Leading lights: what makes good leadership
Everyone remembers the first person they met who set the bar for effective leadership. For some, it was the first person they saw who took control of situations, who grasped the problems and came up with solutions, who was not afraid to get his or her hands dirty and to lead from the front. For others, it was someone who encouraged others to think for themselves, who guided people to come up with their own solutions and find a way forward, and who nurtured talented individuals.
Unfortunately, poor leadership has the opposite effect. A poll by Gallup in 2016 found that employees believe only 18 per cent of managers demonstrate a high level of talent for managing others, Gallup estimated that this costs US corporations up to $550bn each year. Not surprisingly, the worst judges of leadership appear to be the leaders themselves. A survey by McKinsey, also in 2016, found that 86 per cent of leaders believe they model the improvements they want employees to make, while 77 per cent believe they “inspire action”. The disconnect is obvious.
Good leaders can be developed: while some people might have a more natural inclination to take charge, most managers, executives and heads of internal audit acquire and build a portfolio of skills that help them to become better leaders over time. Many of those who are successful credit help from a mentor (formal or informal). However, it’s also worth remembering that organisations spend billions each year on leadership training – and survey results tend to show that much of this gives little return on investment.
There are also many types of leaders – and some types are better suited to particular situations. The person who inspires and leads a small team in a start-up organisation or who takes them into a new market may not be the best person to lead it once it is more established, so skills such as delegation and succession planning are important. It takes a good leader to steer through a crisis, but a brilliant one to then step aside to allow someone with different skills to take the helm when the situation changes.
How effectively an organisation moves its leaders to new pastures can be as important as how well it hires, trains and promotes them in the first place.
As the COVID-19 crisis is proving in many sectors, good leadership comes to the fore in tough circumstances and leading a team through a crisis may emphasise (and require) different skills from those necessary in normal conditions. Similarly, managing people while trying to deliver a major project or change programme can also require leaders to adjust – or even toughen up – their preferred leadership style.
To some extent, leadership style is a personal choice – depending partly on inclination and partly on circumstances. This choice of style can come under scrutiny when, for example, someone takes up a head of internal audit role for the first time, especially if they do not have a traditional audit background.
While there are a variety of ways to lead successfully, getting it wrong can have disastrous consequences. Poor leadership can have catastrophic effects on a team and, in the longer term, the whole business. At the very least, a bad leader can be an expensive mistake if the best staff leave and morale and performance slump. Similarly, bad leaders can destroy a good team culture, create an atmosphere of distrust and fear and cause people to cover up mistakes or shift blame.
Inside information
Bad leaders are not always easy to spot from above. This is why it is vital that management works with HR and internal audit to keep informed about corporate culture and to spot anomalies or warning signs, such as a high staff turnover rate. If your organisation does not offer 360-degree feedback or staff surveys, it should at least conduct exit interviews and listen to (and follow up) findings.
Too often management is seen to side with managers – who can often be convincing and charming to those above them – and staff quickly stop complaining if they know that no one will listen. However, problems do not go away just because people stop reporting them.
One head of internal audit, who asked not to be named, said: “I remember seeing my first head of audit and thinking ‘if that’s the best this organisation can come up with, then there is hope for anyone.’”
The good news is that people will talk if they are asked for feedback and poor leaders can improve with support and training. This is why it’s essential to ensure that your team and your organisation nurtures and coaches potential leaders and encourages a culture that will highlight leadership shortcomings at an early stage.
Further up the scale, internal auditors may be the ones in the unenviable position of having to have difficult conversations with senior management about cultural and leadership concerns if, for example, they see examples of poor practice that put the organisation at risk, or affect strategic decisions.
Good leaders are vital, however good leaders recognise the value of good followers. And, even more importantly, they recognise the value of those who speak truth to power. Internal audit teams need to have innovative and courageous leaders. But they also need to help their organisation’s leaders be the best they can be.
A clear purpose
Alistair Smith, UK internal audit, risk and control director at energy firm EDF, moved from a role as corporate risk director to become internal audit director in 2012. Although he had led a department previously, this was his first formal audit role. Smith decided to acknowledge immediately to his new team that he lacked audit experience and recognised that he had technical skills to learn, but he also explained what the company wanted him to bring to the role and the experience and skills that he believed would help him to do this.
“I knew I had to be honest and upfront from the start,” he says. “I did not pretend to know everything about internal audit, but I said that my principal role was to bring leadership to the function and help it deliver its goals more effectively. I had worked in the business for a number of years, so I understood how it operated, how managers viewed and appreciated risk, and where internal audit could add real value.”
