An effective audit process will mean that audit teams will be taking a systematic approach to gathering and interpreting data and information. In order to maximise the value of the outcomes of the audits the management should: Accept that the audit activity needs appropriate resourcing, including training of auditors, education of operational and management staff, and physical and financial funding. If any of these are inadequate, then the quality of outcomes will suffer. Accept that there will be limitations to the data gathered and the outcomes produced, not least because of the influence of the quality and quantity of resources allocated to the audit activity, but also because of the varying standards of judgement and interpretation that may be applied to the outcomes; Focus on trends, take appropriate corrective action on specific issues, but look for trends and patterns that indicate underlying, hidden, problems that need addressing; Ensure that the auditing activity is flexible and adaptable, in order to make it compatible with the culture and structure of the organisation, rather than adopt a rigid, unchanging process which is likely to be inappropriate and producing inaccurate results; Challenge the findings, the audit process will not be infallible, and should be challenged continuously to ensure that it is, itself, performing effectively; Apply the highest possible standards to the interpretation of results and judgement on what action to take, this requires training, experience, expertise, awareness of the internal and external environment, and an awareness of the impact of proposed changes on the motivation and morale levels of staff and managers, and an ability to forecast the impact on the operational and strategic objectives.
However, there are some dangers that must be avoided in order to maximise the effect of the audits. These include: Overload of data and information, the result either or too many audits being scheduled in general and-or the unnecessary auditing of areas of activity that are obviously performing well. This can be avoided by targeting the audits and schedules more thoughtfully; Overload of improvement recommendations, not in itself a danger, but the organisation can find it impossible to resource, in terms of budget, time, or human resources - all the improvements identified. The answer is to prioritise, focusing on those improvements that will bring greatest value to the achieving of the organisation’s objectives; Complacency, where results are apparently positive in most areas, there is a danger that management will become complacent. By adopting the kaizen continuous improvement approach to auditing, this should be avoided; Over-reliance on the auditing process, by leaving the identification and correction of poor performance to the audit process, rather than the audit process at least in part confirming that positive, continuous improvement activity is taking place; Managers ignoring the relevance of audit findings the most damaging response. If managers do not take the audit results and recommendations seriously and refuse to implement, or only half-heartedly implement the required changes, then the value of the audit process is wasted.
Although the auditing should be scheduled to examine all processes and activity on a regular basis, there is a need for additional emphasis to be given to auditing poor performers. These are activities, processes, functions, systems, where problems are visible of suspected, but the causes are not certain and need further investigation. In these cases management should arrange for ad hoc audits, and-or for these areas to be given priority in current or imminent auditing activity. It is not acceptable to rely on a generic auditing approach. Not dealing with visible or suspected poor performers immediately will allow poor performance to cause immediate and possibly long term damage. Inevitably, the longer the problems remain unaddressed, the more difficult it will be to take corrective action.
There is a danger that management will see only the audit results and concentrate on the decision making as to what improvements to make, and how to implement these. However, management must remember that the audit results are drawn from the activities of people. This means employees, operational staff, managers, specialists, suppliers, customers, stakeholders. Feedback, shaped and delivered in an appropriate manner, depending on the target group, must be seen as an essential element of effective auditing and successful implementation of changes. Not informing people of the rationale, the purpose, the results, and the positive contribution made by auditing, will lead to low morale and motivation, dissatisfaction, and possibly conflict.
It is essential that the improvements generated by the audits strengthen the organisation’s capability to compete. In order to ensure this happens, management will need to be aware that: It will often be necessary for improvement action to be prioritised. Where this is the case, then those improvements that will contribute the most value to the organisation’s competitiveness should be given higher priority. This is a responsibility of management, who will need to be appropriately skilled in this task; The business sector and general external environment is changing rapidly, and even relatively recent outcomes and improvement recommendations may no longer be appropriate due to significant external changes. This requires management to be alert to such changes and to have the ability to interpret how their organisation should best respond; After improvement changes have been implemented these will have, by default, altered the nature of activities and processes, and will need monitoring, auditing, to ensure that the effect is positive. It is highly likely that most changes made will need adjustment, especially in the early stages after implementation. This must be an integral, high profile, element of the change process.
Business Performance Audits are critical to the success of the organisation. The specific functional, process, and activity improvements generated by the Performance Audits are important and must be visible supported by the management. However, strategic and operational priorities will be constantly changing. Senior management must also ensure that the audit activity contributes positively and supports the strategic direction that the organisation is taking. It is the responsibility of senior management to continuously monitor the effectiveness of the auditing activity in the light of this requirement, and make appropriate changes if necessary.
