Makers and breakers: the risks of poor management
While organisations have had to pivot to respond to the shocks caused by the pandemic and lockdowns, so too have managers. Flexible working, increased individual autonomy and the “democratisation” of the workplace, increased expectations that organisations will offer active support in areas such as mental health and wellbeing, and pressure on managers to lead by example and “share” their own experiences – coupled with an acute worldwide talent shortage – are all putting new demands on management.
So, what do managers require to transition to the type of leadership their organisation needs? Are internal audit managers themselves updating their skills and their management practices accordingly? And how do internal audit teams assess and monitor the risks associated with outdated management, stressed managers and a failure to recognise the need to change from the top? Have they factored in the ways in which the disruption of the past few years has affected relationships with staff and updated the control framework?
Today, even managers blessed with an aptitude for inspiring teams, making good decisions, getting the best out of individuals and coming up with ways to be more productive or efficient are feeling the strain. Part of the issue is shifts in workstyles – assessing staff engagement, leading from the front, setting the tone and building team rapport are more complicated when staff are working flexibly and teams rarely meet. There are great opportunities to gain from offering good people more autonomy over the way they work, but there are also risks.
But it’s not just issues around hybrid working, managers in organisations where most people still work on-site face additional pressures too. Talent shortages and staff absences risk overloading those who remain in post. Inflation and the cost of living are changing the external environment for workers, managers and the business.
Internal audit leaders and their teams are also in flux. Teams are being asked to be more agile in their work planning and operations, to take on unfamiliar, complex audit areas, to complete targeted mini-audits and provide real-time reporting, while also scanning the horizon for rapidly changing risks and emerging threats.
Audit leaders must therefore be good at reprioritising risks and realigning priorities, workloads and skillsets in teams quickly and effectively. They must be excellent communicators, good at building relationships across the business and with the board and audit committee, while also demonstrating care for, and commitment to, their own staff and ensuring that their wellbeing is not put at risk. Many are struggling to fill posts, so it is hardly surprising if their own development, and auditing management development and the quality of management decision-making across the business, is not a priority.
Vicious circle
When management goes wrong, the wounds can be deep. “Where it exists, the deterioration of management capability sets up a vicious circle that leads to team deterioration and an increase in resignations,” says Liz Sebag-Montefiore, an executive coach and director of HR consultancy 10Eighty. “Both of these problems then limit the ability to attract new talent, causing remaining staff to be over-stretched, stressed, demotivated and, quite possibly, blamed for some of the fall-out. In that situation, it becomes very difficult for managers to command, inspire and influence (whatever the environment) and that’s a serious problem that will be exacerbated by the uncertainty in the current socioeconomic landscape.”
Several HR-related surveys have indicated that employee engagement has been deteriorating for years – and the pandemic has made this bad situation worse. According to Dominic Ashley-Timms, CEO at management performance consultancy Notion, just one in ten UK workers feel they are actively engaged with their employer, and around half of all employees who leave organisations do it to get away from bad managers. Fewer than half of employees surveyed believe their leaders are up to the job.
Part of the problem, he adds, is that managers receive little or no training when they are appointed, or any further development once they have done the job for a few years, particularly when it comes to people skills.
“Many are simply thrown in at the deep end and are expected to cope as new challenges arise. Even where there is professional learning and development, it often does not meet the organisation’s needs,” he explains. “Managers are expected to think on their feet or to copy others,” he says.
As a result, they usually try to solve problems themselves, rather than empowering their teams to find solutions. “Managers need to commit to more ‘purposeful enquiry’ rather than just solving problems on their own. What lessons or skills are shared with employees if managers come up with solutions without involving the team in the discussion?” he asks. “Furthermore, if employees aren’t included, they don’t feel engaged or empowered. They learn to leave all future decisions to managers – or don’t bother to raise concerns if they feel management is swamped or focused on other issues.”
What can internal audit do?
1 Re-evaluate management roles
Organisations need to re-evaluate what managers are supposed to do in a post-pandemic world and reassess managers’ roles, responsibilities and focus. This may not be internal audit’s direct responsibility, but internal audit can promote the need for re-assessment at a senior level, highlight the risks of failing to change and offer support and assurance.
