Best of both: Award-winning innovations at Standard Life Aberdeen

What is an “ambitious” internal audit transformation programme? And how do you know whether it has succeeded? These are two important questions for Tom Lloyd, who became chief internal auditor at Standard Life Aberdeen just over 18 months ago.

“We’ve been through a huge period of change. We’ve done two class one transactions – a merger and a massive sale – and the world changed significantly in the same period,” he explains.

These were catalysts, but the “magic dust” that initiated the programme was a new mandate from the chair of the audit committee, who set the function a bold challenge. The possibilities were immediately exciting.

An appetite for change

“We’re a relatively small group in the business and we’re independent, so we are able to shape our own destiny,” Lloyd says. “There are few times in your career when the stars are aligned to do this sort of transformation. We knew we could take this and do something exciting and ambitious.”

They brought in Fiona Anderson, who had 20 years’ experience in the HR department, to support the transformation. She was keen to be involved because she could sense the excitement about the programme and the appetite for change. “There was a huge focus on people and on ways in which we could unleash their full potential,” she recalls. The creation of her role showed the intention to make the “people agenda” the top priority in the transformation process.

They began with six core pillars for change: Agile; data analytics and technology; planning and reporting; business engagement; and methodology. People and culture was the sixth pillar and was the “overarching workstream” – seen as “absolutely central” to the function’s transformation process. Their work to ensure that this sixth pillar was able to support all the others won them the Audit & Risk Award for Best Innovation in Training and Development in 2019.

Putting people first did not make this a “soft” project. The challenges were real and the process would not be easy. “When we began this, auditors from both organisations had been on a steady upward trajectory in terms of performance, but it was a gentle slope,” Lloyd explains. “We had to take this to nearly vertical. We needed to change fast and put in a culture of continuous improvement.”

A strong support framework was essential – once people understood the challenges and what they needed to do, they would have to start to use the resources independently and continuously self-improve. At that point, Lloyd says, “the stabilisers could come off”.

Continuous self-improvement

The starting point was to devise a “capability framework” setting out what a “world-class” internal audit function looked like. They then assessed the training resources and opportunities required and identified skills gaps.

To fill these gaps and support continuous development, they set up an Internal Audit Academy – “an online, interactive, one-stop shop” holding all the training, learning and development materials. Team members were given time to access the online resources whenever, and wherever, it was convenient.

At the same time, the team began to adopt Agile practices and techniques, so the Academy was a vital support to enable people to develop the skills they needed to work in a new way. The capability framework and the Agile technique of self-reflection helped people to identify their skills needs and source the best training in the Academy. This was available in a variety of formats, but as the Academy evolved, more online learning resources and “bite-sized” videos were added.

Where there were significant gaps, they brought in external trainers, but captured this knowledge in the Academy, so that it could be rolled out again in future.

Cultural fits

Throughout the process, behaviour and culture was as much a priority as skills. Development activities were plotted on a “functional performance management framework”, which helped to create personal objectives that included behaviours and provided a mechanism for measuring success.

The recent merger meant that the internal audit team was still assimilating two teams, so it was important to establish a desired culture. “We didn’t want just to take the best of each, but to identify what the best was in principle and then add external and new elements to improve the best we already had,” Lloyd says.

A new culture statement and a recognition scheme enabled team members to nominate people they believed had demonstrated core cultural values and recognise their success.

“We built these values into our appraisal system to make it clear that success was not just about what people had delivered, but how they had delivered it,” Anderson says. “And we asked people to call out behaviour that did not fit our cultural values – in a constructive way.”

It was important that this permeated all levels, so Lloyd introduced an upwards appraisal system. “We put ourselves out there and answered criticisms and frustrations, because we had to be transparent to make people trust the process,” he says.

Anderson adds that the team traditionally had a “lovely polite” culture, but management wanted it to be more “robust”. “We want people to point out frustrations or possible improvements without feeling they are being rude or negative,” she says.  “A ‘nice’ culture makes it a lovely place to work, but this mustn’t stop people from raising concerns for fear of sounding critical.”

What did success look like?

