Episode 28 | David Haylor – specialist Internal Audit search and selection

The Assurance Show
Episode 28 | David Haylor - specialist Internal Audit search and selection
/

 

Show Notes

David talks to us about IAC’s latest report, the Talent Barometer and the upcoming Diversity report.

He shares his views on a range of issues including:

  • Data skill gaps
  • Leadership skill gaps
  • Why culture is important

David is open to connecting with Internal Auditors.
You can reach out to him on LinkedIn.

Links

Transcript

Narrator: 

Welcome to the assurance show. This podcast is for internal auditors and performance auditors. We discuss risk and data focused ideas that are relevant to assurance professionals. Your hosts are Conor McGarrity and Yusuf Moolla.

Yusuf: 

Today, we’ve got David Haylor on the show. David is the CEO of IAC Recruit, a specialist internal audit recruitment firm based in the UK with operations in the US. Welcome, David. Do you want to take us through your background and what it is that you do now?

David: 

Sure. Yeah, absolutely. I usually start pre-recruitment because it has molded my philosophy on recruitment quite a lot. After I finished university, I went into the military. I first went to the Royal Military Academy at Sandhurst and became an army officer. That’s important to me because that’s the best leadership training program in the world. Leadership and the development of that is very critical to my philosophy and outlook. I’ll come back to that later. After I left the military, after I got married and wanted to settle down, I fell into recruitment. I’ve been in recruitment for far too long now. But from the moment I started in recruitment, I’ve worked with the internal audit profession. So that’s all I’ve ever done. And my studies are economics based. Economics and the way the whole economy and system works has always been fascinating to me. And internal audit may be a small part of that, but is, a critical part of that; about how corporate governance and our economic system functions. So I’ve always found it fascinating. And we’ve built a business around that over the last 10 years.

Yusuf: 

You’ve spent a lot of time with internal auditors. What is it that keeps you working with internal audit?

David: 

There’s personal and professional reasons. So personal reason is I’ve always found internal auditors to be it may sound like a cliche – but they are genuinely more honest and, sort of clear than most professionals. And I don’t mean that to insult others, but I think internal auditors do hold themselves generally to a higher standard. It’s quite rewarding to work with a body of people who are honest and want to do the right thing. And then on a professional basis, it’s simply that it is such a niche. So it’s allowed us to build a strong reputation and to really be a knowledgeable value added partner.

Yusuf: 

What are you seeing in terms of search over the last six to nine months? So we’re recording this at the end of October 2020, what’s going on?

David: 

It won’t surprise you to hear it’s been a bit of a car crash, for those who’ve worked through the previous great recession. This is different because it’s so universal. Every country, every sector everywhere has been hammered by this experience, unless you’re in, you know, healthcare pharmaceuticals, or some kind of tech tech still doing very well, or online retail, whether it be Amazon or whoever that very small world is doing incredibly well, everyone else not. That’s reflected in the search market. Interestingly, the one area where things are still positive generally, is within the accounting firms because the degree to which every organization from the small family led business to the global Fortune 100, have had to lean on their accounting support in the last six to nine months, has been huge. So not only our accounting clients, but also our own accountants in our network have said they have been swamped with work. So they have still had to hire and they still have to grow some of their teams. And some of them are looking forward to when this is all over, you know what advisory support are organizations going to need once this is finished. So that’s been quite busy, but for internal auditors in general, my advice has been for most of this year is if you can, stay put and wait for things to get better. But if you need to move or if you feel you’re at risk, then we’ve been helping a lot of people to make moves into good organizations that are still able to hire in this environment.

Conor: 

Has there been any discernible difference in the skills that are required by internal audit teams during COVID as opposed to pre-COVID?

David: 

In general, I would say not. However, there are trends that were appearing before COVID, repeated across all disciplines, where there is an acceleration on trends that were already there, which are now going to just appear quicker. So for example, data analytics we’re going to come on to our report that we produce later – but data analytics and understanding the interrogation of data is something that most heads of audit committees have been aware of for some time and have been talking about investing in more heavily, but the reality of that has been fairly limited. This experience has definitely accelerated that. Our report said that 96% of heads of audit were expecting to hire that skillset within the next two years. We’ll come on to whether hiring it is actually achievable or not, but that process will definitely have been accelerated by this experience.

