Internal auditors need training on human behavior to mitigate culture risk

A recent survey conducted among internal audit leaders reveals that executive behavior is considered the most significant indicator of culture risk within organizations. An impressive 68% of respondents ranked executive behavior as the key factor influencing the overall organizational culture.

The study emphasized the critical role played by executives in shaping and influencing the culture of their organizations. The behavior demonstrated by top-level management significantly impacts the ethical standards, values, and practices embraced by the entire workforce.

However, the study also revealed that 37% of organizations do not formally assess culture, despite the potential risks associated with executive conduct.

The report rightly suggested that traditional qualitative approaches like root-cause analyses and behavioral observation, although useful, may not provide comprehensive insights into culture risk and that internal auditors should be trained in more formal, holistic, and quantitative methodologies to assess culture effectively. This includes developing data-based approaches, defining key culture risk indicators, and establishing robust culture assessment programs.

To address this pressing need, AuditBoard’s report authors, Cynthia Cooper and Richard Chambers, have developed a Culture Assessment Toolkit, offering valuable resources for internal audit teams. By taking a data-driven and quantitative approach to culture assessment, auditors can help organizations gain a deeper understanding of the impact of culture on success.

While a data-led, quantitative culture assessment toolkit can absolutely provide valuable insights, a deep understanding of human behavior, motivation, and psychology is essential for a comprehensive assessment of organizational culture.

By investing in training on human behavior and thinking patterns, organizations enable their internal auditors to conduct culture assessments with greater effectiveness and accuracy. Auditors equipped with this knowledge can identify underlying cultural issues, provide valuable insights to management, and contribute to the establishment of a healthy, ethical, and high-performing organizational culture.

Here’s why:

1. Contextual Understanding: Human behavior is complex and influenced by various contextual factors. Without an understanding of these factors, auditors may misinterpret or overlook critical nuances that shape culture. Factors such as social norms, power dynamics, and individual motivations require a deeper understanding to accurately assess culture.
   
   
2. Uncovering Unintended Consequences: Quantitative data alone may not reveal the unintended consequences of certain behaviors or decisions. Understanding human behavior enables auditors to identify the potential impact of actions beyond what the data shows. It helps in recognizing hidden patterns, biases, or systemic issues that can contribute to culture risks.
   
   
3. Behavioral Analysis: Human behavior is not always easily quantifiable. Qualitative methods, such as behavioral analysis, are valuable in assessing culture. These methods require auditors to observe and interpret behavioral cues, understand nonverbal communication, and analyze individual and group dynamics. Such insights are crucial for a comprehensive culture assessment.
   
   
4. Identifying Cognitive Biases: Cognitive biases, which affect decision-making, can significantly impact organizational culture. Auditors trained in human behavior can recognize and analyze these biases, allowing for a more accurate assessment of culture risks. Quantitative data alone may not capture the underlying cognitive biases that influence behavior and decision-making.
   
   
5. Providing Contextual Recommendations: A deep understanding of human behavior enables auditors to provide meaningful and contextually relevant recommendations to address culture-related issues. It allows auditors to consider the underlying motivations and psychological factors that influence behavior, guiding the development of effective strategies to foster a positive culture.

While a data-led, quantitative culture assessment toolkit can absolutely provide valuable data points, it should be complemented by a nuanced understanding of human behavior.

Internal audit teams need to combine quantitative analysis with qualitative insights to gain a comprehensive understanding of the organization’s culture. This holistic approach helps auditors identify culture risks, recommend appropriate actions, and contribute to the development of a healthier organizational culture.

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