root cause analysis for auditors - chapters site dec - train… · root cause mastery for auditors...

12/18/2017

1

Root Cause

Analysis For

Auditors

Elizabeth Frisch, CXO The Thrival Company [email protected]

512.656.7518 cell/ 512.301.1451 office

t. @elizabethfrisch LI. www.linkedin.com/in/elizabeth-frisch

www.elizabethfrisch.com / www.thrivalcompany.com

FB. Elizabeth Frisch Author

©2018. All Right Reserved. Thrival School LLC.

Root Cause Mastery

for Auditors

Do you want free access to the online version

of this class?

To receive access to this class online 24/7,

TEXT ‘rootcause’ to 44222

Be sure to use all lower case and no spaces.

Get film of class and access to the LMS online 24/7 of this course in Q1 2018.

Course documents have been shared at:

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If you have any issues, email [email protected] and she can manually set you up in the system.

mailto:[email protected]

http://www.linkedin.com/elizabethfrisch

http://www.elizabethfrisch.com/

http://www.thrivalcompany.com/

https://www.dropbox.com/sh/imsn7drbx8880ud/AACxzYLQFtL_9oEa-bfUogc_a?dl=0


12/18/2017

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Root Cause Mastery

for Auditors

How many of you have been trained previously in root

cause analysis? Which methods?

Introductionss


Root Cause Mastery

for Auditors

Who do we

have in the

room

today?

• How many of you have seen me at

SAO or IIA events?

• Internal vs. External Auditors?

– Financial/Accounting

– Operational

– Environmental

– Compliance

– IT

– Others?

• What organizations are in the room?

12/18/2017

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Root Cause Mastery

for Auditors

• 25+ years young ;o)

• Recovering Chemical Engineer cross

trained in OD/CM, business

performance and psychology

• Worked in 50+ industries, all levels of

government as

well as the U.S. Military and

NPOs/NGOs.

• Best Selling Author

• 1st performance and culture auditing

protocol developed in 2001

(before there was such a thing out

there ;o)

• Training auditors and capacity

building auditing firms since 2002

Elizabeth Frisch,

Founder and [email protected],

www.thrivalcompany.com

m. 512.656.7518,

o/f. 512.301.1451

t.@elizabethfrisch,

Linked-In/Facebook


Root Cause Mastery

for Auditors

How will

your

time be

spent?

• Part 1: Building your Foundation

• Part 2: Method Learning + Method Practice

– Start easy and ramp up as you go…

• Part 3: Review/Wrap-Up

• Participation is essential

– Working individually

– Working in groups



mailto:t.@elizabethfrisch

https://www.linkedin.com/pub/elizabeth-frisch-best-selling-author-consultant/6/438/673

https://www.facebook.com/thrivalcompany?fref=ts

12/18/2017

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Root Cause Mastery

for Auditors

Action 1

If you could solve one

problem today using root

cause analysis, what would

it be?


Root Cause Mastery

for Auditors

The Evolution of Auditing

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Root Cause Mastery

for Auditors

What is the value

of auditing?

10Image license. Used with permission.

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Root Cause Mastery

for Auditors

Audits

Ensure

Compliance ($)

Control Risk ($$)

Conserve Resources

Reduce Impacts ($$$)

Cost Avoidance

Save Money

Cost Avoidance

Why do Organizations Conduct Audits?


Root Cause Mastery

for Auditors

How many of you ARE REQUIRED to do

root cause analysis during audits?

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Root Cause Mastery

for Auditors

How many of you find

the same findings every year?


Root Cause Mastery

for Auditors

How many of you feel like without audits, the system would go to chaos?

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10

Standards

Written Procedures

Audit

Reality

How we actually

do businessAudit Life©2018. All Right Reserved. Thrival School LLC.


Root Cause Mastery

for Auditors

What is the missing value you could

as an auditor deliver?

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Root Cause Mastery

for Auditors

How many of you have been trained in

lean processes or six sigma methodologies?