“Many managers are performing in much the same way as they operated pre-pandemic and/or are measuring their teams’ performance against the same metrics they used pre-2020, despite the changes that the past couple of years have made to their businesses, strategies and risks,” says John Chesshire, an internal audit consultant and audit committee chair at the London Borough of Hillingdon. “Managers choose to proceed as they did before, because the alternative may be even worse.”
He warns that this creates a danger that risks, as well as potential opportunities, are being ignored or missed. “While management has reacted to changes in strategic and organisational focus, it has often been slower to change policies and procedures regarding the management of certain risks, which means there could be very wide assurance gaps.”
2 Review management skills and capability
Internal auditors are still failing to call out cultural issues within organisations, such as employee engagement, lack of management training or experience and so on, to the extent that they should, Chesshire adds. “There are definitely conversations that internal audit could have with HR about management performance, training and development and employee engagement.”
He adds that senior internal auditors may be reluctant to question managers’ capabilities in case the same criticisms are levelled at them. “Heads of internal audit are facing the same problems trying to manage their teams and workloads. Some may be wary of calling out possible management failings at a time when they feel their own work is suffering.”
Liz Sandwith, chief professional practices adviser at the Chartered IIA, sees two main problems with trying to review management skillsets: first, internal audit is often reluctant to look at management capability, even as part of a culture audit; and second, managers do not want to give auditors the time they need for audit reviews, because they have so much other work to do.
She believes internal auditors need to be tenacious in this area as there is “a strong likelihood that managers are sweeping some risks under the carpet, because they don’t have the time or resources to manage them”. “For example,” she says, “the cost-of-living crisis is likely to demotivate staff, increasing the risk of fraud. However, some managers ignore this risk because they believe there are higher priority risks to manage.”
The age and previous experience of some managers may also contribute to a failure to manage specific types of risk. “For instance, some younger managers may have no experience of operating in a financial crisis and may fail to understand how deep and long their impacts can be,” Sandwith warns. “They may not realise how these situations require organisations to change strategy quickly and may be unaware of the personal pressures they create for themselves and their teams.”
3 Focus on development
Even managers who are good at investing in their staff sometimes fail to recognise their own development needs or make time to work on their own skills. It can be harder to find the right training and development opportunities as you go up the career ladder.
Internal audit can identify whether there is a culture of investing in management development – and, if there is, internal audit leaders should ensure they also benefit from it. A senior management mentoring scheme with active support from the top of the organisation, for example, can provide the ideas, conversation and time that managers need to identify ways to boost their own performance.
Internal audit should also assess opportunities for management development and succession planning across the organisation. What does it do to enable managers to become more effective leaders and to build better relationships with team members? They can look at what communication skills managers are learning, what development opportunities they have – and whether anyone takes these up. Are the learning and development programmes available designed to equip the next generation of managers? Are they fit for purpose and do they deliver the skills the organisation will need? Is the organisation planning far enough ahead to identify and attract the managers it needs in the future and to ensure it achieves the diversity of thought and breadth of experience it will need at board and senior management level?
4 Offer solutions not problems
Internal auditors need to appreciate managers’ workloads and focus their audit reviews on areas that really matter, Sandwith advises. “It’s about being agile and making sense of the situation,” she says. “There is no point doing an in-depth review of an area that has historically not posed a threat to the organisation and then handing management 24 recommendations to complete before the end of the month.”
If an audit or recommendations are important, then internal audit must work sensitively with managers to ensure that they understand the findings and are able to resolve issues. “Some heads of internal audit are reducing their audit plans because they recognise that the organisation would not be able to action the recommendations or agreed actions in a realistic timeline,” Sandwith warns.
If this is the case, internal auditors could offer their services in a consultancy/advisory role. “Internal auditors should have collaborative conversations with managers so that they understand what internal audit needs from them. They should encourage management to buy into the process – not bombard them with recommendations they can’t fulfil or will not prioritise,” she says.
There are no one-size-fits-all solutions, but good management makes or breaks an organisation. At a time of ongoing and intense disruption and uncertainty, managers need help to upskill and develop to meet changing needs, while organisations need assurance that the risks of poor management are being monitored and managed effectively. Internal audit leaders share the pressures, but they can also help others to mitigate the risks and maximise the opportunities organisations gain from good leadership.
This article was published in January 2023.