The Critical Role of Auditing

in Continuous Improvement


By Dr. John Robert Dew


(Originally published in the National Productivity Review, Summer/1994.)


            There is a legitimate role for quality audits in today’s workplace.  The success of the audit depends on management’s guidance of the audit, selection and training of auditors, and willingness to involve people in achieving the opportunities for improvement identified by the audit.  To be effective, the audit process must be properly managed.  A successful audit process is part of an overall plan for continuous improvement and can become a vehicle for recognizing excellence in an organization.


            In an age when organizations are empowering workers, building quality into products, and using statistical control limits to control quality, some might argue that the quality audit is no longer necessary.  It is true that many organizations suffer from over-control and that poorly conducted audits contribute to this problem.  Poorly managed audits instill fear in the organizations and can mislead management with inaccurate information.  But if managers know why they are auditing and if they know how to manage the audit process, well-managed audits can provide a process to foster learning, communication, and internal improvements vital to an organization’s ultimate success.


Audit Basics


            Organizations have a legitimate need for an independent, unbiased assessment of activities.  In spite of the best intentions, deviations from expected procedures may occur in almost any work setting.  Line managers may filter their problems from the next level of management so issues that need upper management attention may go unresolved.

Audits also provide management with confirmation of excellent performance that can be internally benchmarked by the rest of the organization.

            W. Edwards Deming argued that over 85 percent of the problems in a workplace can be improved only by management improving the work systems.  The audit can be a positive tool for finding the opportunities for continuous improvement.  The area to be audited should be defined by management, based on what management wants to learn.  Working like a photographer, the auditor enters the work area to take “snapshots” of how work processes are being conducted to see whether actual performance matches expectations.  The auditor seeks out accurate images of improvement opportunities and examples of excellence in the organization.

            An audit is an expensive investment for any organization.  There is the cost of the auditor, the time that those being audited spend preparing for the audit, the cost of conducting the audit itself, and the time spent for reports and meetings to discuss audit findings.  To maximize the return on such an investment, managers must carefully consider the objectives they are trying to achieve through the quality audit.  The basic questions to be addressed are, What do you care about, and what do you want to know about? A general assignment that asks the auditors to roam about the organization and see if they can uncover any problems is ineffective and creates problems for the auditor and auditees alike.

            A well-defined audit will ask the auditor to examine how one specific practice is being conducted across a large part of an organization.  Or it will instruct the auditor to examine several specific practices in one unit of the organization.  Or it will instruct the auditor to examine several specific practices in one unit of the organization.  In either case, there is a clear definition of mission for the auditor.

            In defining the audit’s mission, the manager should place the highest emphasis on obtaining verification that the most vital work is being performed properly.  What may be most vital will certainly vary form business to business and manager to manager.  In all cases, the value of the audit will be proportional to the value that the audited area has to the organization.


Communicating the Audit and Establishing Performance Expectations


            The effectiveness of the audit will be greatly influenced by how management communicates the purpose and performance of the audit.  Most people do not look forward to being audited and will probably dread the prospect.  This can lead to conflict in the auditing process and an effort by auditees to divert the auditor from observing the real conditions of a work process.  Proper communication of the audit and ethical conduct on the part of the auditors can go a long way to ensuring cooperation with the audit process.

            Effective audits begin with a statement by management that a particular work process is extremely vital to the welfare to the organization, so vital, in fact, that the organization is willing to go to added expense to have an independent review of the work performance.  The purpose of the audit must be stated as an effort to gain a clear understanding of the status of a work situation to maintain and improve the process and to identify area of excellence in the organization.  The emphasis on understanding, continuous improvement, and identifying excellence will help create an atmosphere in which it is permissible and nonthreatening to discuss quality problems with the auditor.

            Where should the expectations of performance in the workplace come from?  Not the auditor!  When the auditors set the performance expectations, the expectations will vary from auditor to auditor.  One auditor may view a particular situation as acceptable while another may consider it a disaster.  Standards for expected performance should be generated internally by the organization or through the adoption of standards agreed on within its industry.  Organizations need policies and procedures that define how vital   work functions will be performed.  These policies and procedures should serve as the standard against which auditors which auditors will measure performance.

            Professional societies have labored for years to agree on standards of performance in numerous disciplines.  Thousands of performance expectations have been codified into law.  Auditors do not need to impose their “professional opinion” in the audit to establish performance expectations.  Many organizations are using internal adaptations of the Malcolm Baldridge National Quality Award as a standard for auditing how quality is being implemented.  The use of these types of consensus documents helps establish the unbiased nature of the audit process and helps the organization focus on continuous improvement and identification and recognition of excellence.


The Auditor’s Role


            The most important action that managers take in initiating an audit is selecting the auditor.  The auditor should know how to use effective listening and communication skills to find opportunities for improvement.  If management selects a person who does not display these skills, the audit may do more harm than good.

            Ideally the auditor should be like Sergeant Joe Friday of Dragnet fame.  Through his conduct and demeanor, Sergeant Friday exhibited the characteristics of an effective auditor.  A “Joe Friday” auditor conducts the audit with a plan.  This auditor knows what is supposed to be happening in the organization because he or she has taken the time to review the procedures being audited.  “Joe Friday” prepares a checklist of specific areas to investigate and takes notes as he or she works through the list. 

            Sergeant Friday knows how to listen and asks open-ended questions to get people to loosen up and express concerns, then follows up with specific questions to nail down the details.  He or she asks to see examples of log books, files, check-sheets, or other relevant documents, and takes the time to study them to make sure they conform to requirements.

