The 5 P’s of QARs: Performance

While last’s week’s blog series of “The 5 P’s of QARs,” focused on Planning, this week I will be discussing the second P: Performance.

Just as one size does not fit all, one metric may not demonstrate the Internal Audit Activity’s value to the organization. There isn’t a magic number when it comes to metrics (although when pressed, I say 8). Instead of focusing on the magic number, ask yourself:

•             What is valued in your organization?
•             Do you have a measure for each of those values?
•             Do you have a mix of qualitative, quantitative, and strategic measures?

Observations of Common Pitfalls

While the above questions will help your organization discover key metrics, a few observations can help your organization identify if you are falling into some common pitfalls while measuring performance.

Insufficient Measurements

Time and time again, I have seen organizations fall into the trap of using insufficient Key Performance Indicators to measure the overall performance of the Internal Audit Activity. Typically, they are only quantitative. The entire picture of your organization’s success and performance is highlighted through many types of measurements, not just one. Measurement activity and outcome measurements are also often not robust enough or consistently measured.

Same Old, Same Old

Similar to only using quantitative KPIs, organizations commonly use the same metrics year after year. Naturally, there aren’t any demonstrations in greater efficiency, data analytics to gain more coverage, nor are there any changes in how the work is to be accomplished. As we learn to do more with less, I would expect certain KPIs to change or even be replaced. By continuously enhancing our value to meet and align with the organization’s goals, KPIs will likely change over time.

For example, a previous client had a report issuance within 60 days that was the same for over 10 years. Had they utilized technology and a more mature environment, they could have reduced the percentage, therefore increasing performance.

The Problem with the Plan Complete Metric

Without exception, I see one performance indicator reported consistently to the Audit Committee or Board: The Plan Complete metric. In today’s ever more complex world and pressure to do more with less, this is not a sufficient measurement for performance success.

Instead, focus on additional qualitative measures that are more concrete, such as:

• Key Stakeholder Satisfaction
• Financial Value
• Budget to Actual
• Risk Identification
• Timeliness of Issue Resolution
• Audit Coverage
• Are the findings appreciated by management?
• Repeat Findings
• Reissuance of Report
• Unplanned IAA
• Skill Sets and Credentials 
• Succession planning

The Forgotten Link: Communication

After investing so much time and energy into measuring your organization’s activity and performance, why not share your successes with the key stakeholders? By reporting your results to the key stakeholders, this keeps you both in mutual trust and communication. This is also a great marketing tool and is not used as often as it should be.

Check back for next week’s topic: People.

Infographic in Plain Text:

The 5 P’s of QARs: Performance
Observations of Common Pitfalls

1. Insufficient Measurements
   – Only quantitative KPIs
   – Not robust enough
   – Not consistently measured

2. Same Metrics Every Year
   – Missing demonstrations of greater efficiency
   – Over time, KPIs should change or even be replaced

3. The Plan Complete Metric
   – Focus on other qualitative measures instead
   – Key Stakeholder satisfaction, financial value, audit coverage

4. Lack of Communication
   – Report your results
   – Share successes with key stakeholders
   – Keeps mutual trust intact