So I am on a theme of thinking about internal audit, as a profession, marketing itself. Why is the profession so bad at marketing itself? Internal auditors at the big four professional services firms are good at it. Add four blue blocks, a few coloured letters, or even a green dot, suddenly messages an in-house internal audit team have given, professionally, over years to a management team are much clearer and more in need of being listened to.
Why is that? The teams in the big four are, of course competent. They have good talent. They are trained accountants (in the main) They are, however, primarily youthful, have an unhelpfully over- systemised (the system depends on the professional services firm) method of internal audit, lack context-specific knowledge of the client, are potentially less independent being conflicted (through fees), and generally come from a financial and business background (which can be both helpful and unhelpful). I have worked in the big four and in-house and think both can work well for different clients but would not necessarily accept a big four opinion as being more valid or of better quality than an in-house team’s.
I wonder if it is because it is easy. A bit like buying a coffee. We all know a Starbucks (other coffee brands are available) coffee is a great coffee. We feel comforted by its brand. Its logo. Its packaging. Just as academic authors like John Gerzema and Ed Lebar are predicting the end of brands and branding (or at least those that do not make super brand status) in their book The Brand Bubble, so the internal audit branding through the big four seems to be alive and well. If we go back to the original purpose of brands, they were to comfort and assure the customer of a product’s quality, safety and its fitness for purpose. Gerzema and Lebar argue that barriers to production and good quality production (primarily capital) are no longer there, so brand differentiation is much more difficult to achieve. They also argue, if super brand status is achieved, like Apple or Nike, then it can value net assets at many 100s of times book value.
So internal audit is difficult to buy, as people, and I would include particularly, senior management, internal auditors and the profession itself, are not clear what ‘good’ looks like. Given internal audit is, therefore unknown, are people not buying a good service, merely buying a professional brand? So because internal audit has a green dot or blue block or coloured letters, no matter how thin or bad the report is (or how similar to an in-house team’s work), it must be good. Would this work for Apple, a super brand? If an Apple computer was okay but not good, would people continue to purchase and pay the premium? Perhaps 2-3 years ago, yes, now I’m not so sure.
So how do we as in-house internal auditors improve our brand? Be less approachable, less familiar, less available? Or perhaps we need sharper suits, more professionally glossy reports? Wizzy Powerpoint presentations? More credible audit committee presentations?
I think the answer does lie in part in better branding. The barriers to glossy production are few. Nice suits are not too expensive. Being a little remote and cold does not do any management team too much harm, one can be friendly without being friends (btw we are supposed to be independent in any case). In house teams perhaps need to be more ‘professional’. The answer also lies in getting our customers, stakeholders and service users to understand us better. To understand the really rather demanding professional standards we work to. To really engage in a more nuanced and complex manner with the real complexity of an organisation that we as internal auditors, perhaps all too well, summarise simply for senior management and the boards we work to.
I suspect the real solution, however, lay in building the profession’s super brand. This will never happen whilst, instead of recognising we are all one distinct and high-quality profession and professionals, we pit in-house versus professional services’ provision models against each other. Of course both can be successful and are appropriate in different contexts. There can also be many hybrid versions in-between. But, at our core, we are people working in a complex world to assist management teams in dealing with their business risks and improving governance, control and risk management.
If Apple did internal audit – what would it look like?…