To obtain the maximum benefit from Business Performance Audits the management must view them as a critically important element of the business. Appropriate resources must be allocated to the activity itself, to the interpretation of results, and to the implementation of improvements generated. Auditing must be integrated into the continuous improvement approach of the organisation. In addition, the objectives of the auditing process must be to generate improvements that contribute positively to operational and strategic objectives. If this approach is taken by management, then the organisation will benefit greatly from the continuous improvements that an effective auditing process can deliver, enabling it to continue to perform to the best of its ability.
Showing posts with label certificate. Show all posts
Showing posts with label certificate. Show all posts
Monday, November 15, 2010
Thursday, November 11, 2010
Auditing Business Performance
At one level this is a relatively simple tool, requiring the management to select a key area of business activity and to audit performance in that area, comparing to previous performance levels and, ideally, benchmarking against known best practice and performance levels. The information generated by these audits will then be used to identify unsatisfactory performance and enable measures to be introduced to bring about improvements.
The business areas that should be regularly audited, in any business, whether public, private, or not-for-profit, include: External Environment: well established tools and techniques are available and used to scan the external environment for information on issues, events, and trends that will impact on the strategies and performance capabilities of the organisation. The quality of this information, and the interpretations of it, is critical, as it is the foundation stone of the strategic planning activity that follows. An audit of processes, tools, and techniques, and the quality of output, is essential in ensuring that the strategic planning process is provided with high quality, relevant, valid information.
Competitors: although an element of the external environment analysis activity, this deserves a separate mention. Monitoring and-or benchmarking - variations of auditing - of competitor performance is essential. Competitors are, by default, in the same business, and gaining knowledge of competitor performance levels, in as many key areas as possible, will bring benefits to any organisation in any sector.
Strategic Planning: often an area of activity that is not evaluated, because it is carried out by the senior executive levels of management, but should be. In addition to the information gathering discussed above, the level of expertise in strategic planning of the managers, the rationale and justification for the chosen strategies, the processes used to communicate the strategies throughout the organisation, the level of support and resources provided for implementation, the performance of existing and previous strategies, are all areas that should be audited in order for optimum performance to be continuously achieved.
Leadership: separate from the Strategy audit, the quality of leadership should be audited regularly. A set of competencies for leadership, at all levels in the organisation, should be drawn up, and the leadership performance measured against these. Development activity should also be based on these competencies, and on eliminating or reducing weaknesses identified by the audit.
Culture: the existing culture that blend of beliefs, values, perceptions, behaviour, that makes up the culture of the organisation should be regularly audited and compared to the culture that is desired by, the objective of, the organisation’s leaders. Particularly at times when the organisation is planning or undergoing major change, information gathered from these audits will be invaluable.
Financial: where, although there is usually a framework of management and financial accounting processes, there is a need to rigorously and regularly audit the effectiveness of these, to ensure that the budgeting and accounting activity is as productive as possible.
Suppliers: one of the most critical areas of any organisation’s activity, the start of the supply chain, supplier performance, including the performance of those in the organisation who audit supplier performance, must be audited, rigorously and regularly. Now accepted, in parallel with research & design and strategic planning, as one of the foundation stones of quality assurance, any weakness in supplier performance can damage the organisation, sometimes irreparably. Auditing ensures that optimum performance levels are maintained.
Physical Resources: the quality of and use of physical resources, such as raw materials, operational equipment, technological equipment and systems, furniture, fittings, and buildings, all need regular auditing to ensure that the most appropriate resources are purchased, installed, maintained, and used effectively.
Human Resources: this entails auditing the quality of human resources employed by the organisation, the way in which they are deployed, how well they are trained and developed, as well as what opportunities and channels exist for progression. Every aspect of human resources activity should be audited at all levels, from operational up to and including executive level.
Equality: encompassing diversity, discrimination, and equality of opportunity which are all key areas that if not audited regularly to ensure high levels of performance not only abiding by legislative requirements but also contributing positively to the culture of the organisation will lead to conflict, dissatisfaction, lower morale, lower motivation, and ultimately lower levels of performance.
Internal Customers: often ignored, the level of satisfaction of internal customers the next department, individual, or team, that handles the next stage of production or service creation is critical. Overwhelming evidence shows that dissatisfaction of internal customers, leading to breakdowns in communication and cooperation, is one of the major causes of poor overall performance.
