The Social Capital Approach

September 3, 2018

INTRODUCTION

Most internal auditors have years of training working with financial capital. Social capital is just as powerful. Like financial capital, there are key principles to follow to cultivate and wield social capital. Social capital is the power people are willing to exert on another’s behalf because of the strength of the relationship with that person. Such relationships can be the catalyst that enables audit findings to generate organizational improvement.

The social capital approach to internal auditing places long-term relationships as the first priority while still insisting that more immediate audit challenges be worked out with the client. Strong, broad relationships can assist in accomplishing future tasks and can prove valuable when bigger issues arise. When those relationships come to one’s aid, or when you are able to assist someone else in need, social capital is at work. But how do you build social capital? Three recommended methods are to establish legitimacy, think solutions, and be collegial.

ESTABLISH LEGITIMACY

Mark Gotberg, Assistant Director of Internal Auditing at Brigham Young University, gained legitimacy in the eyes of others at his university through mentoring students. Over the years, he dedicated more and more time to training student auditors. While it may seem that this training hindered his workload, the opposite was true. Mark established legitimacy in the eyes of academics by explaining the kind of experience and guidance students received in the Internal Audit department. Faculty and administrators are interested in students succeeding in the real world. Although they still do not like being audited, he was respected for helping students.

Another way to establish legitimacy is by building on shared values. For example, after working in the Internal Audit department, Mark Gotberg chose to work for a cause he believes in and spend as much time with his family as possible. To Mark, family values are paramount. He now works for an organization focused on improving families, and makes sure people understand his values, which builds on shared values. Understanding your own values and looking for overlap with those you work with can make work a much better experience. Shared values can change adversarial environments to situations infused with feelings of mutual commitment.

While audits of academic departments tend to focus on administrative duties, faculty are more concerned about
researching and publishing. An auditor needs to find a way for faculty to “connect the dots.” In other words, how can you help faculty see how reviewing administrative duties helps ensure their continued ability to research and publish? This seems obvious to most auditors, but is not so obvious to most academics. Consider working on establishing legitimacy with them.

Overall, connecting with people in ways that are important to them can build social capital.

Try thinking about what matters to academics. Faculty dedicated years of their lives to their research. They defend it at conferences; their position and income depend on it. Taking an interest in their research by spending a few minutes reading over their curriculum vitae, and even glancing through one of their articles, can go a long way towards gaining legitimacy with academics.

Thinking about the academic research and publishing process can be beneficial. Those in academia are used to getting comments on their work prior to being published. By comparing your audit comments to the editorial review comments they receive, you can express confidence in their ability to address the comments and build relationships.

Overall, connecting with people in ways that are important to them can build social capital.

THINK SOLUTIONS

If you want a successful career, you should bring solutions to your supervisors, not just problems.This mentality is key to success in building social capital. Think about what kind of auditor you want to be and what you want to accomplish or solve.

This theory is also relevant when working with clients. Problems internal auditors find are problems for their clients. A shift in thinking to focus on helping clients discover solutions, not just face problems, can build relationships with them. Which would you rather have – solutions or problems (or problems on top of your existing problems)?

Adam Jacobsmeyer, is the Executive Director over Treasury Services at Idaho State University and was previously an internal auditor for private universities and an external auditor for Ernst & Young, LLP. Early in his career, it became evident that solutions to audit findings were apparent to the client at about the same moment they understood the problem. He explained that “as auditors we tend to want to focus on what went wrong so that we can document and get credit for what we brought to light. The client, on the other hand, at the point of epiphany, wants to fix the problem as soon as possible.” Jacobsmeyer found that allowing the client to talk through their enlightenment moment was perceived by the client as adding value. Even if the auditor has little to contribute to the potential solution and only shows interest in the potential solution, the auditor can build social capital with that individual by simply listening. Support audit clients as they think about solutions.

Support audit clients as they think about solutions.

As with many organizations, academic institutions tend to be very political. Even when a solution is identified, it often takes involving the right people to support the solution to enact it. Experienced internal auditors include time to visit with audit clients regarding how to present ideal, realistic solutions in their report. In these discussions, they consider how their own social capital can be useful. They also question audit clients about who they think might be helpful in bringing about change, and thus tap into their social capital. The result is not just a solution to that problem, but a reputation that proceeds the auditor in other parts of the university.