Root Cause Mastery

for Auditors

AUDITORS ARE EXPECTED GIVE VALUE

AND BE PROBLEM SOLVERS…

• The root cause is the ultimate cause

• Ask yourself “Why”

• Short-term vs. long-term solutions

• Prevent recurrence


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Root Cause Mastery

for Auditors

AUDITING –

No. 1 offense -

Jumping to

conclusions

or leading others

to conclusions


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Root Cause Mastery

for Auditors

ROOT CAUSE STOPS BIAS

ROOT CAUSE YIELDS 360

ANALYSIS OF CAUSES

0

2

4

6

Category 1 Category 2 Category 3 Category 4

XYZ AUDIT

Series 1 Series 2 Series 3

Root cause

leads to better

and more

actionable

solutions



Root Cause Mastery

for Auditors

What really is the finding?


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Root Cause Mastery

for Auditors

TRADITIONAL AUDITS

ROOT CAUSE ANALYSIS



Root Cause Mastery

for Auditors

Case Study 1:

Health and Safety Auditof Oil and GasFacility


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© 2002-2005. All

Rights Reserved.29

CORROSION ISSUES

©2015. All Right Reserved. Thrival School LLC.©2018. All Right Reserved. Thrival School LLC.


Root Cause Mastery

for Auditors

Finding:

CORROSION

EXCEEDS

ACCEPTABLE

LIMIT AS

DEFINED BY

STANDARD.

TRADITIONAL AUDITS CAN

MISS THE REAL FINDING…

• COMPARE AGAINST

STANDARDS

• MOSTLY PAPER AUDITS

• MINIMAL CONVERSATIONS

AND SITE WORK


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©2015. All Right Reserved. The Thrival Company LLC.©2018. All Right Reserved. Thrival School LLC.


Root Cause Mastery

for Auditors

ROOT CAUSE ANALYSIS YIELDED –

Finding 1: management doesn’t require employees to be trained on the standard

– no awareness

Finding 2: strategic/budget planning does not account for the lifespan of the

fittings – no money to fix the problem

Finding 3: preventative maintenance (PM) system not being used or followed –

valves are exposed to corrosive atmosphere and no PM is being completed.

Finding 4: managers not requiring same inspections at satellite location as main

plant – operational control

Finding 5: contractors are being trained to a different standard of competence

then employees when they took over facility – change management

+7 more findings…..….


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Root Cause Mastery

for Auditors

WHICH AUDIT FIXED THE PROBLEM?

• AUDIT 1,2,3,4,…..

CORROSION EXCEEDS LIMITS

• AUDIT USING ROOT CAUSE



Root Cause Mastery

for Auditors

ROOT CAUSE SOLVES MORE

PROBLEMS THEN JUST THE ORIGINAL

PROBLEM….


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Root Cause Mastery

for Auditors

Case Study 2:

RESOURCE

AUDIT


This Photo bCC BY-NC

Opportunity to turn off 88 lights during daylight

hours to reduce electrical costs. $109/hour X 8

hrs.=$878/Day X 30 days/year=$26,357/year

Finding: Light are on

during the daytime.

Findings:

1: Only one person know how

to work the lighting system.

2: No PM and sensors that

triggered lights to turn off

were not working.

3: No visibility to utility bill by

managers.

Etc. etc. etc.


http://www.spring.org.uk/2016/01/this-belief-about-time-and-money-increases-happiness.php

https://creativecommons.org/licenses/by-nc/2.0/

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Root Cause Mastery

for Auditors

Case Study 3:

FINANCIAL

AUDIT



Root Cause Mastery

for Auditors

Audit Finding: Major assets are missing from the

depreciation schedule.


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Root Cause Mastery

for Auditors

Findings from Root Cause Audit

• Leadership - Managers are allowing employees to purchase major equipment (above thresholds) outside of the purchasing process

• Operational Control - Petty cash employees are not enforcing standards on what can/cannot be purchased through that process

• Operational Control - Assets are being purchased through credit cards and not reported to financial department

• Training – No awareness of what level of asset must be reported and tracked

• Operational Control - Employees are permitted to purchase and have major assets shipped to their homes.



