Where does Internal Audit report? How does this affect your independence and how can you use this to be able to lead an effective internal audit group?
Getting a seat at the table is built upon what value you bring to the organization as well as what perceived future value you will bring as well.
Professional relationships are going to be one way that we can raise awareness to the value that we provide, and these relationships may go beyond our direct report.

In today’s episode we meet again with Hal Garyn to discuss how to develop professional relationships to help further your career.


00:00:01.469 –> 00:00:11.519
Jason Mefford: Welcome to another episode of jamming with Jason and today we’re going to tackle the age old question of where internal audit should report.

00:00:11.940 –> 00:00:23.520
Jason Mefford: right because there’s a lot of people going back and forth on oh you’ve got to report to the CEO Oh, you need to report, at least to the CFO a How does this all come together kind of in in your independence.

00:00:23.940 –> 00:00:35.280
Jason Mefford: And how you can actually have an effective value added internal audit group and so stay tuned because we’re going to talk and we’re going to actually answer that question.

00:00:35.640 –> 00:00:48.240
Jason Mefford: and give you some practical tips we guard lists of who you may report to on what you can do to improve your effectiveness in your organization so let’s get to the episode.

00:00:51.060 –> 00:00:53.370
Jason Mefford: All right, how I got you back again I keep rolling.

00:00:53.370 –> 00:00:54.570
Jason Mefford: back into these.

00:00:55.740 –> 00:00:59.040
Jason Mefford: I know I love doing this and it sounds like you do have a ball.

00:00:59.340 –> 00:01:02.460
Jason Mefford: Okay, so so let’s let’s talk about.

00:01:03.960 –> 00:01:12.570
Jason Mefford: The independence and the reporting relationship, a little bit because this tends to be one where.

00:01:13.470 –> 00:01:22.170
Jason Mefford: there’s you know there’s the aspiration of what kind of the standards or the profession is saying should happen.

00:01:22.920 –> 00:01:36.090
Jason Mefford: But the reality is, I think, less than five or 10% of the groups can actually achieve that aspiration right and so maybe let’s kind of talk about the aspiration.

00:01:36.690 –> 00:01:54.900
Jason Mefford: Practically where most people actually are and ways that, regardless of who you physically report to administratively are functionally how you can add more value to your organization, by focusing on a couple of different ways to develop relationships with key people.

00:01:55.980 –> 00:01:56.430
Hal Garyn: Excellent.

00:01:58.380 –> 00:01:59.550
Jason Mefford: So where should we jump first.

00:01:59.760 –> 00:02:08.460
Hal Garyn: Well, I mean let’s let’s start with you know what people would like to see happen, it is certainly advocate and okay.

00:02:08.940 –> 00:02:21.810
Hal Garyn: Ideally, ideally, you know for stature enhancing the ability for independence for enhancing the opportunities for objectivity and all that stuff.

00:02:22.710 –> 00:02:32.550
Hal Garyn: Ideally, the chief audit executive reports functionally to the audit committee, and has a strong relationship with the Chair of the audit committee.

00:02:33.120 –> 00:02:44.190
Hal Garyn: and administratively to the senior most executive in the organization, the CEO because that minimizes your you’re.

00:02:45.060 –> 00:02:56.610
Hal Garyn: The the likelihood that someone is you’re going to be auditing areas directly that someone is responsible for yes, the CEOs responsible for the entire organization.

00:02:57.390 –> 00:03:20.790
Hal Garyn: But they may not direct or preclude or influence you in certain areas over others because of their area of specific responsibility So yes, ideally report functionally to the chair of the audit the audit committee chair of the audit committee report administratively this CEO.

00:03:22.410 –> 00:03:25.860
Hal Garyn: And most surveys indicate that isn’t exactly what happens.

00:03:26.790 –> 00:03:28.980
Hal Garyn: No it’s not you know and.

