Internal Audit Should be Providing Assurance on Equal Opportunity Initiatives

A note from me (feel free to skip to the main article below): I'm conscious about posting about this topic, as, to me, it's tied into a political movement (even though it's a valid issue in it's own right) and political tensions are so high right now.

I personally endeavour to try to keep apolitical on this site - making observations as objectively as I can. I feel well-positioned to do this, as I'm exposed to the full range of the political spectrum at any one time:

1. My parents are Londoners, yet they raised me in the Westcountry (if you're in America, think of Californians moving to Alabama...). Racism, sexism and homophobia (as they would be judged by modern standards) are commonplace. If I was to adopt a 'left wing' stance, and fly into a rage every time I encountered this, I'd have a hard time existing here...
2. I pursued an academic education and a traditional 'white collar' career; I now live in a city centre. I find myself surrounded by frustrations around discrimination, climate change, Brexit and the 'ignorance' of 'Little Britain'. Again, if I adopted a 'right wing' stance and started arguing with everyone I spoke to, I'd have a hard time maintaining this lifestyle.

I have, however, been fortunate to develop a global network of friends who are: male and female; from a plethora of races/cultures/countries of origin; from backgrounds spanning ultra-wealthy families to those living in the depths of poverty. I've learned to judge people for who they are, not what they are.

As such, I try to just listen. I try to understand the root causes, empathise with the frustrations and offer respectful opinions - when I feel I have something valuable to contribute.

This is all I'm doing here. I feel like I'm making a valid observation, but in doing so, there's a strong sense of having to dance around a very emotive and divisive topic.

Here goes ??...

Background: I was recently asked what 'Equal Opportunity' means to me. Because of how much time I spend immersed in a politicised environment (i.e. I use social media...), I immediately jumped to 'Diversity'.

But I was wrong to do that, and luckily I caught myself.

You see, 'Diversity' is the same as 'Equal Opportunity'. The former, and I'm not saying anything novel here, denotes a utopic world in which there is equality of outcome (so everyone is completely proportionately represented), while the former denotes a practical, achievable world in which everyone gets as close as reasonably possible to a 'fair crack' at success in their chosen pursuits.

A world in which, where reasonable adjustments can be made to help out someone who is clearly disadvantaged through no fault of their own, are made. The ideal being that we promote meritocracy (the underlying principle behind Capitalism, the socio-economic model we in The West still like to think of ourselves as operating under).

This is a prevalent business issue today, and one I'm sure is on the minds of virtually every CEO out there at this point.

Yet, there is a risk that, if the outcome of the organisation's recruitment and selection processes is not diverse (and that can range simply from reviewing the percentage split between male and female Directors, all the way through to detailed analyses of pay and position across several strata e.g. gender; sexual orientation; disability; race; age; socio-economic background; country of origin etc.).

The question being asked is, of course, where does this end? How much further can we analyse and pick fault?

If you think about it, there is no end; this can go on forever.

I personally fear a world in which I'm pressured to choose a lower quality candidate for my team, purely to meet an agenda that's been decided by someone else. A world in which I, in full disclosure, as a white, heterosexual, male, could be that person discriminated against in my own career; because I don't fit that agenda. A world in which we are, indeed, judged by what we are, not who we are... A world in which positive discrimination becomes the control against Diversity Risk...'.

Maybe I'm unjustified in thinking this, but I've yet to have my fears allayed.

So, putting 'Diversity' to one side, how do we ensure we are achieving 'Equal Opportunity'?

Well, I believe Internal Audit can play a key role here: To use an analogy:

You're performing standard a key controls audit. Do you go to the financial reports (Profit and Loss; Balance Sheet; Statement of Equity etc.), see that, for example, Current Assets are lower than you would expect them to be, and immediately conclude that inventory is being misappropriated?

No.

Sure, this could be one of myriad reasons for Current Assets being lower than you expected. But until you go reverse engineer the process and review the controls in place, you'll neve truly understand the root cause of the issue. You merely have the outcome.

So, we now have companies reporting that they have 'x percentage of female Directors', for example. Well, what assurance is there that this was the result of adequately designed, and effectively deployed, Equal Opportunity policies and procedures i.e. that this was not the result of positive discrimination (so, breaking this down:

1. Discrimination, even positive discrimination, is illegal (although there are caveats, as explained here);
2. The objective of most organisations is to add value to its customers (be that through beating competitor offerings, serving a social cause, or delivering services to taxpayers, this is true, regardless of the Sector the organisation operates in).

So recruitment processes should be oriented around achieving the hire that can add the most value to service delivery, not to meet a societal expectation of Diversity (albeit that the societal expectation does factor into competitiveness these days, this being such a prevalent issue).

Like culture, which has been another challenge for IAs, hiring decisions are inherently subjective. Sure, we can have scoring systems (where candidates are marked quantitively for their respective performances in interviews/assessments/tests they're asked to undertake during the recruitment process), but even then, there's a degree to which the Hiring Manager(s) can influence this.

This is a relatively new issue, but I see Internal Audit accept it readily; unquestionably. This is not how I conduct myself as an Internal Auditor. I work based on evidence, not on social perception, not on gut feeling, not on my personal perception of what is right and what is wrong; evidence.

I'd like to see Internal Auditors not taking this issue at face value; at the what/outcome. Rather, I'd like to see them exploring how and why the outcomes are being achieved.

I'd like to see Internal Auditors bringing this back to that existential question: "does this entity I am auditing most efficiently and effectively support the achievement of organisational objectives?". If not, then we are doing ourselves, and our clients, a disservice.

We could be providing assurance to stakeholders that the process followed was indeed all followed correctly and fairly; regardless of what the outcome may be. That the best talent was secured, unhindered by unnecessary biases, as much as was reasonably practicable...

??

Conclusion: I really hope this

a) resonates with you;

b) encourages respectful debate/further exploration of this issue or

c) prompts someone out there to educate me as to what I'm missing here/why my observations are wrong/flawed.

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