Root Cause Mastery

for Auditors

No. 1 Rule - Root Cause Analysis

All methods are…


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Root Cause Mastery

for Auditors

Pick the best one for your…



Root Cause Mastery

for Auditors

Root Cause – 3 Basic Causes

• Physical causes – Tangible, material items failed in some way (for example, a car's brakes stopped working).

• Human causes – People did something wrong, or did not do something that was needed. Human causes typically lead to physical causes (for example, no one filled the brake fluid, which led to the brakes failing).

• Organizational causes – A system, process, or policy that people use to make decisions or do their work is faulty (for example, no one person was responsible for vehicle maintenance, and everyone assumed someone else had filled the brake fluid).


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Root Cause Mastery

for Auditors

Common Methods to RCA

• Appreciation

• The 5 Whys

• Cause and Effect Diagrams

• Drill Down

• Failure Modes and Effects Analysis

• ARCA – Apollo Method (copyrighted)

• TapRoot – (copyrighted)



Root Cause Mastery

for AuditorsThis Photo by CC BY-SA

http://iteachkinderkids.blogspot.com/2011/09/ready-setgo.html

https://creativecommons.org/licenses/by-sa/3.0/

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Bad Problem Definition =

Bad Root Cause Analysis

©2015. All Right Reserved. Thrival School LLC.©2018. All Right Reserved. Thrival School LLC.


Root Cause Mastery

for Auditors

What if the problem isn’t the problem?

What if you've focused on the wrong

problem, or you're just looking at a

symptom of a larger problem?


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Root Cause Mastery

for Auditors

Did anyone ever teach you how to

define the problem?

This Photo under CC BY-NC-SA


Root Cause Mastery

for Auditors

Just as important as Root Cause

What are you solving/auditing for?

• Mind

Mapping

• CATWOE

• Others…

http://oregontrailschools.com/sandygrade/2015/05/08/read-read-read-6/

https://creativecommons.org/licenses/by-nc-sa/4.0/

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WHAT IS THE PROBLEM

YOU NEED TO SOLVE?

Bad Problem Definition = Bad Root Cause Analysis


Soft Systems Methodology (SSM)

• Grew out of general systems theory, which views everything in the world as part of an open, dynamic, and interconnected system. The various parts of this system interact with one another, often in a nonlinear way, to produce a result.

• A way to explore complex situations with different stakeholders; numerous goals; different viewpoints and assumptions; and complicated interactions and relationships.

– Organizations consist of complex, dynamic, goal-oriented processes – and all of these work together, in a coordinated way, to produce a particular result.

– When something goes wrong within the system, or any of its subsystems, you must analyze the individual parts to discover a solution.

This Photo is licensed under CC BY-SA

http://www.flickr.com/photos/lamenta3/4349576638/

https://creativecommons.org/licenses/by-sa/2.0/

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Steps to Soft

Systems

Methodology

…

Example provided by MindTools

Steps to Expand Problem

Write the title of the subject you're exploring

in the center of the page, and draw a circle

around it.

Example provided by MindTools.com

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• As you come across major subdivisions or subheadings of the topic (or important facts that relate to the subject) draw lines out from this circle. Label these lines with these subdivisions or subheadings.

Steps to Expand Problem • As you "burrow"

into the subject and uncover another level of information (further subheadings, or individual facts) belonging to the subheadings, draw these as lines linked to the subheading lines.

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• Then, for individual facts or ideas, draw lines out from the appropriate heading line and label them.


Root Cause Mastery

for Auditors

TAKE OUT THE

PROBLEM YOU

WANT TO SOLVE.

CREATE A MIND

MAP OF IT.

Part 1 – Solo Work

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Root Cause Mastery

for Auditors

What will be our unifying

theme/problem


Root Cause Mastery

for Auditors

BREAK OUT INTO

GROUPS OF 6 USING

TRAFFIC CONGESTION

ISSUES.