BE COLLEGIAL

Being collegial is key to building social capital. Hollie Andrus, Financial Audit Director for the Office of the State Auditor of Utah, is the type of person others want to be around. She believes in being collegial. She explained that “adversarial relationships only breed dislike and hostility – nothing is accomplished and nothing is improved upon. An audit client once told me that he would make corrections I proposed because of my attitude toward the audit and the client. He also said that if another auditor – one who was more hostile – requested or proposed the same changes, he would ‘dig his heels in’ and would not make the change because of the other auditor’s attitude.” Auditors that go out of their way to manage not just the audit, but relationships with their clients, end up with more rewarding experiences. Over time, they amass social capital that makes them more successful.

Adam Jacobsmeyer also found an effective way to be collegial as an auditor. By maintaining genuine curiosity about the people and companies he audited, he was able to work well with clients even when discussions presented areas for improvement. He explained that he applied the phrase “seek first to understand, then to be understood” (attributed to Steven R. Covey). According to Covey, this implies creating an atmosphere of helpful give-and-take by spending the time to fully understand issues and then giving candid and accurate feedback. Jacobsmeyer suggests that when someone feels another person is genuinely interested in their work, they do not mind being asked about it, which enables further discovery of the process or challenge.

Active listening also fosters collegiality. Joni Lusty, an Assistant Director at Ernst & Young, LLP, excels at building relationships at all levels in her organization. How she builds social capital is simple, but effective: she is authentic to who she is and she listens. She comes across as very real and genuine, because she is, and also caring, because she listens carefully to people. She gives them her full attention and avoids talking over them or cutting them off.

Listening is valuable in consulting, which is part of a prior role Mark Gotberg had before becoming an internal auditor. Consulting taught him that listening to employees at all levels is crucial to success. It is critical to build relationships at the lowest levels and gain their trust. Employees are willing to share their own insights into organizational and process improvements. People closest to a problem often understand it the best and have great solutions. However, they lack the clout or management skills to carry out the solution. These situations are where you, as an internal auditor, can shine if you work to build relationships at all levels. If you are also careful to build relationships at higher levels, you can work on these solutions with the necessary people who can enact them.

Internal auditors do not always find themselves in positive roles, however. They also testify in court and are the impetus for mavericks being roped in. You cannot build social capital with everyone as an internal auditor. The challenge is twofold: do not let the bad experiences sour you and look for ways to build social capital with someone. For instance, while culprits will not like the testimony of an internal auditor, administration can see it as helpful. Again, help them “connect the dots.” Be sure to talk with those who do benefit from your work, even if remotely, so they view you more as a collegial team player, not just as a distant enforcer.

CONCLUSION

Social capital parallels financial capital in several ways. A short-sighted financial view focused primarily on quarterly earnings often sacrifices long-term growth opportunities. As an internal auditor, focusing not just on immediate problems, but remembering the importance of long-term relationships can plant future solutions to potential problems. Building social capital does not require sacrificing, or watering down findings. Rather, it requires establishing legitimacy, adopting a mindset focused on solutions, and being collegial. For most internal auditors who have been through unpleasant scrimmages, it requires remembering why you are doing what you doing and choosing to take the social capital approach.

About the Authors

Emmelia Ciesewicz

Emmelia Cieslewicz tutors university students in writing and quantitative skills. She previously won several Future Business Leaders of America state titles and placed at the national level.
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Emmelia Ciesewicz

Emmelia Cieslewicz tutors university students in writing and quantitative skills. She previously won several Future Business Leaders of America state titles and placed at the national level.

Articles
The Social Capital Approach

Josh Cieslewicz, CPA, Ph.D.,

Josh Cieslewicz, CPA, Ph.D., worked as a student internal auditor, as an auditor at Ernst &
Young, and then in industry. Now a professor at Utah Valley University, he blends practical insights with theory to help his students prepare for their careers. His research has been on corporate governance, audit ethics and supervision, and institutional and cultural influences on international accounting.

Articles
The Social Capital Approach