00:03:29.190 –> 00:03:41.370
Hal Garyn: So it isn’t up to you, as the CA you might be able to influence it, you know, but it isn’t up to you the organization is going to decide where you report.

00:03:41.790 –> 00:03:50.850
Hal Garyn: Now if you’re not reporting functionally to the audit committee that’s problem, but I don’t think that’s what we want to talk about Now this is where you administratively report.

00:03:51.720 –> 00:04:08.100
Hal Garyn: And Okay, so your report to the CFO you report to the car oh you report to the clo the chief legal officer or the equivalent or wherever you know okay now make the best of it.

00:04:10.170 –> 00:04:23.430
Hal Garyn: You know, managed through what you need to do to ensure that you’re maintaining your forget about independence for a minute your objectivity as best as you can.

00:04:25.020 –> 00:04:32.280
Hal Garyn: Are you deciding where you think audit needs to spend its time or someone deciding it for you.

00:04:34.470 –> 00:04:47.580
Hal Garyn: And if you have control as much as you can have control in an organization, you have control over deciding where you’re going to spend your time then don’t worry about don’t worry about when you get over it.

00:04:50.280 –> 00:05:06.930
Hal Garyn: And look at the organization and say okay now where are the relationships, the most important to ensure my success and not fixate on where you report.

00:05:09.990 –> 00:05:20.610
Jason Mefford: yeah I think I think this is important and it’s you know because again like you said most most of the surveys say you know it could be the the you know head of finance head of legal.

00:05:22.380 –> 00:05:35.100
Jason Mefford: You know even sometimes further down to like a controller risk officer, whoever it happens to be right, and I think, as you and I have talked about this before, because because we both served as chief executives.

00:05:35.550 –> 00:05:46.620
Jason Mefford: I know I administrative Lee reported to a lot of different titled positions but also different people in those same titled positions right.

00:05:46.650 –> 00:05:58.710
Jason Mefford: Right and and it’s not so much about hey the CEO is going to be the best quote unquote practice person to report to.

00:05:59.220 –> 00:06:14.100
Jason Mefford: it’s not necessarily the title but it’s a lot to about the person themselves right and and I think kind of that point that you brought up of yeah even though we’d like to kind of control, but are you are you having.

00:06:15.270 –> 00:06:23.130
Jason Mefford: You know, are you taking input or you’re in and choosing where you’re going or you’re being told you can only.

00:06:23.640 –> 00:06:41.820
Jason Mefford: Go certain places right because that’s again it doesn’t matter who you report to if the CEO is telling you well, you can only look at these three areas and that’s it then again it’s the person not necessarily the position I think to write that matters.

00:06:42.450 –> 00:06:45.000
Hal Garyn: it’s the function of the individuals in the role.

00:06:45.570 –> 00:06:51.150
Hal Garyn: Where you were you were the people you report to and yourself.

00:06:52.500 –> 00:07:05.070
Hal Garyn: And is much more important how the individuals approach the roles and their interactions with each other, then the titles, that the people have.

00:07:05.910 –> 00:07:31.560
Hal Garyn: You know the salt, the the the person who is running internal audit who’s called the director of internal audit, but really wants to Title chief audit executive and they report to the vpn Controller and they really want to report to the CEO well the organization decided what you called.

00:07:32.160 –> 00:07:34.530
Hal Garyn: And the organization decided where you’re going to report.

00:07:34.980 –> 00:07:37.680
Hal Garyn: So move on.

00:07:38.850 –> 00:07:50.370
Hal Garyn: If that if you’re not going to be able to influence change there and work with the individuals that you’re working with and make it work.

00:07:51.300 –> 00:08:08.430
Hal Garyn: But it comes back to looking at the organization and deciding where are the relationships, not the reporting lines where are the relationships, the most important to maximize my success in the organization.

00:08:09.510 –> 00:08:10.800
Hal Garyn: And what am I gonna do about that.

00:08:11.760 –> 00:08:15.810
Jason Mefford: Well, I think I think that’s, the key point right because, like you said it doesn’t matter.