Smith’s priorities as a leader were to provide direction to the function and to instil self-confidence in his team members. “My job when I took on the role was to give direction and guidance and to provide constructive support. I wanted to empower each member to have the confidence to make their own decisions about what they should do and how they should do it, and to justify their approach when challenged. I knew my role meant that I needed to champion internal audit throughout the organisation and to make management aware of its scope and capabilities, as well as support my team and escalate issues if recommendations they made were not being followed, or if they were unable to put their points across strongly enough to influence necessary change.”
Smith says that it can be hard to move into a new team and lead it. But he says that leading by example, as well as acknowledging one’s strengths and weaknesses, provides a solid start. “No new head of internal audit – either new to the role or new to the team or organisation – knows all the answers. As a result, effective leadership has to be collaborative: leaders need to ask questions and they need to listen and be receptive to ideas and feedback from the teams they are managing,” he explains.
Leadership skills
Whatever their preferred leadership style, most strong leaders not only need experience in the areas they run, but also display business acumen, self-assurance and a broad mix of “softer” skills, such as having the power to persuade and influence other people. Some of these attributes are acquired through experience and some can be taught. All can be enhanced and developed.
Words and deeds
Liz Sandwith, chief professional practices adviser at the Chartered IIA, stresses that leaders need excellent communication skills, to be savvy and “emotionally intelligent” as well as clever.
“Effective leaders must be able to articulate their vision and be clear about what they want from their teams,” she says. “They should be able to tell management and the audit committee in precise and understandable language what actions they need to take, while also having the ability to persuade and influence them when necessary.
“There will be times when leaders have to ‘test the water’ and abandon an idea if it has no chance of support, but there will be others when they need to push for something to happen if they truly believe it is in the best interests of the business.”
Sandwith adds that being a leader means that “you need to recognise, encourage, develop and reward leadership qualities in other people. A good leader wants his or her team to be the best it can be, so you need to look for talent and develop it.”
She also believes that good leaders lead by example. “It is very important to demonstrate that you have the skills and experience to do the job you are asking your team to do. You must show them that you understand the process and that you understand the difficulties associated with it, and that you can make suitable recommendations accordingly.”
Ethics and integrity
Preeti Sadarangani, head of group internal audit for corporate and commercial functions at Vodafone and the recipient of the Audit & Risk Award for Inspirational Leader in 2019, emphasises that leaders need a “strong value system” and impeccable professional ethics.
“If you ask people to follow your lead, then you need to have integrity and strong principles. You also can’t be afraid of asking hard questions or of making tough choices. People need to see what drives your decision-making, your approach and your attitudes – it is important that your team, as well as management and other stakeholders, can see that your core values are synchronised with those of the business and of best practice.”
Image: Preeti talks community and engagement in her business leadership excellence session at our virtual Internal Audit Conference
She also believes that a good leader must embrace change and accept challenge, particularly to his or her ways of thinking. “Leaders have to be open to new ideas and ways of working, and this includes listening to recommendations (as well as criticisms) made by their own teams. Leaders will not have much credibility for long if they only give instructions and do not seek out, and listen to, input from others,” she says.
Preeti spoke at length on business leadership excellence at our virtual Internal Audit Conference, where, amongst things, she addressed the importance of generating enthusiasm through cultural transformation and organisational impact.
Common mistakes
There are plenty of common mistakes that internal auditors make when they first take on a head of internal audit role – chief among them that the new leadership role requires no change in approach, according to Liz Sandwith, chief professional practices adviser at the Chartered IIA.
“People often think that when they take up a leadership role they are still one of the team, instead of realising that they are leading it,” she explains. “Underplaying the importance of being a leader makes it harder if you have to make difficult, quick and decisive decisions that the team doesn’t fully buy into, but which may be entirely justified. It also creates problems when it comes to disciplining auditors.”
Other newly promoted leaders become bossy and arrogant. “Some leaders think that they have to make their mark quickly, which prompts them to act fast, look for easy ‘wins’, and push their teams hard to achieve results,” Sandwith warns. “This approach increases the risk of making mistakes (which isn’t going to go down well with management) as well as putting people’s backs up.”
Good leaders need to know their limitations, ask questions when they don’t understand, and be prepared to ask for help from their teams. “Such an approach also encourages team members to come forward when they are stuck, rather than trying to deal with a problem themselves, or, worse, covering it up.”
If you know an inspirational leader who should be recognised, why not enter them for the Audit & Risk Awards?
This article was first published in September 2020.