Conor: 

The report you’re referring to there David was your talent barometer. Do you want to tell us a little bit about that?

David: 

Broadly speaking, the idea is to take this opportunity of disruption to understand exactly how the whole audit profession ticks. And one of the things that we’ve always known is that it’s a very internationally consistent profession. You take a senior auditor to a chief audit exec, in any organization, whether based in the U.S., Europe, the Far East, Australia, South America, they tend to build their processes and systems around the same theory, same structures. They do things in the same way. So that what we’re trying to do is really get an understanding about how the whole global audit ecosystem ticks. So the talent barometer is just one of those tools that we’re using, where we’ve interviewed our client base in detail to get them to talk to us about trends within their teams. What skillsets do they need in the coming years? What are the strengths of the team? What are the weaknesses? What are the expectations from the broader business? What are the audit committee experiencing? We pulled that together into the talent barometer. And one of the points that came out of that was that 96% of heads of audit expects to need that skillset of data analytics within the next two years. Interestingly they needed, soft skills and commercial skills to pretty much the same degree, which is particularly interesting because that skillset’s always been needed. And I think this experience has just highlighted the lack of it in certain teams in certain areas.

Yusuf: 

A bit tangential, but quite important, is what internal auditors use as their preferred social media channels.

David: 

The question was specifically about how would you like to be approached or to find your next opportunity? And it was surprising the degree to which as a profession, very anti all forms of contact other than email, LinkedIn or traditional old school phone call. And LinkedIn was extremely highly rated as the place to go for that information. And anything else, whatever other routes you may look at from a social media perspective, was a definite no. Which is surprising because a lot of internal talent acquisition teams and this is something I would have, prior to this report, supported – a lot of them put a lot of work into putting out who they are, what they do onto other channels, whether that be Facebook or Instagram or wherever, but people generally do not want to see that stuff, which was a surprise.

Conor: 

Was there anything else that came out of the talent barometer that surprised you or was new?

David: 

Something that we knew sort of in our gut, but hadn’t had the statistics to back it up. And I’m surprised to the degree to which this was backed up by the statistics. Why do people select a company to work for and why do they leave? Obviously that’s key to what we do. And the big three have always been consistent for us, which is how much money do I get paid? How much is my career going to develop with this organization? And do I like working there? i.e. is the culture one in which I see myself fitting. Those three have always been consistent to us. And when people join an organization, I think most organizations recognize that. And those three things are usually very well communicated and mapped out for people. Usually not always, but usually. But on the flip side, when people leave, what has been fascinating from this report is those three points are consistently important for candidates when they join a company and when they leave a company. Exactly the same, the percentage difference negligible. But for clients, the culture piece does not exist from their perspective when people leave. From their view, people only leave their organization because of money or career progression, and they completely ignored the culture piece. Whereas it is equally important for people who are leaving an organization. That is hugely important, because that is undermining so many organizations and so many teams, because they’re missing a critical element of why people get up every day and go to work.

Conor: 

What can they do to address that cultural issue?

David: 

This is an extremely complicated topic. The simplest answer I can give, is it has to be a sincere and genuine recognition that this matters. There’s still too big an issue where you get heads of departments, senior executives and organizations who look at this as one of those topics that needs ticking. Throughout their careers they’ve had certain degree of training or presentations from outside support who have said, business culture is critical. These are the kinds of things you need to do. Have a chat with our HR team and go, right, we need to take this box. We need to make sure that our reports have these values attached to them. And we need to agree on what our core values are. And let’s make sure that’s in, our marketing material. And that’s often about as far as it goes. There is not a genuine adoption sort of in your heart that I believe this stuff. That if I say one of our company values is honesty, I as CEO, chief audit exec, CFO, actually going to live and breathe that value and ensure it is delivered through our organization. And until people realize that actually matters, then I don’t think that problem’s going to go anywhere.

