn ivory towers, guarding the ingredients with our mortal and immortal souls.

So, yes, we have to be part of the team. And we have to be recognized as such. But it is also important to show why that team needs us; we must be able to show the value we provide that they can't find anywhere else.

Let's be honest. Anyone in the organization could do what we do. As mentioned, our super-powers are independence and objectivity, and we have to ready to wield them as necessary. However, as people look at the department (and the associated budget), independence and objectivity are pretty esoteric sells.

Here's the tall order. We have to be part of the team, we have to be better at what we do than anyone else, and we have to be seen as being worth the expense. Oh yeah, it wouldn't hurt if people thought of us as something special, too.

In the book Predictability Irrational (a fascinating book that is well worth your time as it explains the illogical but real reasons for why we make some of our decisions) author Dan Ariely talks about Starbucks. He discusses how someone might make the choice to visit a Starbucks store. One reason relates to "flocking".

When we see a lot of people experiencing something (for example, we see a line of people waiting for anything), we are compelled to try it. This is the concept of flocking and it explains how the popularity of Starbucks has led to the increasing popularity of Starbucks. (And this isn't the point to argue whether you like Starbucks or not, just follow the logic here.) Therefore, as Ariely puts it, you begin to be willing to pay the extra price for Starbucks over, say, Dunkin' Donuts. (And I'm not disparaging Dunkin' – just using the same analogy Ariely uses. And I do love me some Dunkin' maple donuts. Mmmm... Okay, I'm back.)

And the more you choose Starbucks, the more you are creating a personal herd mentality – you become your own members in the line. You create your own flocking. And, once you have accepted the price of the coffee, you explore options – Caffe Americanos, Macchiatos, Frappuccinos, Flat White (the greatest of the coffee drinks – seriously, take my word for it. And with an extra shot of espresso. Mmmm… Sorry, I'm back, again.)

All well and good. But how does flocking get started? Ariely considers the question of how anyone was drawn into Starbucks in the first place. Why spend the extra money, even if the coffee is better? He describes how Howard Schultz, former CEO of the company, worked to separate Starbucks from other coffee shops. He built an ambiance in the shops. (One that, in my opinion, no longer exist. But I'm trying to keep my asides to a minimum of sixteen per day.) The smell of roasted beans, the sound of espresso machines, a selection of pastries that weren't found in other coffee shops. He built an ambiance that drew people in and made customers feel the higher prices were worthwhile.

And the coffee was pretty good, too.

Success came by providing an experience that customers could not get from any other place where coffee was sold. And that experience drew more customers. And that built the desire of others to join the line.

Which brings us back to internal audit. (About time.)

Let's face it. If most people knew what it really costs for us to exist, they wouldn't think it was worth it. Sure, we provide assurance, but do our customers really know what that means? And is it something they really want to pay for?

That's why it behooves us to make sure that, while we are still seen as part of the team, we build an experience that our clients cannot get anywhere else. And this doesn't happen by telling them we provide an important service that is sometimes required by legislation or some such justification. That is the cod liver oil approach to selling internal audit. Instead, we have to show a value we can provide that no one else can. And we have to do it in such a way that people experience the unexpected with internal audit, eventually becoming part of the flock that comes to our department.

A good friend and co-worker was put in charge of a new department, a part of internal audit, in our Phoenix Regional Office. She was determined to take the steel-case desk, dingy-tan-walled offices that were the norm throughout the company and make her own Starbucks vibe. (Starting to see a theme here?) She and her staff came in on the weekend and painted the walls. They bought their own desks. The put in different lighting. They made an office space that was their own, and an office space that was welcoming to others. Yeah, Building Services wasn't happy, but everyone came to grips with it. (Which brings up the old adage, never ask for permission, only forgiveness.) Going to work become a much more positive experience. And people visited because they enjoyed being in that presence.

We did similar things when I was in charge of the Phoenix Regional Auditing Department. We had an annual open house. We wrote on our walls. We had a fundraiser where we drew bricks on the wall outside our office and people paid to draw in them. We maintained a collection of coffee pots. (Yeah, a theme.) We put up post cards we sent to ourselves from all over the world. And employees were drawn to the office because they felt comfortable. And the word was spread that internal audit was a nice group of people to know. And, figuratively and literally, a line of people began to form outside the office.

But the next step was probably the most important. When those people became involved with the department – when they experienced what we did (audit and assurance, not just the coffee from the open house) – they got a top-quality product. The successful model we accidently fell into was to bring people in, give them something they couldn't get elsewhere, make it worth their while, and build raving fans. And as those fans came, others saw the line and decided they wanted to see what it was all about. And more fans were made. And others saw the line and wanted to join. And so on.

A few of you are probably saying "All well and good for the rank and file, but this couldn't work for the executives." Not so quick there McGraw.

When executives from our home office would visit the Phoenix Regional office, they often came to see internal audit. Yeah, part of it was to see the something different we had built. (And let's not talk about the visits from the executives responsible for Building Services except to say that they managed to get over themselves.) But part of it was because the executives in our office had told them about the value we were providing.

Raving fans.

And there is another often-overlooked concept. You never know where the next executive is going to come from. Some of those raving fans that we had built over the years became important. Just a few examples: a VP in Sales, a VP in Claims, and even a Chief Marketing Officer.

Building raving fans by being different and by providing value.

Yes, internal audit is the controls, risk, and process expert. And, yes, we should distinguish ourselves through independence and objectivity. But none of that is worth anything unless we can get clients through the door in the first place. Only when we get them in the door can we start selling that expertise, our independence, and our objectivity.

Of course, by the time we start that particular sales job, they should already be raving fans. We should have been providing value long before we try to explain the nuances of what makes us special. Independence and objectivity should just be the pumpkin foam that makes them love us more.

Mike Jacka, CIA, CPA, CPCU, CLU

Co-founder and Chief Creative Pilot, Flying Pig Audit, Consulting, and Training Services (FPACTS), based in Phoenix.