Distribution: of the products and-or services provided by the organisation is an essential element in making the organisation successful. Auditing this process will ensure that logistics best practices are in place, and that distribution activity is contributing positively, in terms of financial costs and corporate identity, to marketing, sales, and customer service efforts.
External Customers: auditing the satisfaction levels of external customers is a critical activity that should be carried out on a frequent basis. Customers here include all those at separate points in the distribution chain, through to buyers and end users. Information drawn from these audits will ensure that the organisation is in tune with and can respond appropriately to the needs of its most important stakeholders its external customers.
Stakeholder Relationships: stakeholders are any individual, team, external organisation, that has a legitimate interest in the performance of the organisation. This could include, depending on the sector and specific organisation: employees, unions, parents, relatives, local or national media, local authorities, emergency services, shareholders, financial institutions, funding bodies, governors, national or international governments, strategic partners, and of course, a variety of external customers. Relationships with each of these, in their own way, are critical, and should be audited regularly to ensure that they are as healthy as possible.
Quality System: deliberately listed as the last area to be regularly audited, this is an audit that should be carried out in addition to all the individual audits listed above. Whether an organisation has an externally certificated quality assurance management system, or an internal only system, there should be quality criteria set for every critical activity, event, stage, and process, from the starting point to the final point of the supply chain from the earliest stages of design and supply activity to the point where the product or service is in the hands of the final, end-user customer. Quality criteria that describe required quality levels, performance levels, and outputs, are essential to the success of any organisation. The quality system, including the internal and external auditing processes, should be audited to make certain that it is performing as intended that is, assuring that the required quality standards are being met, and of course, continuously improving.
Effective auditing will bring a number of benefits to the organisation. The first group of benefits are those where obvious weaknesses or problems are identified, including: identifying where immediate improvements could be made; identifying emerging trends that may signify corrective, defensive, or offensive action is needed. The second group of benefits are more subtle, and include: identifying the actual situation, rather than what is perceived to be the case by management or specialists; increasing the pool of knowledge that individuals and teams can learn from; ensuring that the operational activity is, as intended, supporting the strategic objectives: establishing a culture that expects performance to be regularly audited and evaluated: establishes a culture that is driven by continuous improvement activity.
Unless an organisation continuously audits and evaluates its performance in all key areas, it cannot know for certain where poor performance is occurring, and it cannot take corrective action because it is not aware of the problem, or it does not have sufficient information on which to base appropriate action. Rigorous, regular auditing will provide a flow of valuable information that the organisation’s management can use to decide on operational changes that will improve performance in critical areas. Applied across the whole organisation, this will provide the strategic objectives with a stronger foundation of support, and ultimately more chance of success.
The business areas that should be regularly audited, in any business, whether public, private, or not-for-profit, include: External Environment: well established tools and techniques are available and used to scan the external environment for information on issues, events, and trends that will impact on the strategies and performance capabilities of the organisation. The quality of this information, and the interpretations of it, is critical, as it is the foundation stone of the strategic planning activity that follows. An audit of processes, tools, and techniques, and the quality of output, is essential in ensuring that the strategic planning process is provided with high quality, relevant, valid information.
Competitors: although an element of the external environment analysis activity, this deserves a separate mention. Monitoring and-or benchmarking - variations of auditing - of competitor performance is essential. Competitors are, by default, in the same business, and gaining knowledge of competitor performance levels, in as many key areas as possible, will bring benefits to any organisation in any sector.
Strategic Planning: often an area of activity that is not evaluated, because it is carried out by the senior executive levels of management, but should be. In addition to the information gathering discussed above, the level of expertise in strategic planning of the managers, the rationale and justification for the chosen strategies, the processes used to communicate the strategies throughout the organisation, the level of support and resources provided for implementation, the performance of existing and previous strategies, are all areas that should be audited in order for optimum performance to be continuously achieved.
Leadership: separate from the Strategy audit, the quality of leadership should be audited regularly. A set of competencies for leadership, at all levels in the organisation, should be drawn up, and the leadership performance measured against these. Development activity should also be based on these competencies, and on eliminating or reducing weaknesses identified by the audit.
Culture: the existing culture that blend of beliefs, values, perceptions, behaviour, that makes up the culture of the organisation should be regularly audited and compared to the culture that is desired by, the objective of, the organisation’s leaders. Particularly at times when the organisation is planning or undergoing major change, information gathered from these audits will be invaluable.