00:08:16.200 –> 00:08:23.100
Jason Mefford: I mean obviously you want a good relationship with the person that you administratively report to whoever That is right, so you’ve got to.

00:08:23.550 –> 00:08:33.570
Jason Mefford: you’ve got to develop that relationship, but what are the other key relationships in the organization, where you need to focus on, and you know, one of the.

00:08:34.860 –> 00:08:40.020
Jason Mefford: One of the experiences I had one of the companies that I worked with the.

00:08:42.090 –> 00:08:52.620
Jason Mefford: There was going to be a new CEO in the future right the CEO was going to retire within a couple years, and so there were certain people in the organization, who are kind of.

00:08:53.250 –> 00:09:07.200
Jason Mefford: thought of as potential replacements right This tends to happen, most of the time right there’s there’s a 234 executives that could take over that role you just don’t know who it is right.

00:09:07.860 –> 00:09:25.680
Jason Mefford: Well, a few years out I could tell who it was going to be now how did I know because I saw the person who was establishing the relationships with the board members and the owners of the company.

00:09:26.520 –> 00:09:42.930
Jason Mefford: And so, as an example right I would show up to a charity event right and guess who’s sitting next to you know that the the Chair of the Board well it’s this President within the company right yeah.

00:09:43.980 –> 00:09:52.200
Jason Mefford: Who was you know I remember, I think I was in the airport one time and and I saw this person walking with another board member.

00:09:52.680 –> 00:10:03.780
Jason Mefford: Right, so that person understood the importance of relationship building had establish those relationships, over a period of time he didn’t report.

00:10:04.290 –> 00:10:12.090
Jason Mefford: To those people, yes, he would give he would give you know his report to the board on what his operating division was doing.

00:10:12.480 –> 00:10:19.170
Jason Mefford: what he was doing more than just showing up and giving the report he was developing deeper relationship with those board members.

00:10:19.560 –> 00:10:27.090
Jason Mefford: Not a surprise when he took over a CEO right because, like I said I could see it coming I knew some other people that wanted it.

00:10:27.690 –> 00:10:34.500
Jason Mefford: But I knew they weren’t going to get it because I saw what this what this other person was doing right so So what are some ways that we can.

00:10:35.250 –> 00:10:53.580
Jason Mefford: Maybe learn from that or operationalize that then in our organization, who might be some of these these people that that we, as you know, there is the chief executive would be wanting to develop a better or deeper relationship with as well in the organization.

00:10:55.020 –> 00:10:59.520
Hal Garyn: Well, internal audit proverbial always wants the seat at the table.

00:11:00.780 –> 00:11:10.080
Hal Garyn: Right and if you don’t get the seat at the table by virtue of your title you don’t get the seat at the table by virtue of.

00:11:11.340 –> 00:11:24.180
Hal Garyn: What you’re going to do you get the seat of the table by what you have done, and you get the seat at the table, based on what value is perceived you’re going to be able to add.

00:11:25.020 –> 00:11:38.310
Hal Garyn: And that and who, where does it start, if you want to get that seat at the table and manage the perceptions, to ensure that you not only get it to get to keep and that’s the CEO.

00:11:40.050 –> 00:11:50.040
Hal Garyn: starts and ends there they set the tone if you’re showing up to meetings as a CEO and the CEO says what are they doing here.

00:11:51.960 –> 00:12:13.890
Hal Garyn: You know who invited them well you didn’t develop the relationship with the CEO that you needed to so It all starts and ends with the CEO So if you administratively report somewhere else in the organization you gotta develop that relationship with the CEO first and foremost.

00:12:15.780 –> 00:12:17.910
Hal Garyn: i’ll tell you i’ll tell you a story here.

00:12:18.930 –> 00:12:24.990
Hal Garyn: I was new CEO in an organization and I reported administratively to the CFO.

