Higher stakeholder expectations and increasingly complex risks are demanding different skill sets from professionals. For internal audit, that means evolving beyond traditional financial, operational, and general IT skill sets. It means expanding the function’s competencies based on a more comprehensive understanding of the company’s risk profile, bringing in people with advanced expertise in areas such as analytics, data mining, cybersecurity, and privacy, or with industry-specific knowledge and acute analytic and critical-thinking capabilities. It means boosting the function’s business acumen so it can truly understand the company’s critical and emerging risks and offer valuable insights.
New talent is central to this evolution—but new talent can be hard to come by. According to a 2015 Institute of Internal Auditors survey, 54 percent of internal audit executives blame a shortage of available talent for the skills gaps in their audit teams. And PwC’s own 2016 State of the Internal Audit Profession study shows that finding qualified candidates and managing existing employees is the profession’s number-one challenge. In all, just 13 percent of internal audit functions reported that they perform very well at obtaining, training, and/or sourcing the right talent for their audit teams – this despite the fact that our study also showed a close correlation between good talent management, internal audit leadership effectiveness, and the function’s ability to deliver the value stakeholders expect.
The fact is, there’s a limited pool of skilled auditors to fill internal audit’s evolving needs. Compounding that challenge is the pressure for the profession to adapt its work environment to align with the unique attributes of today’s Millennial workforce, which has greater expectation of support and appreciation from the enterprise and a marked preference for flexible work schedules and work-from-home options. With Millennials expected to account for 50 percent of the workforce by 2020, it is critical that internal audit functions acknowledge this seismic upheaval and devise new strategies to attract, develop, and retain resources.
So what are the steps that internal audit, human resources, and other stakeholders can take to close the widening talent gap and help the function deliver greater strategic value? In our latest internal audit talent survey, we delve into four key ways organizations can build for the future.
1. Evolve Your Talent Acquisition Strategy
As internal audit functions evolve their talent strategies, their plans must become more fully informed by an understanding of the company’s risk profile and the new skills it demands. To assure that the needs of all constituencies are addressed, the internal audit talent strategy should be developed as a cooperative project between internal audit, human resources, and the business units. A comprehensive skills-gap assessment (followed by periodic re-assessments) can help proactively identify talent needs and determine a clear value proposition to attract the necessary talent. When staffing up, business stakeholders might participate in job interviews, and such skills as leadership and critical thinking can be emphasized in order to create a talent pipeline for the business.
Addressing key and emerging risks will mean widening the net beyond traditional financial and IT skills and acquiring diverse talent that matches your risk areas—even talent with nontraditional backgrounds such as engineers, supply chain professionals, deep industry specialists, or individuals with advanced technology expertise. Especially when seeking technology skills, look outside the box. While business degrees and experience retain their value, candidates with degrees in computer science, mathematics, and engineering may be more applicable for the specific expertise you need, and candidates without any academic degree at all might turn out to possess advanced and valuable capabilities.
2. Invest in Mentoring and Development
Leading internal audit functions are deploying innovative new mentoring models that align to the function’s key objectives and also support the current and long-range development needs of individuals— the latter an especially important consideration for today’s diverse pool of Millennial employees.
The best training and education approaches now include apprentice models, rotational programs, executive shadowing and mentorship arrangements, and sourcing partnerships. Apprentice models give staff the support necessary to more fully develop already-learned skills and then apply them on the job. Rotational programs can enable managers throughout the organization to work in internal audit or enable internal audit managers to work in other areas of the business for specified periods. High-potential staff may be assigned to shadow business leaders or enter into formal mentoring relationships. Sourcing partnerships can free resources from routine testing and allow them to focus on more business-specific or strategic risk areas that enhance their learning objectives. Conversely, bringing in external expertise to address a new risk to the organization can promote knowledge transfer and the development of specific in-house skills.
All of those approaches can provide internal audit with a more holistic understanding of the organization’s strategic and business risks and create a mechanism for integrating specialized knowledge within the department. Such approaches also create opportunities to demonstrate staff appreciation and provide informal feedback, both of which are especially important to Millennials. Because Millennials constitute an ever-growing proportion of audit staff, it’s important to also consider this generation’s preferences in the design of their training by providing more hands-on, interactive, technology-enabled, and team-based training opportunities.
3. Implement a Strategic Sourcing Strategy
Leading internal audit functions are constantly looking for ways to better manage their expanding risk landscapes in the most cost-effective way, and ultimately they often do so through strategic sourcing. These departments co-source to fill a variety of needs beyond episodic staffing shortages. They may be seeking to access subject matter expertise, strategically accelerate staff development, or develop new audit capabilities. They may be seeking to expand their geographic reach, or create lower-cost delivery models through global delivery capabilities.
In developing a sourcing strategy, internal audit functions and human resources should think strategically about the entire value proposition of the sourcing relationship. They need to be honest about where the function’s capabilities are strong and where they need support. It may be more effective to access talent through sourcing than through additional hiring.
4. Enable Performance Management Through Technology
Innovations in technology and automation are helping internal audit functions simultaneously transform their people’s performance outcomes, increase department quality and efficiency, optimize costs, and over time shift from a wholly people dependent model. Investments in data analytics and enabling tools can increase productivity, driving higher performance and adding value for the business. The goal should be an environment where both Millennials and more-senior staff are fluent across a range of technologies that enhance productivity and communication.
Internal audit can also better leverage existing technologies for talent management. For example, most functions currently use audit management systems to house electronic work papers, manage schedules and engagements, and track issues, and many already use them to link the requirements of particular audits to available resources and skills. However, audit management systems can do more, minimizing the manual interventions needed to compare results, cross-reference data, and test across audits.
Expanding internal audit’s use of governance, risk management, and compliance (GRC) technologies in the areas of risk assessment, analytics, and reporting can also foster better linkages and synergies with other risk management functions. This type of integration can facilitate seamless information sharing across the lines of defense, boosting risk management effectiveness.
Growing Your Strategic Vision
Talent is the cornerstone of internal audit’s strategic plan and central to the function’s ability to align to business needs. As companies demand greater strategic value from internal audit, pressure will mount to move beyond traditional hiring practices and embrace a more multifaceted strategy, expanding the pool of talent by re-envisioning which talent can best address the business’s expanding risks and needs.