Group Work

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CATWOE

• A method for expanding your thinking about a problem or situation before you zero in on a specific problem that you want to solve.

• By analyzing the CATWOE factors (Customers, Actors, Transformation process, World view, Owner, Environmental constraints) that are influencing an issue of concern, you keep your perspective broad and are able to see the issue from many angles.

• This is a great tool to keep in mind, especially when you first start thinking about a problem, or try to come up with a solution.

Before you try to root cause an important problem, use the

CATWOE checklist to brainstorm the various people and elements

that are affected.

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How to use CATWOE to define the

problem(s) you want to root cause…

Define what you are thinking about. Remember, this is not a problem statement; it is merely a statement describing the situation.

– Need to figure out how to improve employee retention

Class Example provided by MindTools.com

How to use CATWOE to define the problem(s) you want to root cause…

Brainstorm ideas around the various CATWOE elements.

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Class Example

provided by MindTools.

com


12/18/2017

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Class Example

provided by MindTools.

com



Analyze your "answers" to the CATWOE questions. Look for underlying processes that are having the greatest impact on the issue you are investigating. In the example above, the following likely have the greatest impact on the issue:

– Corporate Culture.

– Employee Training.


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• From these processes, separate out the problems that you can identify and then begin your process of problem solving. Notice that you will have a larger number of problems, and presumably more root problems, than you would otherwise have started out with. For instance:

– Our company culture isn't people-oriented – new people are left to "sink or swim."

– There's no orientation training.

– The rewards we give aren't motivating and engaging people.



Root Cause Mastery

for Auditors

BREAK OUT INTO

GROUPS OF USING

TRAFFIC CONGESTION

ISSUES.

Group Work

12/18/2017

35


Root Cause Mastery

for Auditors

Appreciation Method

• What it is?

• Pros and Cons

This Photo by Unknown Author is licensed under CC BY-NC-

The Appreciation

Method

• What it is? Appreciation helps us uncover factors that we might have ordinarily missed, and it can be very useful for brainstorming solutions to problems.

• Origins: Originally developed by the military to help commanders gain a comprehensive understanding of any fact, problem or situation that it was faced with in battle.

• Basics: Starting with a fact, you first ask the question "So what?" – in other words, what are the implications of that fact? Why is this fact important? You then continue asking that question until you have drawn all possible conclusions from it.

• Utility: It is often used to get the most information out of a simple fact or statement vs. drilling down to the root of a problem.

http://horadevolar.wordpress.com/2009/12/22/juan-mann-la-historia-de-un-abrazo/

https://creativecommons.org/licenses/by-nc-nd/2.5/

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Example of Appreciation

We have received 50 customer service complaints in the last month.

• So what?

• This is unacceptable and is causing our organization to have a bad reputation.

• So what?

• If this continues, we will lose our funding.

• So what?

• Then we don’t have money to pay staff or provide required services

• So what?

• We have to fix this by XXX date or lose funding.

• So what?

• We need to analyze the complaints to figure out what they are about.

• So what?

• This will give us the information to figure out what needs to be fixed…

• So what………

Limitations of

Appreciation Method

• Appreciation can restrict you to one line of thinking.

• For instance, once you've answered your first "So what?" question, you might follow a single line of inquiry to its conclusion.

• To avoid this, repeat the Appreciation process several times over to make sure that you've covered all bases.

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Root Cause Mastery

for Auditors

The 5 Why’s

• What it is? A questioning method that allows people to quickly drill down to possible root causes of a problem by asking “Why?”

• Origins: Sakichi Toyoda, one of the fathers of the Japanese industrial revolution, developed the 5 Whys technique in the 1930s. He was an industrialist, inventor and founder of Toyota Industries. His technique became popular in the 1970s and Toyota still uses it to solve problems today.

• The Basics: It is remarkably simple: when a problem occurs, you uncover its nature and source by asking "why" no fewer than five times.