It’s notoriously difficult to assess the success of cultural change, so Lloyd and Anderson developed a measurement framework to record “uptake, efficiency and enhancement”. This enabled them to mix objective measures, such as the number of times certain processes occurred or people accessed resources, with subjective measures indicating how team members felt about themselves, their roles, the team and the company.

The findings were encouraging – 97 per cent of the team said they would go above and beyond for internal audit, 81 per cent said they were very satisfied with their opportunities to develop their skills and experience. Every member of the team had used the Academy and 65 per cent do so each month. Overall, internal audit had the highest engagement scores of any function in the group.

“One sign of our success is that internal audit is increasingly seen as a talent feeder to the whole organisation,” Lloyd adds. “This means we have to keep recruiting and training new people, but it’s a great advert for audit skills and the talents of our people – for example, one person has just left to take on a senior role in the first line of defence.”

Many people are also going on secondments. “Our department is seen as somewhere you go to develop and expand your career and open up new opportunities,” he adds. “We’ve got a great offering and we now want more people to see this and want to work for us.”

Boosting the external reputation of the team and showcasing its talents is vital, Anderson says. Not everyone can get promotion, but every member of staff can get development opportunities that stretch them. “We’ve just completed our second talent review and are working to align individuals’ aspirations with their talents and skills, so we can offer opportunities that stretch them and provide the exposure they need,” she explains.

Part of this involves getting to know each member of staff and their aspirations better. “I’ve been driving the progression programme through the function to ensure that everyone has a high-quality development discussion at least once a quarter,” she says. “It means that we can look at all the opportunities – from the Academy to shadowing and mentoring – and we know what people want to do in future and help them to own and control their development.”

Staying ahead of change

Lloyd points out that the internal audit profession can be too reactive and slow to spot problems in advance. “It’s much more useful to prevent things happening, rather than spotting the bodies afterwards and asking why they died,” he points out.

He realised that if his internal audit team was to achieve this, they needed more than just data analytics capabilities. They also needed to be data architects and engineers. They have already developed some software and are planning to start using Salesforce, a customer relationship management tool, to help them focus on risks in new areas and across multiple regions and departments.

“Nirvana will be when we can introduce predictive analytics, so we can spot problems before they emerge,” he says. “We’re working on this, but in the meantime we need to develop the associated people skills and the outlook to use this data effectively.”

This is why his priority is now to ensure that all internal auditors can exert more influence across the entire group.

“The third line is not always a board priority, so to influence the agenda we need to be strategic and we need a lot of soft skills,” Lloyd says. “We must also be braver – sometimes we need to force our way into discussions if we know we have something important to contribute. We need to think strategically about where we should be and why we should be there, and we need to tell people this.”

This had to work at multiple levels if the whole audit team was to become more influential, so Anderson worked with stakeholders to identify what good would look like and to set out the capabilities that auditors needed at different levels of the organisation. These capabilities were linked to individual development plans and to resources in the Academy.

“We wanted to set a base point, so that when we start on a project or on training, we can guarantee that all the team members or participants are at the same level, are talking the same language and know the same basics,” Anderson explains.

Leading the way

Lloyd is now keen to help the wider organisation understand the progress that internal audit has made, and how it has done it, to encourage other areas to benefit from similar transformation programmes and learn from their experience. This is also useful for publicising what internal audit has achieved.

“We have already been asked by the group distribution team to help them create data analytics tools for assessing customer sentiment,” Lloyd says. “They have a very different culture from us, and we’ve been able to help them make these tools.”

Others in the organisation are also taking notice. The chief investment officer told Lloyd that “it really feels as if audit has found its focus and its voice”.

“People notice when you are focusing on the right things, saying the right things and then doing something about it,” Lloyd says. “Everything we’re doing is about transforming the idea of what internal audit is and what it can do, as well as how it’s done.”

Top tips

• Be ambitious. Set the bar high. It galvanises people.

• Own the process and learn from it. You don’t need to get external consultants in to drive transformation. You need to do it and gain the skills yourselves.

• Empower and trust your people. We created the tools for the team to use, but they are the ones who use it.

• Be confident. The hardest part is the initial leap of faith. You don’t need the complete final picture before you start.

This article first appeared in July 2020.