00:12:26.400 –> 00:12:38.070
Hal Garyn: And I quickly surmise that if i’m going to get anywhere in this organization and do what I know I need to do, I the CEO hold the keys to the kingdom.

00:12:38.820 –> 00:12:50.280
Hal Garyn: In terms of whatever they perceived of me and the role, I had in the organization, the rest of the organization would follow so as a new guy.

00:12:50.730 –> 00:12:59.520
Hal Garyn: I didn’t want to get anybody upset after I had come to that conclusion which probably is true in many organizations and most organizations, if not all.

00:13:00.270 –> 00:13:15.000
Hal Garyn: So I told my administrative boss, because I didn’t want to get his nose out of joint you know I told him I wanted I I believe I need to develop a stronger relationship with the CEO that I currently have.

00:13:18.180 –> 00:13:28.380
Hal Garyn: I here’s what I would like to do and how i’d like to go about it, are you okay with that and if they started doing all of this pushback stuff.

00:13:29.130 –> 00:13:39.090
Hal Garyn: I knew I was going to be in trouble, I was the new CEO their new organization and they embraced it okay good happy.

00:13:39.600 –> 00:13:53.220
Hal Garyn: So, then, I didn’t want to get them upset either So the first couple of meetings I set up with the CEO to develop the relationship and spend some chat time whether the CEO I went to the CFO and I said here’s what i’m going to talk to them about.

00:13:55.020 –> 00:14:06.360
Hal Garyn: And then, when the meeting was over, I traced back to the CFO his office and I said here’s what we discussed and after we did that twice, he said we stopped doing that I don’t care.

00:14:07.020 –> 00:14:15.600
Hal Garyn: Unless there’s something that’s gonna affect me or you think is gonna affect the organization just do it, and I was like Oh, thank God.

00:14:16.290 –> 00:14:27.480
Jason Mefford: yeah but see how the way you did that that that was perfect right because, again, a lot of times a CFO like that will have some miss.

00:14:28.800 –> 00:14:34.890
Jason Mefford: Some apprehensions about oh my gosh what are you going to be talking about to the CEO that i’m not going to know about right.

00:14:35.130 –> 00:14:41.760
Jason Mefford: Are you going to tell them what a bad person I am are you going to try to you know start reporting to them instead or you’re going to throw me under the bus right.

00:14:42.240 –> 00:14:52.440
Jason Mefford: A lot of times, people have those those apprehensions, and so the fact that you told the CFO before you told him afterwards right.

00:14:53.100 –> 00:14:57.270
Jason Mefford: And so you were being completely transparent not trying to hide anything.

00:14:57.780 –> 00:15:06.180
Jason Mefford: But then having the CFO say how quick coming back you don’t have to come back right now it’s their choice in you’ve.

00:15:06.570 –> 00:15:19.050
Jason Mefford: You started to establish a relationship with the CEO while also not pissing off your CFO right, so the way in which you did that was was awesome right, I mean, as far as so.

00:15:19.440 –> 00:15:35.550
Jason Mefford: If people are trying to do this, learn from that story that how how just had there, because if you don’t then that administrative reporter might think you’re trying to and around them, and nobody likes to be around it to the boss that will get you fired quick.

00:15:36.720 –> 00:15:37.320
Hal Garyn: and

00:15:39.600 –> 00:15:43.380
Hal Garyn: Your administrative boss, and the organization.

00:15:44.850 –> 00:15:51.840
Hal Garyn: almost always will have a stronger relationship with the board members than you do.

00:15:54.360 –> 00:15:59.190
Hal Garyn: They will able be able to wield influence and so.

00:16:00.420 –> 00:16:05.850
Hal Garyn: You got to manage that relationship carefully, because if you go sideways with them.

00:16:06.930 –> 00:16:13.200
Hal Garyn: And they want you out of the organization, they want to move you aside.