Yusuf: 

Going back to data, there just aren’t enough qualified people to fill all of the potential roles that might be available. How best are we going to address it? Is there a solution? Are there different ways in which we need to be approaching this challenge?

David: 

This is a consistent issue that we’ve seen across technology for years. So whether it be a simple core IT audit, data analytics, cybersecurity, all these technical skills, there just are not enough people. And the intrinsic problem is that most internal it teams still will, and I’m generalizing here, but a lot of them will take their teams from a training ground, whether it be the big four or one of the other large accounting firms, where people are trained and developed. And will usually take people from that route and then build them up through their teams. Now, if the large and the medium sized firms aren’t training people there just simply is not a pool of talent to get these people from. it has not been economically viable for the large firms to train anywhere near enough technical experts. And that’s not anything that large firms are doing wrong because it just isn’t in their interest. It’s not like the external audit world that is a regulated environment where you have to deliver a certain amount of work and therefore you need a certain amount of people. The data analytics side is not like that. you don’t need to train so many people. It’s simple mathematics. If 96% of teams need data analytics skills in next two years, there will not be enough people to fill that. So therefore, what do you do? Well, what you do is you train the people that you’ve got, or you are a bit more open-minded about the broader organization that you’ve got. And there may be people with data skills within the organization and you bring them into the team either on a contracted basis, or in some kind of skills rotation. So bring your skillset to us for two years where we will take you through the organization and send you out, or just simply training. You have to bring in experts to train your team, to do that job effectively.

Yusuf: 

We seeing a lot of that as well and the options that you laid out are exactly what the better audit teams are looking at. But one of the things we’ve been talking to our clients about for a while is that technology skills are one thing. So being a cyber expert in order to be able to execute on a cyber audit, you really need to understand that area very well. When it comes to data and the use of data, it’s so broad and there’s so much that needs to be addressed. Change of mindset, doing some really basic data work, all the way to more advanced data work. That it is something that every auditor should have some level of familiarity, at least with, in order to be able to properly scope and, execute and, at higher levels manage and guide the teams on. So, what is it that you think is holding teams back from, or holding individuals back from, gaining those skills themselves, even if it’s just mindset shift?

David: 

The problem with these conversations for me is they’re always very simple day-to-day practical issues that tend to cause the problem. And the simple day-to-day stuff is that most audit teams generally are either led by people who may not yet have fully got to grips with this, because if you were trained 20, 30 years ago, it sometimes might take a few extra years for you to realize things really have fundamentally changed. I don’t mean that as a criticism because that’s perfectly natural, normal human behavior. You can’t possibly catch up with every trend straight away. So that’s not a criticism, it’s just an observation. But even if you have fully grasped the issue, fully grasped what you could do, you then have internal problems. And when we speak to lots of organizations where their systems are so outdated and often don’t talk to each other very well. I mean, some of the large, and I certainly won’t name names, but some of the larger global companies are running scores of different systems, applying different sets of data and to Interrogate that information would require a vast amount of resources. You’ve then got the day-to-day of the audit committee expecting certain things from the team this year. Where are the extra hours coming from to do this training? Where’s the budget coming from? It’s a classic issue where people see the problem, but it’s not yet punched them in the face hard enough to know we have to deal with this today. And therefore budgets and general resources are not allowing people to plan ahead and do that additional work.

Conor: 

Was there anything in the talent barometer around whether individuals thought they were getting enough training or should be provided more, or anything around that in your findings.

David: 

Leadership training. We know that was extremely light. And we specifically asked that question, as opposed to the others, because we feel it underpins the others. The leadership training underpins two things. The development of the team. Every team requires leadership, in any walk of life. And also leadership skills allow you to interact with the wider organization better. And that is critical to internal audit because you have to be able to influence, communicate, persuade, build rapport, adjust your communication style. And the core leadership skills help you do all those things. And to take people with you on the journey or the message that you are trying to communicate. And the training hours there are insignificant. They’re tiny. One or two hours per year, most were doing none. If that’s a reflection of training in general, I think a lot of teams just don’t have the resources to give the necessary training.

