Management audit

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The term management audit describes a systematic assessment of the competencies and performance potential of executives with regard to the strategic success of a company (measured in terms of company value or the fulfillment of stakeholder expectations ).

Delimitation, goals and meaning

A management audit is not an aptitude diagnostic tool, but a process in which numerous instruments are used. This process begins with the development of a competency model from the corporate strategy, leads to the performance and potential evaluation of the executives and ends with the derivation of strategic and personnel policy measures. The most common empirical goals of management audits include management development, succession planning and the assessment of company value in the event of takeovers and mergers. In addition, there is the desire for an external (neutral) opinion on important personnel policy decisions. Further details and references are given in Figure 1 opposite.

Figure 1: Empirically determined goals and reasons for management audits

In an expert survey, around 80 percent of those questioned stated that they expected management audits to become increasingly important. The majority (52 percent) were generally satisfied with the audits carried out so far; around 30 percent were only partially satisfied and 18 percent were dissatisfied. This relatively high level of dissatisfaction is due to problems with objectivity, practical relevance and the consultants' lack of operational management and leadership experience. Occasionally it was criticized that consulting companies run such projects as a pure routine and pay too little attention to customer-specific adaptation, especially since this is an important success factor.

Development and historical background

The audit was first developed in the United States in the 1940s and 1950s as a valuation tool for investments and securities and then used in many other areas. These range from schools and hospitals to assessing global activities of the Catholic Church. It was then applied to companies. One of the first systematic audits was prepared by the American Institute of Management in the early 1960s. According to this concept, the following characteristics of companies are to be analyzed and assessed:

  • Economic Function (assuming responsibility for industry or society)
  • Corporate structure (evaluation of the effectiveness of the organization)
  • Health of earnings (exhaustion of economic potential)
  • Service to Stockholders (fairness to shareholders' expectations)
  • Research and Development (securing the future through research and development)
  • Directorate Analysis (contribution of individual top managers to the company's success and balancing of conflicts of interest between management, owners and the public)
  • Fiscal Policies (Financial Soundness and Tax Payment Policies)
  • Production Efficiency (profitability of the essential business processes)
  • Sales Vigor (clout of marketing and sales)
  • Executive evaluation (quality of managers, in particular their skills, commitment and integrity).

To this day, not very much has changed in this basic structure of a management audit. Rather, the further development focuses on individual aspects and instruments such as interview techniques, 360-degree feedback, competence models and methods of company evaluation.

Current uses

In addition to assessing performance and potential, management auditors can provide valuable help in the following business situations:

  • Strategic realignment
  • Change in top management
  • Mergers and business combinations
  • Due diligence
  • Holdings
  • Restructuring
  • Diversification into new business areas

In such situations, management audits should contribute to better personnel control, adapt competencies more precisely to the increased requirements and ensure a greater correspondence of competencies and requirements because managers are more willing to change. After all, it is important to identify and develop top talent earlier (see Figure 2).

Figure 2: Importance of management audits

Typical process of a management audit in practice

According to a study by the Steinbeis Institute for Management Innovation, the process can be summarized as follows: A management audit is usually based on a company's competence model. It contains operationally defined specialist and management skills with behavioral descriptions that are necessary for implementing the corporate strategy (target skills). The audit then provides an assessment of the current skills. From the target / actual comparison, statements about the future viability of the company and the qualification and development needs of managers can be derived.

Evaluating managers begins with collecting data on their performance. This information can come, for example, from a 360-degree feedback , an assessment by a manager, the résumé or a case study . This is followed by an interview in which two experts (mostly external consultants) question a manager over several hours. This interview differs from classic surveys in that it uses a special questioning technique that is widely used in the United States as a behavioral interview. It was originally developed by John C. Flanagan and refined by David McClelland in the 1990s. It is also used in marketing as a critical incident technique to measure customer satisfaction. In the behavioral interview, it is important to emphasize that the behavior and the (measurable) successes (economic results) of the managers are in the foreground, because these have a much higher prognostic validity than character traits , leadership styles or personality traits .