• Utility: You can use the 5 Whys in troubleshooting, quality improvement and problem solving, but it is best for simple or moderately difficult problems.



Root Cause Mastery

for Auditors

Example of The 5 Why’s

• Problem: Your client is refusing to pay for the leaflets you printed for them.

– Why? The delivery was late, so the leaflets couldn't be used.

– Why? The job took longer than we anticipated.

– Why? We ran out of printer ink.

– Why? The ink was all used up on a big, last-minute order.

– Why? We didn't have enough in stock, and we couldn't order it in quickly enough.

• Counter-measure: We need to find a supplier who can deliver ink at very short notice.

Example provided by MindTools.com©2018. All Right Reserved. Thrival School LLC.

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Root Cause Mastery

for Auditors

Take out the problem you want to solve.



Take a break -

10 minutes

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Root Cause Mastery

for Auditors

Break out into groups of 4-6…

Part 2 – Group Work



Root Cause Mastery

for Auditors

What is the real reason the problem occurred?

Outbrief


12/18/2017

41


Root Cause Mastery

for Auditors

Limitations of the ‘5 Whys’ Method

• It is most effective when the answers come from people who have hands-on experience of the process being examined.

• For more complex or critical problems, it can lead you to pursue a single track of inquiry when there could be multiple causes.

• Easy to use in audits and always the 1st try option as it’s quick and easy.


Cause and effect analysis

12/18/2017

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Cause and Effect Analysis

aka. Also known as Fishbone Diagrams, Ishikawa Diagrams,

Herringbone Diagrams, and Fishikawa Diagrams

• What it is? Combines brainstorming with a type of mind map.

• Origins: Devised by professor Kaoru Ishikawa, a pioneer of quality management, in the 1960s. The technique was then published in his 1990 book, "Introduction to Quality Control."

• The Basics: The technique uses a diagram-based approach for thinking through all of the possible causes of a problem. This helps you to carry out a thorough analysis of the situation.

• Utility: You'll find that they are particularly useful when you're trying to solve complicated problems.

4 Steps to C&E Analysis

• Identify the problem (Mind-mapping or CATWOE).

• Work out the major factors involved.

• Strategy, Structure, Systems, Shared values, Skills, Style and Staff (McKinsey 7s)

• Product, Place, Price, and Promotion (4Ps of Marketing)

• Methods, Machines (equipment), People (manpower), Materials, Measurement, Environment

• Identify possible causes.

• Analyze your diagram.

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EXAMPLE FISHBONE DIAGRAMS


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IT

EXAMPLE FISHBONE

DIAGRAMS

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Your Turn

Take out the problem you want to solve. Create a fish bone diagram of it.


12/18/2017

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Break out into groupsPart 2 – Group Work

What is the real reason the problem occurred?

Outbrief

12/18/2017

49

Take a break

10 minutes

Risk control in audits –

Finding failures before they happen and fixing the root cause

Failure Modes and Effect Analysis

Impact Analysis

Kaizan

12/18/2017

50

Things to discuss…

What can you do to prevent the problem

from happening

again?

How will the solution be

implemented?

Who will be responsible for

it?

What are the risks of

implementing the solution?

Predict the risks of the

solution

Failure Mode and

Effects Analysis(FMEA)

• What it is? Looking at all the things that could possibly go wrong at design stage, you can cheaply solve problems that would otherwise take vast effort and expense to correct, if left until the solution has been deployed in the field

• Origins: FMEA was originally known as Failure Mode, Effects, and Criticality Analysis (FMECA), and was first published in 1949 by the USDOD. FMEA grew out of systems engineering, and is a widely-used tool for quality control. Originally used in product development, it is also effective in improving the design of business processes and systems.

• The Basics: You start by looking in detail at the proposed solution and then you identify systematically all of the points where it could fail. Once these potential failures have been identified, you rate the potential consequences by severity, frequency, and detection (or duration)

• Utility: Failure Modes and Effects Analysis is a useful tool for uncovering possible points of failure that may be lurking within business processes and solutions, whether these are already in place within your company or are proposed for the future.

