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Audits

The term ‘Audit’ generally brings up an image of an IRS accountant knocking on the door. Hopefully at your company, audits don’t bring about such negative feelings.

Simply put, audits are checks on things (like Lean procedures) that people are supposed to be doing. In most cases, the term ‘audit’ implies some structure to the check, rather than simply walking around and looking things over (though leadership presence like that is important). These types of assessment audits may be of a process or system (i.e. quality systems, regulatory compliance, trade-secret protection, etc.).

They may also be for a specific follow-up. A common example of this in the continuous improvement world is checking on the leftover tasks from a kaizen. In many cases, projects have an action item list—the ‘To Do’ list to wrap up the loose ends. Audits help keep those lists on track.

Kaizen audits (or any procedure audit) may be conducted individually, or by a team. They may be done from within the group (manager or team member), or by an external auditor. They may be regulated by a governing body, such as for ISO certification, or internal to the company. They may be done at set intervals, random intervals, or for a limited number of times after an event. A very specific type of audit is a verification. In this case, the auditor is checking to confirm that something is true. (i.e. a verification audit to see if your teenage child is really studying at the library).

Imagine that you want your child’s room clean. You can do a ‘normal’ audit. This might be scheduled regularly (every morning), randomly with notice (I’m going to check your room sometime tomorrow before you can go to the party), or unannounced (surprise!). A verification is different. You ask your child if they cleaned their room, and then you go check it after they tell you that they did. Verifications are especially tricky, primarily because of implication of a lack of trust. Some basic advice: don’t ask if you plan on checking anyway. It will feel like a setup. Instead, let people know that you will be verifying reports on occasion, and tell them why.

Of note, many companies are required to conduct periodic financial audits. This is typically done by a firm employing Certified Public Accountants (CPAs) to ensure that the company is in compliance with government regulations. In recent years, this has become an increasingly thorough (and burdensome) process.

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There is an old saying—people do well on the things that are checked. An audit’s main effectiveness comes not from the audit itself, but from people knowing they are going to be audited and preparing for it. But be careful. Audits should be used for the purpose of confirming adherence to standards, not to address personnel problems. Do not use an audit as a substitute for leadership. The results of an audit should never come as a surprise to a leader. Leaders should have a great idea of what is happening in an operation long before the auditor shows up with his or her clipboard.

The level of detail of an audit should be determined from the risk and the level of complexity of the process. Obviously, higher risk drives a more detailed audit. Also, ensure that your auditors are competent to do the audit. In the previously mentioned ISO audit, an operations manager might not have the level of expertise required—a QA Manager may be more appropriate. Match the skills to the task.

Make sure audits are not ‘pencil-whipped’. This means that the auditor does a casual perusal of the process and signs off. Here’s an interesting side story, about pencils and audits. When I was in the military, I had a seasoned, crusty sergeant tell me that a Number 2 pencil was just about the same caliber as an M-16 bullet. The implication was that it was pretty easy to make a soldier pass a qualification on his or her weapon.

I won’t get into the details of my reaction, but the point is the same as I am making here. How an audit is conducted sets the standards in your organization. If you let something slide on an audit, or give more credit than you should, you are not doing people a favor—you are establishing a standard, whether it is a high one, or a low one. You also jeopardize your credibility if you preach something different than how you act in an audit. Audits should enforce your standards, not establish them.

Audits can be emotional for people. For some people, audits seem like a form of micromanagement. Explaining the purpose of your audit is essential. Conduct the audit with respect for people. Refrain from any belittling comments, sarcasm, or public reprimands. Creating a partnership while doing audits will help open up the flow of information that will benefit the team on future audits. You will be able to find most things, but on occasion, you will need help in uncovering the real story. How you treat people determines how much help you get.

An underused type of audit is the daily walk-through. The degree of formality varies, possibly including a checklist of what to look for. It should be structured, though. It will get people used to the fact that you are constantly looking for ways to improve the team. One purpose of auditing is to inventory where the teams’ shortcomings are. In most cases, teams want to do well. Problems are frequently a direct result of correctable factors, rather than with peoples’ attitudes. Make sure that you are recording the problems you find on daily walkthroughs so you can find trends and take corrective actions.

One often overlooked part of auditing is understanding what to do if an audit is not completed to standard. Make sure you know before you start what actions should be taken if an audit is failed. A failed audit with no follow-up reinforces poor standards.

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