''Lean'' for Internal Audit

Lean for Internal Audit
Overview
November 26, 2015
Copyright of this material is owned by Lean Agility Inc. Not for duplication or distribution without prior written consent.
Paul Choquette
Lean Six Sigma Black Belt, CIA, CCSA
Craig Szelestowski
MBA, Lean Black Belt

2
LEAN
less inventory
NOT
less people

The Challenge
With fewer resources :
• you must still deliver as much, and maybe more
to your clients
• faster and better
• while increasing staff engagement
3

Retirements backlog reduction plan
0
50
100
150
200
250
300
350
400
450
15/01/2013
16/01/2013
17/01/2013
18/01/2013
21/01/2013
22/01/2013
23/01/2013
24/01/2013
25/01/2013
28/01/2013
29/01/2013
30/01/2013
31/01/2013
01/02/2013
04/02/2013
05/02/2013
06/02/2013
07/02/2013
08/02/2013
11/02/2013
12/02/2013
13/02/2013
14/02/2013
15/02/2013
18/02/2013
19/02/2013
20/02/2013
21/02/2013
22/02/2013
18/04/2013
Date
Casesinqueue
Planned reduction
In queue actual
New process start date
Retirements Review
Improvement plan over three weeks
Stabilization
(remaining cases too far in the future to process)

Reduce time to staff a position
by 50%
Reduce claims and payments
time: 87 → 14 days
Waiting time for a hearing:
two years → four months.
Top 35 companies to work for
in Canada list – Report on
Business Magazine
6

7
Difficult to believe
until you see how.

What is Lean?
• A way of thinking + habits leading to
speed, flow, effectiveness and efficiency
• Find ways to stop doing things that are not
necessary in the eyes of your Client/end
user/key stakeholders.
• Apply this “found” capacity to higher value
added activities, creating speed and
quality without working harder or adding
resources.
8

Business
System
People
System
LEAN
9
Processes
that flow;
constantly
makes
problems
visible
Willing, able, and
enabled people
who constantly
solve these
problems
Faster, better,
more capacity
with inspired
people

Elapsed Time:
90+ % non-value added
“It takes us three weeks to process a
file…
…but the time we spend actually
touching it or working on it is only
four hours.”
10

Flow
11
If you took a file, put an imaginary video camera on it and sent it through your
process, what would it see?
bottlenecks
chronic
errors
missing
info
backlogs
unbalanced
work
last-in,
first-out
unnecessary
approvals
too many
handoffs
waiting
waiting
waiting
clarifications
unnecessary
steps

How backlogs often develop
12
MURA:
Unevenness
MURI:
Overburden
MUDA:
“Waste”
creates
made
worse by
Defects
Overproduction
Waiting
Not using skills
Transport
Inventory
Motion
Excessive Processing

THE CLASSIC EIGHT LEAN WASTES
“DOWNTIME”
13

Defects
When something is
missing, or must be:
• corrected,
• clarified, or
• adjusted/adapted
in order to be used.
14

Overproduction
When
• The work is started too
early
• Too much work passed
to next step
• Too much work is taken
on
15