Conor: 

Can you talk to us a little bit about some of the leadership work that you do with internal audit teams and chief audit executives?

David: 

The very first thing that we do is talk about it. Because if you’re trying to change something, awareness is the first and most important thing that you can do. Most leadership training in a corporate environment only happens once you’re already leading. Now, we would never stick an accountant out, to run a large team or run a large audit and only train them once they started doing the job, we would all recognize that’s madness and it won’t work very well. And it’s the same with leadership and leadership is, bizarrely, a skill that we all see as critical. if you look at whether it be sports, politics, business, people very quickly recognize where leadership isn’t working. So it’s very visible. You can see it’s important and you know, when it’s not working. But where’s the training. We all go to university in this professional path that we’re on then professional training. After that, the military is the only organization that provides a professionally recognized, highly developed, very detailed leadership training course, because it recognizes if it gets that wrong, everything falls over. But nobody else does. And I find that bizarre. So the message that we’re trying to get across is 1. Can we recognize that? and 2. If you’re going to have a world beating audit team that can achieve all the things that we know you need to achieve, you need to understand within your junior members of your team, who wants to be a leader first and foremost, and where are the skills that you can encourage and develop and start talking to people early in their career about the skills that you can develop and work on. And for us that starts with simple things like values. Because unfortunately some of the values that sit behind leadership, aren’t ingrained in people early enough in their career. Which is why some of the behaviors exhibited by senior leaders within business often aren’t what you would like to see. Because unfortunately they’ve learned from generations behind them where treating people badly, doing things in the gray, being a little bit immoral is fairly normal in a business environment. Well, that shouldn’t be the perception and we shouldn’t assume that the right behaviors just automatically happen. Again that’s why the military hammer values and standards from day one constantly. Because the way you behave is intrinsic to the way you think. The way you believe is intrinsic to the way you then act. And that’s part of foundations of leadership. And I think internal audit and business in general would benefit from that enormously.

Narrator: 

The assurance show is produced by Risk Insights. We provide data focused advice, training and coaching to internal audit teams and performance audit teams. You can find out more about our work at datainaudit.com. Now, back to the conversation.

Conor: 

Those high-performing Internal audit teams those the teams that have those early conversations, even with their junior staff about what leadership is and expectations and so forth?

David: 

Yes, to a degree. The best teams have a longterm view. The conversations I love the most are the heads of audit who go I’m looking to train someone within my team to replace me. I know I can’t and shouldn’t be here for too long, for two reasons. 1. That’s a good way to develop the team. and 2. The view that I have for years of talking to people is that most heads of audit really after five years or so are going to start losing their value to an organization because once you have become habitually ingrained within how organization works, it becomes harder to see where the problems might be. Rotating your head of audit gives you a fresh pair of eyes, a fresh perspective, where could the problems be here? What are the new threats? Where are the risks? And if you have that philosophy and as an individual, you have that kind of selfless philosophy that I can’t sit here for 10, 20 years. I need to be developing my team. I need to replace me. That tone from the top then spreads throughout the team. So the team recognize I need to be developing, I need to be learning, I need to be training so that I can move up and support others. And if you combine that with a philosophy of not everyone wants to be in internal audit forever. So I want to train my team up to make them ambassadors into the organization, to build relationships, todevelop their own careers. But also just spread brand audit to go out there and talk to people about this is what we do, this is the value that we add, this is how we can help you, this is how we partner with you. So if you have that ethos of development, of moving forwards, of communicating with the wider organization, of selflessly developing your team, then you create a fantastic team. Now, there are lots of other things that have to go in to achieve that. But if that culture and tone is set, It’s like putting oxygen on the flames. It just grows. And you end up with a really, really strong team.

Yusuf: 

You mentioned that there’s a lot of formal training and a particular set of values that comes with having spent time in the military. Do you see more recruitment, particularly into internal audit, of ex-military personnel?

