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Adding Value to the Value-adding Value We Add

Blogs Mike Jacka, CIA, CPA, CPCU, CLU Sep 15, 2020

I know I've told this story before. But it's a good one and it's worth repeating.

And it is going to be the basis for a realization I just realized that speaks to the rhetoric internal audit uses and how poorly we market ourselves.

(And before telling the story, I think a warning/disclaimer/clarification is warranted. It should probably be repeated every time I talk about anything to do with my days at Farmers Insurance, but I'll reinforce it here. I retired from Farmers more than five years ago and my experiences with the company span 30 years. So, anything I talk about, as well as many of the people, have changed. None of the stories I share are meant to reflect anything currently occurring in the department or the company. They are meant to show how things might be done better or, as in this case, be a cautionary tale of how things can go wrong.)

When the buzzword "added value" began to make its rounds in the profession, our audit department jumped on it like a fraudster grasping at his final alibis. The epiphany surrounding "value add" led to changes in our department — some good; some not-so-good. One of the most painful was a proclamation that every audit report must contain an additional section that would demonstrate a "value add" from our audit work; a section literally titled something to the effect of "Value Added." It was intended to show the little bit extra we had provided/accomplished.

A scrambling and scurrying of the internal audit staff began, one unmatched since the olden days when we had to move from just reporting issues to coming up with solutions. Every one of us was suddenly trying to figure out the additional value provideed by each audit.

We reached our nadir when one of our reports indicated that we had added value by having the department remove a line from an electronic form. This astounding discovery was included in our report to the audit committee. What was overlooked/not reported was that use of the form was going to be discontinued in the next few months.

Okay, a pretty obvious misuse of the concept, right? And yet …

Internal audit has glommed onto the phrase "add value" like it was Willy Wonka's golden ticket and we thought we were going to win the chance to ride in a glass elevator that would take us to previously unsuspected heights. We wield it like a sword. We spew it at the earliest opportunities. It has become the rhetoric of our daily conversations. And we start building our marketing foundations on its sandy bedrock.

Now, don't get me wrong. The idea of us understanding our value and how we provide value is a good thing. In fact, a while ago The IIA put out a two-page piece titled The Value of Internal Auditing for Stakeholders (PDF). It laid out the value stakeholders should expect from internal audit and still serves as a good place to start for any internal audit department trying to figure out how to market itself and articulate value to its stakeholders.

But what some departments seem to miss is the difference between the internal and external uses of the term "add value."

When we take this phrase out into the public — when we begin literally using the words "add value," when a part of the way we market ourselves includes actually saying that we add value, when we begin to sell this as our raison d'etre — that is the point at which we are no longer selling our services, but instead are selling words. Why should we expect this to work? When was the last time you bought a product whose only claim was that it was going to make everything better — that it was going to add value? And, perhaps more importantly, is there any operation in the organization that is not designed to add value?

Accordingly, what message do we send when we proudly and prominently pronounce that we add value? What does such a rhetorical statement mean?

Oh, that's right. We know exactly what it means. Add value is defined in the glossary of the International Professional Practices Framework (IPPF). In fact, it's the very first entry. (Not because of a specifically desired emphasis; just a quirk of alphabetical entry.)

And it's even right there in the Definition of Internal Audit: "… an independent, objective assurance and consulting activity designed to add value and improve an organization's operations."

What, value does the phrase "add value" add here? Try it out after removing that phrase. "Internal audit is an independent, objective assurance and consulting activity designed to improve an organization's operations." Is it me, or does that make more sense than when we throw in buzzwords that add nothing?

The problem, as previously noted, is that we have placed so much emphasis on this particular concept that we begin using "value add" in our external messaging.

Yes, hammer the phrase home internally. Hammer home how we add value. Hammer home the way "add value" is defined in the IPPF. Hammer home that our value is only added when we are objective; when we are independent; when we are relevant; when we contribute to efficiency and effectiveness; and when we improve governance, risk management, and control processes. But do not let the phrase slip beyond the department

When we at Farmers Insurance internal audit first added the value-add section to the report, I was kind of surprised. Not just surprised that we were adding it. (And, trust me, this is one I spoke out against.) But surprised that our clients were not screaming, "After all these years, you're finally going to show me how you are adding value? What were you doing before?" followed by our being unceremoniously kicked out by the clients, laughingly ridiculed by the executives, and summarily dismissed by the audit committee.

You want to talk about the value you will add? All well and good. But quit trotting out value-add service as if it were a new idea. We've always added value. (Our department was adding value the entire 30 years I worked there.) And we always will.

Ultimately, the concept of value add can be a crutch. However, if the concept is understood and embedded in what you do — not used as a handy buzzword but a principle that is foundational to the department — then it is part of a greater message that sells the value of and need for internal audit.

Do not say it — show it.

Mike Jacka, CIA, CPA, CPCU, CLU

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