Financial: where, although there is usually a framework of management and financial accounting processes, there is a need to rigorously and regularly audit the effectiveness of these, to ensure that the budgeting and accounting activity is as productive as possible.
Suppliers: one of the most critical areas of any organisation’s activity, the start of the supply chain, supplier performance, including the performance of those in the organisation who audit supplier performance, must be audited, rigorously and regularly. Now accepted, in parallel with research & design and strategic planning, as one of the foundation stones of quality assurance, any weakness in supplier performance can damage the organisation, sometimes irreparably. Auditing ensures that optimum performance levels are maintained.
Physical Resources: the quality of and use of physical resources, such as raw materials, operational equipment, technological equipment and systems, furniture, fittings, and buildings, all need regular auditing to ensure that the most appropriate resources are purchased, installed, maintained, and used effectively.
Human Resources: this entails auditing the quality of human resources employed by the organisation, the way in which they are deployed, how well they are trained and developed, as well as what opportunities and channels exist for progression. Every aspect of human resources activity should be audited at all levels, from operational up to and including executive level.
Equality: encompassing diversity, discrimination, and equality of opportunity which are all key areas that if not audited regularly to ensure high levels of performance not only abiding by legislative requirements but also contributing positively to the culture of the organisation will lead to conflict, dissatisfaction, lower morale, lower motivation, and ultimately lower levels of performance.
Internal Customers: often ignored, the level of satisfaction of internal customers the next department, individual, or team, that handles the next stage of production or service creation is critical. Overwhelming evidence shows that dissatisfaction of internal customers, leading to breakdowns in communication and cooperation, is one of the major causes of poor overall performance.
Distribution: of the products and-or services provided by the organisation is an essential element in making the organisation successful. Auditing this process will ensure that logistics best practices are in place, and that distribution activity is contributing positively, in terms of financial costs and corporate identity, to marketing, sales, and customer service efforts.
External Customers: auditing the satisfaction levels of external customers is a critical activity that should be carried out on a frequent basis. Customers here include all those at separate points in the distribution chain, through to buyers and end users. Information drawn from these audits will ensure that the organisation is in tune with and can respond appropriately to the needs of its most important stakeholders its external customers.
Stakeholder Relationships: stakeholders are any individual, team, external organisation, that has a legitimate interest in the performance of the organisation. This could include, depending on the sector and specific organisation: employees, unions, parents, relatives, local or national media, local authorities, emergency services, shareholders, financial institutions, funding bodies, governors, national or international governments, strategic partners, and of course, a variety of external customers. Relationships with each of these, in their own way, are critical, and should be audited regularly to ensure that they are as healthy as possible.
Quality System: deliberately listed as the last area to be regularly audited, this is an audit that should be carried out in addition to all the individual audits listed above. Whether an organisation has an externally certificated quality assurance management system, or an internal only system, there should be quality criteria set for every critical activity, event, stage, and process, from the starting point to the final point of the supply chain from the earliest stages of design and supply activity to the point where the product or service is in the hands of the final, end-user customer. Quality criteria that describe required quality levels, performance levels, and outputs, are essential to the success of any organisation. The quality system, including the internal and external auditing processes, should be audited to make certain that it is performing as intended that is, assuring that the required quality standards are being met, and of course, continuously improving.
Effective auditing will bring a number of benefits to the organisation. The first group of benefits are those where obvious weaknesses or problems are identified, including: identifying where immediate improvements could be made; identifying emerging trends that may signify corrective, defensive, or offensive action is needed. The second group of benefits are more subtle, and include: identifying the actual situation, rather than what is perceived to be the case by management or specialists; increasing the pool of knowledge that individuals and teams can learn from; ensuring that the operational activity is, as intended, supporting the strategic objectives: establishing a culture that expects performance to be regularly audited and evaluated: establishes a culture that is driven by continuous improvement activity.
Unless an organisation continuously audits and evaluates its performance in all key areas, it cannot know for certain where poor performance is occurring, and it cannot take corrective action because it is not aware of the problem, or it does not have sufficient information on which to base appropriate action. Rigorous, regular auditing will provide a flow of valuable information that the organisation’s management can use to decide on operational changes that will improve performance in critical areas. Applied across the whole organisation, this will provide the strategic objectives with a stronger foundation of support, and ultimately more chance of success.
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