David: 

To be honest, Yusuf, there aren’t enough of us to go around unfortunately. There’s not that many people. I think the U.S. is slightly different. So the U.S., they have a vast military community. And from an anecdotal perspective, a high percentage of auditors with some form of military background. Whether active service or national guard or some form of training. The values of the military are seen as very compatible, with the audit world. Outside of the U.S., the military just isn’t big enough to see that kind of impact.

Yusuf: 

How is recruitment changing and how will it change?

David: 

There are a number of trends. I mean, the first one you jumped to is technology and automation. and obviously it’s changing so fast. So I’m not predicting any way where things will be in 10 or 20 years. God only knows, but from what we can see at the moment that change is all about volume information. For example, for large organizations that are hiring lots of people, the more AI, more automation you can build in the more you can see trends , which can help you with things like diversity can help you with identifying the right people can help you with maybe spotting the right competencies because you’ve got enough data, which you’ve analyzed correctly can guide some of that decision-making process. more of that analysis will go into the recruitment processes, for mass lower, skilled jobs. The world you’re talking about when you ask the question is simply very small. If you look at the number of people in that profession relative to the greater world, it’s a small number of people and therefore it’s very individualized. So every audit team. Is different. The culture is different. the needs are different. The way they conduct themselves can be surprisingly different. Here in the UK if you take 10 of the FTSE100 and you really understand what their chief audit execs do on a day-to-day basis, what the CFO’s view is, how the audit committee guide things, and then how that drips down into the team, the way they conduct themselves can vary enormously. And so what might look like a fairly generic senior manager job can vary hugely. And the job description, won’t tell you that. And then the CVs will look identical more or less, that’ll come through a big four environment having been to a top 10 university with a good degree and they will look very similar. But we will know those 10 people are all completely different. As we all are as individuals. And the culture that we will bring to an organization, the way that we will interact with people, the way that we will apply our technical skillset, is different. And at the moment there is no technology that can really identify that. It requires that interaction between people to really understand that connection. So I think that core element won’t change. Some of the data around it will be better informed. And I think therefore, as recruiters, we have to double down on that skillset. On that value add around how do people actually work and how do they tick? And how does that broaden into how a team operates and works. Which is why we’re doing so much more work around culture leadership. The next report we’re running is a diversity barometer. We’re just about to close off the questionnaire that’s been running for the last month, which had a huge global response, on diversity. And we’ve gone into real depth as to how is your team made up and every form of diversity you can think of. There’s probably people listening to this who might know different. We haven’t seen anything that’s quite as in-depth and global as this. And I think it will really guide the internal audit profession as to where they’re currently at or moving down what is an important area. You have to look at diversity in its full breadth, which brings you back to cognitive diversity. A point of diversity again is not to tick a box. It’s not Oh, this sounds like a great idea. We should be seeking to do this. It is a good thing for a reason. From an audit perspective, if you have people from all socioeconomic groups, sexual preferences, gender fluidity, all of those areas. They have different experiences, different perspectives, and they think differently. And audit is about identifying issues, looking at risks, looking at controls, where are the problems within an organization. If you have 10 people who think differently, they’re far more likely to spot those problems. As a group, we’ll look at that from 10 different viewpoints and spot the issues and be able to work through solutions quicker and more effectively. If you’ve got people who are all – and this is still quite common unfortunately – white, male, middle-class from the same universities from the same professional development background. Funnily enough, they can look at the same problem and come up with the same answer consistently. And we see that again and again and again.

Conor: 

Three major underpinnings there, about what a successful audit team might look like in the future. So you talked about leadership, you talked about the foundations of culture and you talked about cognitive diversity. What’s one piece of advice you would give a young auditor starting out today to take with them on their career journey.