The following example illustrates how this technique works: For example, if the consultants want to assess the competence “decision-making and problem-solving skills”, they ask the following question: “Tell us about a difficult problem that you recently had to solve and how you proceeded. ”From the answers you can see on the one hand whether the candidate had to solve trivial or demanding problems or whether he has even avoided important decisions. On the other hand, the reviewers compare the candidate's behavior with the previously defined competence model. Without this standard, the candidates would not be comparable. In the example, the candidate gets many points if he has proceeded systematically and if possible has taken into account all the framework conditions relevant to the decision. This includes aspects such as careful weighing of opportunities and risks, involving other departments, assuming responsibility for the consequences, comprehensive information for those involved or the use of modern decision-making techniques.

The PAR principle usually serves as a guide for the interview. The letters stand for problem, action and result. Accordingly, it must be clear from the answers that the candidate has tackled an important, relevant problem in the company, carried out suitable actions and achieved measurable results after a reasonable period of time. Ultimately, only economic parameters such as productivity and profitability count as a contribution to the company's success. Here is an example of answers from a candidate who could get a good rating:

  • Problem: I had to decide within three months whether we should build the production facility at location A or B. Investment volume: four million euros.
  • Action: I created a business and investment plan including a sensitivity analysis and submitted it to the management for approval.
  • Result: After a year, the production plant went into operation; the investment has paid for itself after three years.

This example also makes it clear that the quality of the audit depends on the reliability and validity of the underlying models (decision, delegation, conflict or leadership models). It is also important that the consultants have sufficient operational business and management experience (and not only have been active as consultants), otherwise they can hardly assess the responses of the managers properly. How do the consultants want to judge the performance of a manager if they have never developed and implemented a business plan themselves or have never had disciplinary management responsibility? For example, some of those affected spoke of “horoscopic” reports in the expert survey. How is that possible? In one case the consultants used the (popular) model of situational leadership as a basis, the validity and reliability of which is extremely questionable. This type of “measuring” is comparable to a tape measure made from very elastic rubber.


Increasingly demanding expectations and requirements are placed on the audit methodologies that are not always met. The criticism resulted in numerous suggestions for improvement. Figure 3 provides an overview of the empirically most frequently mentioned improvement requests. Furthermore, the following points of criticism can be found in the everyday discussion:

Figure 3: Suggestions for improving management audits
  1. The (candidate) feedback as a substantial part of the audit is often criminally neglected: as if the consultant couldn't care less about being able to look after “tomorrow's clients” with “today's candidates”, audit participants with difficult to understand - often stereotypes - judgments "left out in the rain". The logic that every diagnosis implies sensitization for professional development and personal growth of the candidate on the basis of self-reflection and tangible development measures to be derived is often no longer recognizable. Targeted audit methods must accordingly try to take into account the candidate feedback in terms of importance, timing and depth. The latest developments here show that feedback - together with the supervisor / top management or top HR manager - offers a very efficient and acceptable solution. The variant of "split" feedback - once a consultant and then a superior - appears to be very suitable in this context.
  2. Most audit approaches rely almost exclusively on semi-structured interview techniques - without these, as the principle of method diversity requires to supplement other diagnostic instruments. Above all, the erroneous assumption that a critical mass of suitable top executives leads to entrepreneurial success, leads to methodological trivializations and artifacts. In a one-sided way, the process and methods focus on individual management qualifications instead of examining the "interplay" of individual resources. What falls by the wayside is one of the most dominant factors in successful management - namely the social level of cooperation and communication. The now scientifically proven assumption that the behavioral analysis of interactions and problem-solving processes in teams and management committees is more meaningful than the often speculative, but in any case introspective, efforts of an auditor to penetrate the candidate's "black box" and hide "more social." Desirability ”and intellectual sophistication of the candidate's reactions and statements to make a supposedly objective picture of the other is actually just as much a basic teaching content in organizational sciences as the fact that“ a team of top people is by no means a top team ”. An audit methodology that does not incorporate the idea of ​​team analysis at least as an optional tool restricts itself accordingly in terms of meaningfulness and scope of the results. State-of-the-art in the audit area is therefore a. the use of complex business simulations, in which a team of candidates takes part at the same time, a whole range of "socially interactive" settings can be mapped here: from very "confrontational and competitive" to purely "cooperation-oriented". These simulation methods can be used to generate "behavioral data" that can be related to interview data and other analysis results. In addition, the simulations also enable a "management team" to analyze themselves.
  3. Another point of criticism should be noted: the often observed (one-sided) focus on standards of the 360 ​​° assessment (see 360 ° audit ) can support "micro-political" activities, "muddle" and thus ultimately the lack of transparency in decision-making processes - instead of these to put on a rational, comprehensible basis. The formerly “independent” external consultant then often becomes the plaything of the various interest groups or the “compliant” executor. The consequence is that the audit process often turns into a prejudicial farce. The often criticized "legitimation function" (ie the pseudo-justification of unpleasant personnel and organizational measures through the audit results) gradually comes to the fore - utility functions in which shareholders, financiers and cost bearers are genuinely interested become at the expense of validity and expected Meaningfulness of the audit results pushed into the background. The sustainability of management and organizational development suffers. “360 ° or 180 ° analyzes” should therefore be used very carefully. Experience shows that elements of this approach work more in "mature", highly developed organizations (but not in change and merger situations, etc.). They require very close consultation with the client and should be able to guarantee and verify the plausibility of a procedure that is as objective and “impartial” as possible.

