ISQM1 AND ROOT CAUSE ANALYSIS 4 - RCA, CULTURE & TRANSFORMATIONAL CHANGE

The proposed International Standard on Quality Management (ISQM1) paper sets out a structure of wide-ranging proposals that, when implemented, will encourage substantial changes in quality management related to audits, reviews of financial statements and other assurance or related engagements. 
 
At the core of ISQM1-ED is a genuinely proactive, risk-based approach to quality management.  One that proposes high quality Root Cause Analysis (RCA) as the preferred method for firms to ensure that audit deficiencies are fully understood, addressed and explained.  As global RCA specialists within audit and accountancy, we have prepared four short articles expanding upon the objectives and benefits of RCA, as laid out within the proposed ISQM1 framework.
 
 
ISQM1 and Root Cause Analysis. Article 4.
Root Cause Analysis, Culture and Transformational Change in Audit and Accountancy
 
In this short article, the final of 4 on Root Cause Analysis (RCA) in the Audit and Accountancy profession, we will be looking at how firms can utilise structured problem solving to support the forms of cultural change that the ISQM1-ED is encouraging.
 
As highlighted throughout ISQM1-ED, a new and substantially improved approach to quality management is expected if firms are to better tackle any audit deficiencies.   In addition, ISQM1-ED directly addresses the topic of culture within firms some 20 times, but how does Root Cause Analysis contribute to this particular aspect of the paper?
 
To answer this, we first have to come out of the audit and accountancy sector and reference firms operating in sectors where Root Cause Analysis is already well established. These organisations will often refer to an effective problem-solving process as having three essential components.  These are usually defined as method, skill and culture.  The first two are relatively straightforward, at least in conceptual terms.
 
First of all, a firm has to adopt a structured problem-solving method and with that will come the technical process, along with many secondary benefits, for example, a common language, uniform behaviours and shared expectations.  From here a firm is in the position to move to stage two and develop the finely tuned skills that will transform the outcomes from the acceptable to exceptional.  It’s this stage that delivers the initial shift from corrective to preventative problem-solving. This takes time, underpinned by a commitment of resources from within the company.   The final stage of the process is the emergence of a stronger problem-solving culture. Establishing a strong RCA culture is a crucial contributor to a whole host of significant transformational changes that manifest within and between the disciplines that coexist in any large organisation.
 
Firms simply cannot improve unless they genuinely aim to consistently seek out and solve their problems.  For most there are no shortcuts, in the main because these have already been explored long ago.  In reality it means undertaking a profound cultural change which must begin from the top.  Following a systematic Root Cause Analysis process, is encouraged by ISQM1-ED, not because it is helpful in delivering a cultural shift in problem-solving, but because it is essential.  There are no hacks, not even for firms with a wealth of experience. All firms have problems, many of those problems have to be solved, and a shared, rigorous and structured method will always beat incoherent, ad-hoc equivalents ‘hands-down’.
 
In practice, a high quality structured problem-solving method is often ‘easy to understand but hard to master’. Because of this there is a likelihood that an organisation may misjudge what it takes to effectively implement and utilise a good quality process. The likely outcome is an initiative that stalls at the first fence, or worse than that, is fully implemented (using precious time and money) but is ineffective.
 
But for firms who get it right, a structured problem-solving method and culture is integral in making the leap from continual solutions to continuous improvement. Senior Managers and CEOs are often astounded by the number of long-standing challenges that a firm can successfully address, even in the early stages of an RCA programme. So much so that some wonder if it’s simply a case of the ‘low hanging fruit’ being picked, and that at some point the law of diminishing returns has to kick in.  When in fact the opposite applies. 
 
Firms that successfully embed a culture of structured problem solving, underpinned by a coherent and evidence-based method never see any let up in improvement.  Their teams solve a greater number of functional and practical problems, which frees them up to be smarter and more tactical in their long-term problem solving.  From here it is a small leap for the RCA mindset and method to underpin a firm’s strategic and organisation-wide decision making. This delivers a culture where problem solving is no longer about fixing particular problems, it’s about always striving to do things better and knowing ‘how’ you did things better. 
 
ISQM1-ED demands that firms introduce a proven structured Root Cause Analysis method that will deliver a substantially improved problem-solving culture. Sologic lead the way in delivering training, software and leadership in Root Cause Analysis methods used by many of the world’s most successful organisations.  Contact Us for further details.