            “Joe Friday” arrives on the scene with an open mind.  He or she is there to investigate the situation and report back to management.  Sometimes people just need a friendly reminder about requirements or a pat on the back for doing a good job.  Sometimes people need to have deviations pointed out to them.  “Joe” knows that his or her role is to give accurate feedback, not to harass suspects or to keep on investigating until the least some minor problems is uncovered.  “Joe” knows that the identification of excellence is just as important as the identifications of opportunities for improvement.

             A well-conducted audit demands that the auditor not be confined to a comfortable conference room, reading documents submitted by the auditees.  Sergeant Friday went out into the field to see firsthand what was going on.  “Joe” will play an active role in selecting documents to review instead of relying on the audited organization to feed him or her the documents that may happen to comply best with the requirements.

            A good “Joe Friday” auditor will understand the difference between problems caused by special circumstances and those that are built into the system.  Competent auditors understand the concepts of statistical variation and can interpret statistical control charts to help access what types of opportunities the organization may have for improvement.


The Problem Audit


            Unfortunately, not all auditors work with “Joe Friday” proficiency.  Some act a lot more like Deputy Barney Fife from The Andy Griffith Show.  When given the opportunity, Barney Fife would swell up with authority, belittle people, and throw his weight around.  He was allowed only one bullet, and he had to keep that one in his shirt pocket so he would not shoot himself in the foot.  When managers allow a “Deputy Fife” to conduct audits in their organization, they are inviting disaster for the auditor and auditee alike.

            The purpose of the audit is to gain important information as operations are examined through the eyes of an unbiased observer.  If the auditor creates a climate of fear or intimidation, then the audit findings will be of little value of the organization.  People working in the organization will distrust management for sending in such a person.

            Auditors need to be capable of calmly collecting information in a nonthreatening manner.  If potential auditors cannot conduct themselves in this way, they should never be permitted to conduct an audit.  The underlying problem with a “Deputy Fife” auditor is that he or she is focused inwardly instead of on the people being audited.  “Deputy Fife” is interested in establishing his or her expertise and telling his or her own story.  “Deputy Fife” enjoys making people squirm under the scrutiny of an audit.  The only excellence “Deputy Fife” wants to recognize is his or her own.

            People who are going to audit need to be trained in how to organize for the audit and how to effectively gather information for management.  They need to learn how to conduct a pre-audit meeting, how to write audit findings, how to close out audits, how to write audit findings, how to close out audits, and how to write audit reports.  Auditors can be trained to develop good listening and observation skills and can be coached to become good “Joe Friday” auditors.  The audit process is too expensive for organizations to skimp on training for their auditors. A poorly trained auditor will undermine the positive attitude about continuous improvement and high quality that management desires to instill in the organization.


Audit Follow-Up: An Orientation Toward Improvement and Excellence


            The most important part of the audit is not what the auditor does in collecting the data, but what the manager does with the audit information.  Managers must be prepared to take actions to correct audit deviations and to recognize excellence.  The actions taken to make improvements must not make the situation worse.  The best approach is to meet with the people involved in the deviation and ask for their ideas for improving the situation and to empower them to solve the problem.  This allows them to assume ownership for the problem and for the solution.  The manager must then seek commitment from people to resolve the problem within a certain time frame and make resources available to support improvements, if necessary.

            The worst possible scenario is for managers to use audit information to punish people.  Management must drive fear out of the organization.  Punishing people will condition the organization to resist audits and hide problems from management.  The manager must learn to receive bad news from an audit as an opportunity for improvement and then involve staff members in resolving the issue.  Often the audit will bring to light performance problems that can be solved only by upper management.  Although management alone has the authority to change the system, management can usually invite the people who work in the system to help diagnose the problem, make recommendations, and implement solutions for resolving the problem.

            The most effective resolutions of audit findings occur when the organization has systems in place that allow for employee participation and an open climate for discussion about problems and opportunities as part of the normal business environment.  Joint union-management efforts for achieving quality are ideal for addressing audit concerns.  Elected councils of salaried employees, working with managers offer another good channel for addressing issues in a participative manner.  An accepted method for creating cross-functional teams will provide a good vehicle for making improvements.

            Successful organizations are those that learn to place a high value on continuous improvement.  Everyone in the organization, from the managers in the strategic center to the individual contributors, must all share a belief in the positive discussion of problems and deficiencies as a necessary first step in achieving excellence.

            The audit will serve as one of several tools available for identifying opportunities for improvement.  It must be part of a system that includes employee suggestions, analysis of quality data, feedback from customers, suggestions from suppliers, and benchmarking of other organizations.  An organization needs to use all these avenues to continuously improve its process, and maintain competitive position in its market.

            Along with identifying opportunities for improvement, the audit should identify opportunities for reward and recognition.  Managers should set the expectation that auditors will identify excellence as well as opportunities.  The identification of excellence must be followed up with recognition.  An effective recognition program will employ such methods as internal newsletters, cash or award incentives, and meetings or banquets that focus on recognition and praise.  When management links the audit process to the reward and recognition system, the audit becomes an exciting opportunity for people in the organization instead of a potentially negative event.


Improving Continuously

            The audit can become a powerful tool for feeding a continuous improvement process and providing recognition for excellence in any organization.  Successful implementation of an audit process requires managers to set positive expectations about how audits will be conducted, select important areas for audits, provide positive communication about the purpose of the audit findings, and involve people in following up on the audit findings.  The audit should be seen as a method for identifying both opportunities for improvement and areas of excellence that deserve reward and recognition.