00:16:14.280 –> 00:16:30.900
Hal Garyn: They are going to start managing the Board and the audit committee in such a way, regardless of what it says on paper as to who can theoretically hire fire decide your compensation, we all know how it really works.

00:16:32.550 –> 00:16:43.530
Hal Garyn: And so it was that in that story that I told, which is a true story is that the way I wanted to do it no it wasn’t the way I wanted to do it.

00:16:44.460 –> 00:16:59.910
Hal Garyn: It was the way I learned to do it by seeing how others were successful managing the people in politics of the organization, it was keeping my eye on what I wanted to accomplish.

00:17:01.560 –> 00:17:16.800
Hal Garyn: Focusing on, as I told someone recently, you know be relentless about what you want to achieve not be relentless about the way about how to get it done.

00:17:17.400 –> 00:17:22.530
Hal Garyn: Be relentless and achieving the result, the result they wanted was the relationship with the CEO.

00:17:24.480 –> 00:17:32.250
Hal Garyn: And if I had to go about doing it differently than the way I wanted to to get to the goal Fine, let it be that way.

00:17:34.140 –> 00:17:36.990
Hal Garyn: And so you know, at the end of the day.

00:17:38.280 –> 00:17:48.090
Hal Garyn: evaluate where whoever you administratively and functionally report to is the relationship with the CEO where you want it to be.

00:17:49.350 –> 00:17:53.430
Hal Garyn: If not, why not, and what are you going to do about because.

00:17:54.450 –> 00:18:16.440
Hal Garyn: If you as the CEO at and your staff want those seats at the table, want to be involved in the organization that that all starts and ends with the tone that gets set from the top it all starts and ends with the CEO It all starts and ends with how the seat what the CEO perceives of you.

00:18:18.570 –> 00:18:27.240
Jason Mefford: yeah because if you, you know again that little analogy right if if you want the seat at the table that’s an analogy people talk about all the time right.

00:18:27.390 –> 00:18:39.000
Jason Mefford: right then look at who decides, because I usually refer to it as like the big kid that you know the adult table and the little kids table right because I grew up in a big family so every time that we had.

00:18:39.540 –> 00:18:44.220
Jason Mefford: You know, big family dinner, there was the kids table, and then there was the adult table right.

00:18:44.970 –> 00:18:53.790
Jason Mefford: Well, you know you always wanted to sit at the adult table, but so if you want to sit at the adult table who decides who said that the adult table.

00:18:54.330 –> 00:19:03.150
Jason Mefford: it’s usually the CEO right, and I think like you said before right, if you want that seat at the table it’s based on what you’ve done before, but also.

00:19:03.600 –> 00:19:16.260
Jason Mefford: The value you’re going to provide now, why do we not let the little kids sit at the adult table, because the adults, want to talk about adult things right, and if there’s kids at the table.

00:19:16.650 –> 00:19:24.870
Jason Mefford: Then you’re not going to talk about those adult things right i’m not talking about adult things but maybe it is adult things depending on your family but.

00:19:25.560 –> 00:19:35.580
Jason Mefford: But you know so it’s the same thing right is that you have to be able to contribute to the conversation going on at the table.

00:19:36.030 –> 00:19:50.040
Jason Mefford: And if you haven’t developed relationship with some of those people that are already sitting there that are already saying hey you know what I want how here because I value what he’s talking about so next time we have one of these let’s invite him, please right.

00:19:50.100 –> 00:20:01.470
Jason Mefford: Right that’s that’s kind of where and why this relationship building is so important because you’re never going to get there, if you don’t have relationships with the people that are at the table.

00:20:02.010 –> 00:20:05.040
Hal Garyn: yep and and taking your your your.

00:20:06.240 –> 00:20:08.580
Hal Garyn: analogy there just a step further.

00:20:11.400 –> 00:20:19.170
Hal Garyn: When you’re when you’re developing the relationship with the CEO are you going there and talking about you want to talk about.

00:20:19.230 –> 00:20:22.140
Hal Garyn: Are you going there and talking about what they want to talk about.