Scientific / paradigmatic background

Behind some points of criticism of the audit approach there is a kind of methodological ambivalence, which can be justified from the history of applied management diagnostics :

In contrast to the conventional assessment center method (AC), the classic audit sees itself as a primarily "business-oriented" advisory instrument for analyzing the management qualifications of the upper management level. Against the background of the relevant market knowledge as well as the technical and technical understanding of exposed management positions in companies, which to this extent most likely have the large executive search consultants, the audit methodology has developed as a "bottom-up procedure"; to a certain extent she has committed herself to a “naturalistic” approach. And is based on the relevant business case itself. The focus is not primarily on abstract personnel psychological taxonomies and typical suitability criteria of organizational science manuals - but rather performance requirements influenced by specific, strategic business implications, the highest possible social acceptance by clients and candidates, and the apparent practical use of the analysis results for the business itself.

After the fashionable years of the AC approach, both research and consulting practice quickly established that the method - which is often stingy with practical relevance - should actually be differentiated according to the hierarchical position of the participants, especially in Central Europe. The higher the hierarchical position of the target group, the more demanding, but above all the more realistic the method would have to be. For the upper management levels, the conventional AC was neither acceptable from the point of view of the range of results nor from the perspective of social acceptance. The core requirement of the classic audit, on the other hand, was the seniority and the business experience of the consultant: The methodology focuses on dealing with real business strategy issues and the position-related technical discussion based on mutual expectations of competencies, not hypothetical case work, post basket exercises and similar scenarios.

From a scientific point of view, the classic audits represent and still represent "audit situations" rather than well-founded management diagnoses (see Internal Audit ).

What falls by the wayside in the context of this classic audit procedure, which was developed purely generically in the course of experience and based on one-sided interviews, is systematics, a target-oriented degree of structuring and standardization of preparation, implementation and follow-up as well as the necessary, well-known quality criteria of personnel diagnostic methods: Objectivity, reliability and validity. While the AC is criticized as over-structured and unrealistic, the classic audit methodologies suffer from the most banal deficiencies in terms of the scientific basis, process control and thus the comparability of the results, despite their high demands on the intellectual and technical level of the candidates and consultants (Sarges, 2005 ).

Further development and outlook

The guiding principle of newer audit methodologies is therefore to combine the quality assurance standards of the AC method with the bottom-up approach of the classic audit based on specialist knowledge. The quality criteria of the analyzes must be based on the general knowledge of scientifically sound management diagnostics . The audits must be methodologically supervised and generally take place under conditions that are as controlled as possible.