Waiting
When the work flow
is stopped to wait
for…
16

Not fully utilizing people
When people are not used to their full
potential
17

Transport
When material and
information travels
further than necessary
18

Inventory
When work piles up
and stops flowing.
19

Motion
People move more
than required to do
their work
20

Excessive Processing
When the work is
processed more
than required.
21
Process Description
Create blue file with Post-It notes
JOB TITLE
File Creator
1- Create a file
10P/T: seconds
2CT: minutes
100C&A: %
Inv/WIP 52 Piece(s)
Batch: 3 Piece(s)
Process Description
Add up the first line, sign
JOB TITLE
Addition A Officers
2- Add Line A
20P/T: seconds
2CT: minutes
100C&A: %
Inv/WIP 5 Piece(s)
Batch: 3 Piece(s)
Process Description
Add up the second line, subtotal, grand
total, sign
JOB TITLE
Addition B Officers
3- Add Line B and Grand
Total
30P/T: seconds
72CT: seconds
99C&A: %
Inv/WIP 6 Piece(s)
Batch: 3 Piece(s)
Process Description
Verify accuracy of file, sign
JOB TITLE
Supervisor
4- Verify File
10P/T: seconds
5CT: minutes
60C&A: %
Inv/WIP 31 Piece(s)
Batch: 3 Piece(s)
Process Description
Verify accuracy of file, sign
JOB TITLE
Manager
5- Review & Approve
15P/T: seconds
29CT: seconds
50C&A: %
Inv/WIP 6 Piece(s)
Batch: 3 Piece(s)
Department of Addition (DoA)
Current State Value Stream Map (VSM)30 3030
Requestor
30 3030
Requestor
FUTURE STATE
Minimum Lead Time: 21 weeks (5 months)
Maximum Lead Time: 67 weeks (7 months)
Touch Time: 19 days
Reference Checks
Delegated Manager 0
CHRBP: Build templates, contact references, check
logistics, evaluation of checks; 2 references/candidate
P/week Inv P0 0
PT 15 mins
CT 3 wks
C&A 0 %
Inv C 0
Total 0
Batch 1
Correction Demand % Time/ week
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
0 0 minsTotal correction demand
OK 90%
NOT
OK10%
Create forms and sign
Delegated Manager and Board 0
Board, candidates, exams, screening forms, (3X)
P/week Inv P0 0
PT 1 hrs
CT 2 days
C&A 0 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Follow Up if references not ok
P/week Inv P0 0
PT 0 hrs
CT 0 days
C&A 0 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Check References Lead Time: 2-4 weeks
BIZ Touch Time: 2-3 hours/candidate
Compile Assessment results/report
P/week Inv P0 0
PT 2 hrs
CT 0 days
C&A 0 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Review Assessment results/report pkg & create pool
P/week Inv P0 0
PT 0 hrs
CT 0 days
C&A 0 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Create Results Letters
HR Assistant 0
P/week Inv P0 0
PT 1 hrs
CT 1 days
C&A 30 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Review Results Letters
HR Advisor 0
P/week Inv P0 0
PT 15 mins
CT 1 wks
C&A 66 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Fill out Right Fit form
Delegated Manager 0
CHRBP
P/week Inv P0 0
PT 1 hrs
CT 2 days
C&A 0 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Review Right Fit Form
HR Advisor 0
P/week Inv P0 0
PT 30 mins
CT 2 days
C&A 50 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Verify Conditions of Employment
HR Assistant 0
P/week Inv P0 0
PT 5 mins
CT 0 days
C&A 50 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Notify Candidate Verbally
Delegated Manager 0
P/week Inv P0 0
PT 15 mins
CT 3 hrs
C&A 0 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Value Added Fill out Security Clearance Form
Delegated Manager / Admin Asst 0
CHRBP
P/week Inv P0 0
PT 5 mins
CT 3 hrs
C&A 0 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Conduct Security Clearance (Reliability)
Security 0
P/week Inv P0 0
PT 0 mins
CT 3 days
C&A 0 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Official Languages Process
HR Assistant 0
P/week Inv P0 0
PT 5 mins
CT 0 days
C&A 50 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Security Lead Time: 1 day (existing clearance) 6 months (no existing clearance, Secret)
Touch Time BIZ: 10-30 minutes
Touch Time HR: 5 minutes
Conduct Security Clearance (Secret)
Security 0
P/week Inv P0 0
PT 0 mins
CT 26 wks
C&A 0 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Re-Verify Priority Clearance
HR Advisor 0
Occurs if more than 2-3 months from first priority
clearance; Non-Value Added?
P/week Inv P0 0
PT 0 mins
CT 0 hrs
C&A 0 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Create Notice of Consideration
HR Assistant 0
CHRBP
P/week Inv P0 0
PT 20 mins
CT 1 days
C&A 0 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Create Notice of Appointment
HR Assistant 0
CHRBP
P/week Inv P0 0
PT 5 mins
CT 1 wks
C&A 75 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
NO COMPLAINTS
CO
MPLAINTS
Informal Discussion
Delegated Manager 0
CHRBP
P/week Inv P0 0
PT 0 mins
CT 0 wks
C&A 0 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Prepare Letter of Offer
HR Assistant 0
P/week Inv P0 0
PT 20 mins
CT 1 days
C&A 75 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Review Letter of Offer
HR Advisor 0
P/week Inv P0 0
PT 10 mins
CT 1 days
C&A 75 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Verify Letter of Offer
Delegated Manager 0
P/week Inv P0 0
PT 30 mins
CT 2 wks
C&A 20 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Send letter to employee
HR Assistant / Coordinator 0
P/week Inv P0 0
PT 0 mins
CT 1 wks
C&A 0 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Candidate signs letter of offer
Candidate 0
CHRBP
P/week Inv P0 0
PT 0 mins
CT 1 wks
C&A 0 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
Value Added
Enter signed letter into PeopleSoft
HR Assistant 0
CHRBP
P/week Inv P0 0
PT 0 mins
CT 1 wks
C&A 80 %
Inv C 0
Total 0
Batch 1
0 0 mins1.
0 0 mins2.
0 0 mins3.
0 0 mins4.
WF Officer/Manager
PT: 2 minutes
CT: 0.5 days
Issue request for HRSR
Clerk/Admin Coordinator
PT: 5-10 minutes
CT: 0.5 - 1 day
Create HRSR
WF Officer / Manager
PT: 2 minutes
CT: 0.5 day
Review HRSR and make
changes (if required)
Regional Management
Board
(meets every 2 weeks);
covers WMB challenge
PT: 2 minutes
CT: 0.5 day
Regional Management
Board Review
WF Officer or Coordinator
PT: 2 minutes
CT: 0.5 day
Send Signed docs to HR
Can be done in
parallel earlier in
the process if
appropriate – eg.
At initial screening
Can be done in
parallel earlier in
the process if
appropriate
Can be done in
parallel earlier in
the process if
appropriate
Eliminate
expiration date on
pools where
posssible
Add local, regional,
national and
interdepartmental
pools to website
Send written
questions in
advance to
referees