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Steps to FMEA Analysis

Process map the proposed solution.

Identify the solution, system or process you're

looking at and, if

appropriate, the main issue you want to

investigate. List the critical

elements, in a logical (for

example, chronologica

l) order.

Develop a flow chart to

map the solution or

process, and the

interactions between its

various parts.

Use a template to

work through each

element in this process

in turn.

For each element in

the process use

brainstorming to identify all possible

failures. Enter the ways the

solution for process

could fail.

For each potential failure,

identify the consequenc

es of the failure.

For each potential

failure in the system, rank

Severity, Occurrence

and Detection.

Calculate the Risk Priority Number

(RPN) for each of the modes and effects by multiplying

the 3 ratings (Severity x

Occurrence x Detection).

Brainstorm actions and

make recommend

ations to counter the

potential threats you uncovered. This step is

best completed in

phases starting with the modes and effects

that have the highest RPN

(Greatest Threat).

Once you've modified the design for

the proposed solution,

repeat the Failure

Mode and Effects

Analysis process to review the

design, and make sure

that no additional potential

failure points can be

identified.

The objective here is to develop a solution

that has a low overall

RPN.

Example of RPN

Rankings

Severity – how critical is the failure?

5 – Very High (huge losses that threaten company viability)4 – High (large losses, company is still operable)3 – Low (losses exist, can be remedied)2 – Minor (loss is minimal, quite insignificant)1 – Low (no effect)

Occurrence – how likely is the failure to happen?

5 – Very High (must be addressed immediately, will happen very often)4 – High (will cause frequent issues, will happen often)3 – Low (will cause sporadic issues, will happen occasionally)2 – Minor (issue will be few and far between, will happen quite infrequently)1 – Low (issues unlikely, not likely to ever happen)

Detection – how easy will it be to detect the failure?

5 – Very Difficult4 – Difficult3 – Somewhat Easy2 – Easy1 – Very Easy

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Root Cause Mastery

for Auditors

Overcoming barriers

What are the barriers to Root Cause

Analysis?


Root Cause Mastery

for Auditors

Barriers to RCA…

• Duration of audit

• Resources (Expertise, People, etc.)

• Lack of knowledge

• Time to complete

• Complexity of problem

• Is it your role?

12/18/2017

53


Root Cause Mastery

for Auditors

You are Ready to Be My Guinea Pigs!

TEXT ‘rootcause’ to 44222

Get film of class and access to the LMS online 24/7 of this course.


Root Cause Mastery

for Auditors

Testimonials from your fellow auditors on

Leadership in Auditing Course

• “I was surprised at the applicability of the information discussed in the course. Not only is it useful in the audit world, but the

trainer gave examples of how it can be applied in personal situations too. This is a training course that is useful for

practically anybody and the instructor was excellent!”

• “Excellent class, one of the best if not the best class I have attended in a very long time. I think every auditor in our off ice

would benefit and should attend the class. This class impacts all the work we do, whether it is a work paper or an audit

report.”

• “Loved this class. Elizabeth is an engaging instructor with relevant auditing experience.”

• “Ms. Frisch is experienced and knowledgeable of this subject area. She is energetic and covered a lot of material in the

course. The course is full of hands-on exercises with the various tools discussed. The pace of the course allowed the

participants to perform the exercises, ask questions and receive feedback, without feeling rushed.”

• “Elizabeth is one of the best CPE instructors we have had in here [at the State Auditor’s Office (SAO)] for a long time. She

was well-prepared and knowledgeable about her subject matter. She used real-life exercises on a topic of interest to all

participants. She structured the class so that we had hands-on learning that was not odious or contrived.”

12/18/2017

54


Root Cause Mastery

for Auditors

Stay in touch – don’t disappear!

Elizabeth Frisch

512.656.7518

t. @elizabethfrisch

[email protected]

Join the blog conversation at

www.thrivalcompany.com

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root cause analysis for auditors - chapters site dec - train… · root cause mastery for auditors...

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