Furthermore, differentiated handling of different assessment methods is necessary. The audit instrumentation should basically include the classic inventory of methods of management diagnostics as a modular pool of instruments, adapting the individual methods to the target group to be diagnosed, making position-specific adaptations and adapting the selection and combination of various instruments to the specific questions and needs of the client company. In particular, the aspect of adequate social acceptance by clients and candidates, as offered by the audit compared to the AC approach, is of central importance here.

A methodical further development of the management audit can be seen in the concept of the multimodal management audit proposed by Schuler and Frintrup (2005) . The theoretical basis of the measurement goes back to the multimodal interview by Prof. Schuler. The basic principle of this new approach is the implementation of the principle of multimodal diagnostics through the simultaneous consideration of:

  • Biographical approach: previous achievements are recorded and serve as a predictor of future achievements
  • Simulation approach: complex leadership situations are simulated and the behavior of the candidates is made objectively observable
  • Property approach : property characteristics relevant to requirements such as B. Emotional stability. Integrity, professional motivation or even cognitive skills are recorded using standardized test procedures.
Multimodal management audit according to Schuler & Frintrup, 2005

In the multimodal management audit , however, not only these three levels of diagnostic information, but also different data sources are combined with one another:

  • Potential analysis in the sense of an event-related external assessment (= individual assessment)
  • Third-party sources in the sense of reference surveys and performance reviews
  • Self-reports as self- assessments e.g. B. in the context of a performance biography interview.

With this method, all diagnostic fields are covered and the often purely simulative (behavior-observing) approach is supplemented by biographical and property-based assessment aspects. This leads to the expectation of a higher explanation of variance and thus a better forecasting performance in terms of professional success.

The special problem "Face Validity"

As becomes clear in various standard articles on the diagnostics of top executives - especially in continental Europe - a major problem of psychological-diagnostic procedures is to ensure adequate "social acceptance" (face validity) as well as adequate "ecological validity" of the instruments. In contrast to the Anglo-Saxon and Scandinavian cultural areas, for example, in Austria , Germany or the Czech Republic, the use of psychometric methods (as objectively, reliably and validly checked) - especially questionnaire-based instruments - is difficult or impossible to implement in practical advice. When it comes to evaluating senior executives, clients and candidates are skeptical or even negative about “psychological” procedures. On the one hand, it is stated that psychometric methods can only depict traits, attitudes and behavioral dispositions - but not abilities and performance against the background of situated management actions - due to their analytical approach; on the other hand, standardized AC methods are (as I said) rejected as not “target group-oriented” and “unrealistic”.

As empirical values and more recent results of applied management research and management diagnostics show, qualitative, clinically oriented and “dialogue-based” diagnostic methods are, on the other hand, accepted and also suitable as appropriate to the subject and reality; they have the required social validity in the context of management audits. Above all, action diagnostic approaches meet the practical demands and the social reality of management audits - but are nonetheless secured with regard to their scientific quality criteria. A central requirement dimension of qualitative work, on the other hand, is the "personal competence of the auditors". Accordingly, this takes on the essential position in the selection of audit service providers by the customer.


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Web links

Portal management audit

Individual evidence

  1. ^ T. Gerhardt, J. Ritter: Management Appraisal. Frankfurt am Main 2004.
  2. ^ W. Pelz: Clever storytellers. In: Human Resources. 1/2007.
  3. ^ J. Martindell: The Management Audit. In: Academy of Management Proceedings. 1962, p. 164.
  4. ^ J. Martindell: The Management Audit. In: Academy of Management Proceedings. 1962, p. 265 ff.
  5. K. Leciejewski: The management audit as a new management tool. In: J. Samland (Ed.): The Management Audit. Frankfurt am Main 2001, p. 23 ff.
  6. W. Pelz: Many audits do not address the reality of the company. In: HR Manager. No. 3/2007.
  7. ^ D. McClelland: Identifying Competencies with Behavioral-Event Interviews. In: Psychological Science. Vol. 9 (1998), no. 5