Audit and Improvement

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I have been reading The Audit Society by Michael Power, after it was recommended to me in relation to my research. Written in 1997, it describes the processes and trends in which western societies have developed audit and assurance processes to the point of them being endemic, and asks why this is, and is it really what we want?

My take of this story is that during the mass expansion of the industrial revolution and as businesses and organisations grew, the people with the money, shareholders etc., who took the risks to establish businesses could no longer see for themselves how it was being used or even know the people spending the money on their behalf, leading to a concern their money may be used fraudulently and inappropriately, leading to the breaking down of trust.  Thus this began, initially from a financial perspective, the growth of the audit and checking industry whereby third parties were on the lookout for fraud, giving shareholders some ‘comfort’ and alleviating their fear.  Problems of fraud, mis-reporting and so on were not necessarily eliminated but were now identifiable, and steps could be put in place for shareholders to be assured of appropriate use of funds and hold accountable fraudulent or incompetent employees where needed, (Poldark being summoned to a board meeting to justify his expenditure in his re-opened mine, comes to mind!)

Initially all transactions were inspected however overtime given the growth of the businesses and organisations even this became impractical and furthermore, those running the businesses rather than the owners didn’t really like being inspected, thus agreements to only partially check transactions or to sample transactions became more commonplace, leading to the developing of sampling techniques often used in quality control.  Ultimately, given resource constraints by both delivering audits and those being audited, this has developed into the risk assessment process, so that areas are assessed based on their risk level to ensure inspection resources are focussed on key areas and with organisations having to have similar processes so that they could be audited.

Power describes how these audits focussed on three elements, economy, efficiency and effectiveness and notes that given much of this started within finance, often the emphasis was more on the first two than the third, and that effectiveness was much more a contentious issue, covering difficult to measure areas such as leadership as well as quality and outcomes.

Over time these audits spread from only financial transactions to other areas such as environmental, clinical and engineering technical audits that checked other areas and often required more multi-disciplinary input, generating turf war problems between professions each challenging to seek supremacy over the audit process and developing processes linked to their own professional skill sets and protecting entry to audit careers through professional qualifications  (ouch, sounds a little too familiar).   The growing process of audit also ensured that work, particularly former ‘black box’ work protected by professional groups (who have often found inventive ways to resist these changes and who resented the inference of dis-trust), was now increasingly opened up, to be transparent and measurable.  However, this was all based on an assumption that all things could be measured and that this is desirable and had no unintended consequences, and in many cases the measurement and reporting has become an end in itself, with stories of gaming, ritualistic compliance and other problems.

I haven’t yet completed reading the book, but it has made me think about improvement work.  I can seem some parallels and connections here in the history of the development of audit and the development of engineering technical audit and quality improvement approaches.  The quality control work in particular influenced the work in Toyota through the use of statistical process control (SPC) and the ideas of transparency across areas is similar; consider a visual board near a production line in a lean organisation, typically showing actual cycle time versus takt time and the production volume and quality rates of the day etc., in many ways the equivalent to real time audit that anyone working on the line – or off it, a third party – would be able to observe and use.  Though the use of the data on the line in organisations like this, is usually not used for ‘shareholders’ worried about trusting their employees, but instead for local problem solving to ensure better quality for customers

To me the developments of audit and improvement seem to have been utilised for different people (shareholders and customers respectively), by different people, (objective third party vs trusted employees) and also for a different purpose. The original development of the audit work seems to be due to fear of fraud whereas what I understand about the development of post-war Japan (and maybe I am mis-informed), was more to do with re-building a country and all the companies pulling together to do that and in that sense more of a purpose for improvement connected to hope rather than fear – the fault line between improvement and inspection approaches.

Given how endemic audits have become, with third party reviews being mandatory in healthcare organisations in the UK e.g. external & internal audit (economy & efficiency), 3 yearly governance reviews, CQC inspections (effectiveness) etc, as well as an increased focus on self-declarations and ‘internal’ audit processes delivered corporately e.g. ward accreditation processes and so on, it could be argued fear of medical error, harm and continued cost inflation drives these different healthcare audits, to ‘comfort’ all of us that something is being done.  The challenge though now is how to ensure these audits whilst originally built on mis-trust and fear can now be adapted not just to ‘assure and hold accountable’ employees on behalf of shareholders (and their equivalents including patients) but also to provide important information and data to inform and ensure improvements for their customers and most importantly their patients so that they need not fear.  Organisations like Toyota have already shown us it is possible to do this and how they have done this in their context and culture, in very challenging circumstances; in healthcare we need to keep trying to adapt it to ours.

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About joyfurnival

Interested in TQM, lean, Quality Improvement, Healthcare, Regulation, Accreditation, Inspection Improvement Science, QI, improvement capability.
This entry was posted in Improvement, Regulation and tagged , , . Bookmark the permalink.

2 Responses to Audit and Improvement

  1. Hi Joy, a very interesting read! As an employee at the Wales Audit Office, I hope that we’re putting some of what you mention in the last paragraph in action, by working to share good practice between public services in order to help them improve. As we audit public services, we are in a great position to see what good things are happening and to bring learning from them together to share with others. It’s been great to be a part of, and as I work in the team it’s been fantastic to learn from so many people and organisations who are doing good things.

    Cheers,

    Dyfrig

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