David: 

It is the one that’s probably not new but it is to embrace fully that when you’ve finished your ACA, your CPA, you haven’t finished. You have got to be consistently learning and looking to learn because the world is moving so much, and there’s so much more to learn. So whether it be the IT audit skillsets, data, leadership skills, communication skills, understanding concepts like cognitive diversity. You need to be reading about this. You need to be researching. You need to be understanding. If you ever want to be the lead expert in something you’ve got to be researching it. If you ever want to lead one of these teams, you’ve got to understand all of these dynamics that are at play. Otherwise you will flounder. It’s a universal point for all professions that you can no longer look back to what may be a rose tinted past of parents where you trained as a professional in whatever form and that was your job for the next 40 years and brilliant, sorted. You never stop training, you never stop learning, and you have to embrace that philosophy.

Conor: 

You got to maintain that hunger for ongoing professional development and learning.

David: 

Yeah, and have an open mind as to what that might mean. Because learning about the psychology of cognitive diversity might not automatically jump to mind when you’re doing your ACA work, but actually if you ever want to lead, it’s pretty useful if you understand this stuff. And also it will make you valuable because if you, as an auditor, understand this, when you’re auditing teams, you can really understand where their problems might lie, and that process and control that is set up, might in theory work perfectly. But if the team operating it isn’t functioning as a team. That’s where other things fall over. And if you understand that, you can bring much more value as an auditor.

Yusuf: 

People have slowly been getting to grips with working as a team when they’re not physically together. There are many challenges that come with remote work and we’re not going to get into that today. But what is the current view amongst your contacts, people that you interact with, regarding remote work and what that looks like within cities, within countries and then across borders.

David: 

It’s fast moving and complicated. At a general level, remote working, I think will go on well into next year. A lot of the large firms that we’re talking to, certainly in the U.S., are talking through to next summer, at least. And I think that view is going to be fairly consistent internationally. The need for it and the value of it is understood, so at a simple level it will continue well into next year.

Yusuf: 

Is there more appetite for recruiting individuals that will work remotely?

David: 

Well there is now, and I think that remains an open question. I’m naturally an optimist, but I’m a little bit cynical about people’s habits. What will tend to happen in any period of change, is that where at all possible most organizations would habitually reset to where they were before, unless they’ve been forced into a change, which they demonstrably can see works for them for the better. So I know, right now people are very open to remote working and we are onboarding people across different continents, working for organizations, and they’re quite happy for people to never set foot in the office and it’s not said to be temporary, But I’m fairly cynical as to how long that will last once normality starts to return. And I think some organizations, at least, will put pressure on people to no longer be remote and won’t be open to hiring people remotely. I could be wrong, but people naturally and organizations generally are still very built in a hierarchical controlling way and it takes a lot of trust and confidence and leadership skills to really manage and lead a team who you barely ever see.

Conor: 

You guys are publishing the diversity barometer…

David: 

Closing it off at the end of this week, but it’ll take us about a month to analyze the data and then put the report together.

Conor: 

Sure. And you’ve already got your talent barometer. So where can listeners get a hold of those two publications?

David: 

On LinkedIn, you will find us putting this information out daily. So if you just keep in touch with us. You can email us directly. So if you want to get hold of me, it’s David dot Taylor at IAC-recruit.com. But the reports are hosted on one of our websites, which is IAC-auditsearch.com.

Yusuf: 

Are you open to people contacting you on LinkedIn?

David: 

Yep. Probably easier on LinkedIn because you don’t have to remember an email address then. So LinkedIn’s probably the easiest way to get ahold of me.

Yusuf: 

We’ll put a link in the show notes to make it easy for people to just click and find you. David, thank you very much for joining us. I’m sure a lot of people will take, value from that conversation and the insights that you’ve had and the insights that are coming soon.

David: 

Thank you guys. This is a fascinating conversation and I love discussing these topics. thank you for having this show. I think it’s really valuable for people and I really enjoyed being invited. Thank you very much.

Yusuf: 

Excellent. Thanks, David.

Conor: 

Thanks, David.

Narrator: 

If you enjoyed this podcast, please share it with a friend and rate us in your podcast app. For immediate notification of new episodes, you can subscribe at assuranceshow.com. The link is in the show notes.