00:20:22.560 –> 00:20:28.080
Hal Garyn: Are you having the kid conversation or the adult conversation I don’t mean to be that you know.

00:20:28.770 –> 00:20:46.350
Hal Garyn: The CEO is gonna is not going to give you the time of day and there’s not going to look forward to your meeting and maybe even you’ll start finding those meetings get canceled rescheduled or whatever unless you’re going and talking about what they want to talk about.

00:20:47.970 –> 00:21:05.610
Hal Garyn: how you can spin that to your take on the subject and add value and add insight, but you can’t go in there with the list of things you want to talk about, because that will not develop a relationship develop a transaction.

00:21:07.500 –> 00:21:09.600
Jason Mefford: Well, we don’t have time to hit on it today, but.

00:21:09.600 –> 00:21:14.760
Jason Mefford: that’s relevant relevance, you know that we’ve talked about so many times before.

00:21:15.060 –> 00:21:17.700
Jason Mefford: yeah but yeah I think you know again it’s.

00:21:18.720 –> 00:21:28.410
Jason Mefford: You know I think we’ve given people some good good things today, you know just so just to kind of wrap up a little summary right don’t don’t get too bent out of shape on who you report to.

00:21:29.010 –> 00:21:36.570
Jason Mefford: don’t necessarily try to force changing that because you don’t have any control over it right.

00:21:36.960 –> 00:21:49.350
Jason Mefford: But what you can control is the relationship that you have both with your administrative reporting, you know executive that you’re reporting to, and also to some of these other key executives.

00:21:49.770 –> 00:22:01.770
Jason Mefford: Obviously CEO being a big one that you want to try to develop but there might be others as well too right because you know, like you said how if you if you want to get invited to the to the table.

00:22:02.520 –> 00:22:09.060
Jason Mefford: You got to be talking about what people at the table are talking about and you’ve got to develop the relationships with people.

00:22:09.570 –> 00:22:27.210
Jason Mefford: That want you there right that you are adding to the con to the conversation, and they actually want you there if people are requesting that you’re at the table you’re going to come to the table, but if you’re over there saying come on dad let me stay at the big table.

00:22:28.590 –> 00:22:31.530
Jason Mefford: it’s gonna be like no grow up right, you know.

00:22:33.270 –> 00:22:37.140
Jason Mefford: So anyway good good good stuff good stuff any any final things.

00:22:37.350 –> 00:22:46.230
Hal Garyn: yeah the, and so the only thing i’d add to that is there is actually a relationship that’s even more important than really building a relationship with the CEO.

00:22:47.250 –> 00:22:52.740
Hal Garyn: And that’s building a relationship with the CEOs in the admin support person.

00:22:53.250 –> 00:22:54.120
Jason Mefford: Oh yeah.

00:22:54.180 –> 00:22:55.440
Hal Garyn: yeahs to the kingdom.

00:22:56.460 –> 00:22:57.990
Hal Garyn: They can tell you.

00:22:59.250 –> 00:23:06.510
Hal Garyn: They can get you access, they can block you access, they can get you moved up the list, they can stop you from moving anywhere.

00:23:07.470 –> 00:23:31.410
Hal Garyn: They can tell you what’s on their mind, they can warn you as you’re walking in the door for the conversation it’s been a really bad day here for and all that stuff so not only developed a relationship with the CEO but the bonus here is developed a relationship with their ad.

00:23:32.370 –> 00:23:48.660
Jason Mefford: Oh yeah no and that’s that’s a great point thanks for bringing that up because again it’s you know, when I look back at the the two companies, where I was CA yeah it was the relationships with with those you know executive assistants that made all the difference right.

00:23:49.980 –> 00:23:54.450
Jason Mefford: So yeah make sure and take time to do that as well alright well thanks how.

00:23:54.720 –> 00:23:56.550
Hal Garyn: yeah it’s fun.

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