Tools: Value Stream Mapping
22

Sustaining: Visual Management
23

Sustaining: “Stand-Up” Meetings
24

Typical Challenges to Implementing
Lean Government
10% technical
90% human
25
Typical
Challenges
10% technical
90% human

28
How does Lean
apply to
Internal Audit
work?

Specific Lean Issues in IA
• Too much work taken on – lowers
productivity and quality
• Audit plan not executed consistently –
inconsistent data needs rework or re-
collection
• Documents: Audit Plan and Audit
Reporting – Too many edits, takes too
long and too much effort to get to final
version
29

TOO MUCH WORK TAKEN ON
30

Too much
work is
taken on…
When we “multi-task*”, we get less done.
*actually, “switch-task”
31

Time Yourself
Scenario 1 (Focus-Tasking)
1. Write:
Multitasking eats time
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
2. Note how long that took.
32

Time Yourself
Scenario 2 (Context Switching)
1. Write one letter, then one number,
one letter, one number, etc:
33
2. Write down how long that took.
Multitasking eats time
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

AUDIT PLAN NOT EXECUTED
CONSISTENTLY – INCONSISTENT DATA
NEEDS REWORK OR RE-COLLECTION
35

36
Visual warning
Predictive
Preventive
“Poka Yoke” – Error Proofing

Sustaining: “Stand-Up” Meetings
37

Repeatability and Reproducibility
Gage R&R
38
Assessment Agreement
Appraiser # Inspected # Matched Percent (%) 95.0% CI
Sally 50 3 6.0 ( 1.3, 16.5)
Joe 50 9 18.0 ( 8.6, 31.4)
Betty 50 1 2.0 ( 0.1, 10.6)
Bob 50 5 10.0 ( 3.3, 21.8)
Sue 50 4 8.0 ( 2.2, 19.2)
David 50 12 24.0 ( 13.1, 38.2)
# Matched: Appraiser's assessment across trials agrees with standard.
Individual accuracy
Appraiser # Inspected # Matched Percent (%) 95.0% CI
Sally 50 25 50.0 ( 35.5, 64.5)
Joe 50 34 68.0 ( 53.3, 80.5)
Betty 50 22 44.0 ( 30.0, 58.7)
Bob 50 28 56.0 ( 41.3, 70.0)
Sue 50 25 50.0 ( 35.5, 64.5)
David 50 36 72.0 ( 57.5, 83.8)
# Matched: Appraiser agrees with him/herself across trials.
Repeatability

Gage R&R (cont’d)
39
# Inspected # Matched Percent (%) 95.0% CI
50 0 0.0 ( 0.0, 5.8)
# Matched: All appraisers' assessments agree with each other.
Reproducibility
# Inspected # Matched Percent (%) 95.0% CI
50 0 0.0 ( 0.0, 5.8)
# Matched: All appraisers' assessments agree with standard.
Overall accuracy… Decisions routinely made using this data as a base… 0% accuracy!

AUDIT PLAN & REPORTING TAKES TOO
LONG, TOO MUCH EFFORT
40

Creation of Spring project update (intranet article)
41
DM
ADM ADM EA
Project
DG
Project
DG EA
Project
Director
Project
Liaison
Project
Manager
Comms.
Liaison
DG
Comms
CIO CFO CHRO COO
DM EA
Subject
Matter
Expert
Subject
Matter
Expert
Subject
Matter
Expert
Subject
Matter
Expert
Subject
Matter
Expert
Article
approved
Article
posted
on
Intranet
Fall
Two-page intranet article
Handoffs 97
Lead Time 9 months
Effort Time >100 hours
Organizational
Learning
?

Issues in
document creation
work
42
Many review
“loops”
Too much
work in
progress
Unclear
“voice of
client”
Preventable
work / 8 Lean
wastes
“Waterfall”
Development
Workflow is
invisible

SUMMARY
Lean for Internal Audit
43

Summary
1. Not a “project” – a business
approach and tools, create habits
2. Applies equally to your client’s work
as well as IA work
3. Makes Internal Auditors more
effective and delivers better results
to clients
44

Lean Internal Audit Yellow Belt
Training
Ottawa, Feb. 22-24, 2016
To register:
anne@leanagility.com or
leanagility.com
Craig Szelestowski
Craig@leanagility.com
(613) 266 4653
Paul Choquette
Paul@leanagility.com
(819) 598 1426
45

''Lean'' for Internal Audit

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