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Business auditor reveals the 7 most frequent failures by Australian organisations

A leading global risk management provider has revealed the most common reasons why organisations fail to meet the goals they set.

SAI Global is a trusted global leader in risk management solutions through its standards, assurance and training offerings across more than 130 countries. Over the years they’ve audited thousands of organisations – from the ASX top 200 to SMEs.

Principal Advisor in Business Improvement at SAI Global, David Smith, carries out training and certification for organisations seeking to meet the ISO 9001 Standard for quality management systems.

He explains the audits are designed to uncover any issues in the business that would be a barrier to meeting this goal.

“We have highlighted the most frequent audit failures, because we believe Australia still has a long way to go to producing the highest quality services and products,” he notes.

“Problems associated with quality usually come from organisations failing to set realistic objectives; and not effectively marrying their processes, systems and employee talent cohesively within their organisations to meet those objectives.”

SAI Global’s top 7 businesses failures, as revealed by its audits:

1. Lack of effective strategic planning.

Audits by SAI Global seek proof of a business strategy, and proof that the strategy is being reviewed and followed, that the business understands its strengths and weaknesses, and its market and competition.

David says audit failures here are more common among small-to-medium businesses.

“We find smaller businesses more commonly have less of a focus on strategy and direction. They are too busy running their business and don’t have the resources to look at the bigger picture.

“As such, they have less of an understanding of the competitive environment, are less able to compete, and often struggle to identify opportunities and grow.”

2. Mid-level and junior employees are in the dark about the business’ objectives.

The audits also look for evidence that senior management has cascaded measurable objectives – and the necessary resources – to relevant functions in the organisation.

Surprisingly, this is among the most common audit failures, David says.

“This leads to the ‘silo’ effect, where internal teams are working independently of each other. Businesses that fail this aspect of their audit commonly struggle to meet their objectives.”

3. Important functions of the business are not monitored.

Quality management audits look for evidence that the organisation is monitoring performance at each appropriate level.

“For instance, a company might want to improve the efficiency of its customer-facing staff but is unlikely to achieve this if they don’t implement a scheduling system they can measure,” David explains.

“Our assessments of organisations have found that monitoring processes have not always been developed or followed. Again, this makes it a significantly more challenging for businesses to meet their goals.”

4. Short-sighted leadership.

Leadership is an area in which successful small-to-medium businesses often shine, but big business can sometimes fall behind.

“In large organisations, I have often seen a section head focus on their own area, not the organisation as a whole,” David notes.

“This can lead to the ‘silo’ effect and hence inefficiency.”

Auditors often identify this problem by assessing the linkage of processes between sections and the flow of information and work.

5. Conflicting systems, processes and objectives.

Another common problem frequently identified in the audits are internal systems and objectives within individual departments that clash with the organisational systems and objectives.

For instance, an organisation’s call centre may have an efficiency target that requires its operators to limit their call times with each customer.

This could mean that all of the information required from the customer to provide a quality service is not obtained and this can hinder the achievement of the quality service objectives set by the organisation.

6. Employees don’t receive support to develop competence.

Auditing the qualifications and competence of employees in various roles is also included in SAI’s audit process and too often it reveals initial support is limited.

“When we interview employees, most tell us they were put into a role with very little mentoring and support. As a result, they have difficulty in fulfilling the requirements of their role, particularly early on,” David says.

7. Failing to identify and solve problems.

Senior management often fall prey to using profit and loss statements as the only way to monitor the health of the company and make strategic decisions.

“Basing decisions on financials without a focus on the quality of the organisation’s products and services happens a lot – and is not an effective means of identifying problems,” David says.

In the case where organisations do identify a problem, a significant proportion of audits show that managers don’t have the capabilities available to solve them.

When the ‘silo’ effect is occurring, problems are sometimes hidden in that department and this can have a negative effect on the whole organisation.

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