As we know, management is about formal authority, whereas leadership comes from moral authority. Leaders derive moral authority when followers trust them. Hence, the crux of people management is building a relationship of trust.
Auditors and risk managers face some serious challenges in building trusting relationships with business teams. Frequently, when the business teams hear an internal auditor is coming to meet them, the reaction is – “Why is he coming? When will he go?” Auditors are unwelcome, as business teams view them suspiciously. The relationship is as healthy as that of a divorced couple sharing parenting responsibilities. Aha, we base marriages on trust and it reminds me of this one.
A man took this beautiful finance to his attorney to sign the pre-nuptial agreement. The attorney looked her over, smiled and asked the man – “Do you trust her?” The man replied – “With my life, but why bet my money on it”.
As is obvious, the trust levels are deteriorating in most relationships. However, auditors and risk managers cannot use that as an excuse. Internal auditors enjoy very low confidence level with business teams. A recent PWC State of Internal Audit survey stated that just 45% of the respondents were comfortable with internal audit’s management of critical risks, though 74% had enterprise risk management in place. Another point to note was less than 50% believed that their internal audit function was well coordinated with risk management functions. The scenario is dismal; there are communication gaps with business teams and risk managers. The focus has to be on building better relationships.
Auditors must look at David Maister’s trust equation. According to him:
Trust = Credibility + Reliability+ Intimacy
Let us see how the four elements affect auditors’ relationships with business teams. More important is to determine a way to build trust-based relationships instead of transactional relationships.
Establishing credibility is about meeting technical and emotional aspects. The technical knowledge of auditors and risk managers qualify them guide the business teams. If they lack relevant qualifications, experience and knowledge, the relationship of partner, mentor and advisor is doomed. However, all the knowledge and experience will fail if the business teams believe that auditors and risk managers do not walk the talk. An auditor cannot pile on the free launches offered by business teams, and in the same breath talk about ethics. Here, to build trusting relationships, each auditor and risk manager in the team has to establish personal and professional credibility.
People need to know where a person stands on various issues to develop a comfort level. They need to perceive the person as predictable, just, fair and ethical in his/her dealings. The business teams fear auditors and risk managers; a politically motivated report can build up a storm. The principle of issuing accurate, apolitical and balanced reports goes a long way in building a reliable reputation. Without it, there is going to be a fight, us against them mentality with prevail between business teams and auditors. The win-lose situation created will result in business teams viewing auditors and risk managers as the bad boss archetype.
This is about sharing confidences and deepest darkest secrets about the professional life. This is not about personal life. An auditor and risk manager delve into the negative side of business – identify shortcomings and high-risk scenarios. Depending on the organization culture, these findings have an indirect impact on career development, promotions, compensation and hiring and firing of business teams.
Hence, business teams will stay silent and it is not enough for auditors to say – “I have an open door policy”. Ethan Burris in his research found that – “employees who speak up and challenge the status quo are viewed as less competent, less dedicated to the organization and more threatening compared to those who support the way things are. They are also rated as worse performers, and their ideas get less support.” No one is going to open up and identify the real risks and concerns, unless some level of intimacy is established. Hence, auditors and risk managers need to show emotional honesty to break down the barriers of communication.
When people view a leader entering into relationships primarily to serve his/her own self-interest, then this denominator will wipe out the positives of the three elements in the numerator. The use and discard policy of transactional relationships causes engagement and commitment to plummet. In this case, as Burris says – “It can be scary to open up the lines of communication, because you don’t know what’s going to come out of it.” Thrusting relationships will not form when business teams perceive risk managers as serving their own agendas at their cost to win brownie points and laurels. They need to be transparent, altruistic and balanced in their approach.
An auditor went to do a stock take of a weapons factory. The inventory manager hated the auditor. In the previous report, auditor had made many disparaging comments about the manager’s work. This time, the inventory manager in a pleasant voice said to the auditor –“Please don’t touch this, it is dynamite. The manager held the next bin and the manager said – “Oh that is just anthrax”.
Rather than face a similar situation, it is much better to follow Blaine Lee Pardoe’s advice – “When people honour each other, there is a trust established that leads to synergy, interdependence, and deep respect. Both parties make decisions and choices based on what is right, what is best, what is valued most highly.”
- PWC- State of Internal Audit Survey
- David Maister – Trust Equation
- HBR – What is really silencing the employees – Ethan Burris