The real relevance of internal controls and their development

Mutual exclusivity?

I’m hearing a lot of comments about the relevance and the redundancy of internal controls and especially internal controls development and internal controls training. A number of new management philosophies such as this one – pretty much unknown outside of the French speaking world, but mirrorred in philosophies such as the one of Ricardo Semler – talk about ownership and responsibility of the collaborators. I’ve written about this most recently here.

What surprises me is that these approaches are seen as mutually exclusive. As if internal controls are something bad, or something redundant or even limiting in a context where collaborators are given individual freedom. First, what any given responsibility comes the ability to respond, but also the obligation to explain what was done and how means (both budgets and people) were used. Well designed internal controls increase the likelihood the use was appropriate, effective and efficient.

More than a response to a single issue

But we should not see internal controls as just a procedure or a procedural aspect. We need to see it as a training for eventualities which will most certainly occur. The real value of using and learning about internal controls is that it teaches people to handle those unexpected occurrences which we will be confronted with, whether we like it or not. The best internal controls teach our collaborators to handle eventualities, even outside of the reach of those controls, because the habits of working with the controls have become so engrained that they become second nature in any type of situation.

Think about budget usage controls which are used at work and find their way into the home, leading to better budgetary control and a better life for a family. Or consider solvability checks required at the start of a contract being executed at regular intervals, ensuring the organisation doing the work remains capable of executing that work well. These are but a few examples.

Developing muscle memory

More than just considering the narrow scope of internal controls, consider the use, the training and the development of internal controls as the exercise leading to muscle memory, to a direct response when faced with a control deficiency stimulus.

And let’s remain aware that the untrained will never be able to decently dance the tango of work and life. Even if we encourage them to take their responsibilities, we have an obligation to provide them with tools that allow them to appropriately take these responsibilities. Internal controls are one of these tools.