Transformation requires a diversity of leadership skills, says AfricaRAS CEO Patricia Stock

This Future of Audit Series interview is proudly brought to you by ACCA.

“Audit transformation relates to the agility of audit professionals,” says Patricia Stock, CEO of AfricaRAS. “We need to move away from the traditional way of doing things and embrace change with speed, including technological advancement, amongst others.”

Patricia says that this starts with leadership, by setting the right tone at the top. Corporate Finance Institute (CFI) explains that “tone at the top, commonly referred to in auditing, is used to define a company’s management and board of director’s leadership and their commitment to being honest and ethical. The tone at the top sets forth a company’s cultural environment and corporate values.”

Patricia adds that tone at the top also speaks to the culture of continuous development and the diversification of leadership skills. She believes that while transformation is often used in South Africa to refer to issues of inclusion, including race and gender diversification, she says that there should first be a shift in focus to include the diversity of leadership skills and embracing the unfamiliar, but relevant areas of expertise.

“The right tone to reshape the organisation’s culture begins with governance structures,” she says. “If you’ve got a board of directors that hasn’t really embraced the need to transform the organisation, then you will find it very difficult to realise it, even if people in the middle and lower levels of the organisation understand the need to transform.”

For example, she cites leadership teams that have not taken on board the way Covid-19 transformed the world of work. “We’ve seen that we can work in a more flexible way and the accounting profession is no longer only servicing local markets – we can work at a global level now. But when people at the top haven’t embraced these changes, it results in a loss of critical skills as people in the organisation leave to find a flexible work arrangement. Leaders must embrace ‘global citizenry’.”

She believes that it’s important for boards and other governance bodies to focus on transformation holistically, in view of the ‘six capitals’: financial capital, manufactured capital, intellectual capital, human capital, social and relationship capital, and natural capital.

“Transformation starts with having the right information,” she says. “But having the right information isn’t enough on its own – it’s about appreciating that information and then applying it correctly. This also speaks to continuous development. Organisations develop through a collective of behaviours. So, if the individuals in the organisation are committed to continuous development and are able to embrace change with speed, you’ll find that the organisation itself is able to achieve agile growth.”

She says AfricaRAS has been putting this into practice in the wake of the pandemic, shifting to engage at a global level, which Patricia says also means realising that one can source information, technology and thought leadership from a global pool. “We’ve been looking at how to build on our intellectual capital with speed and not just follow trends much later. Whereas larger firms have always tended to be the ones embracing innovative ways first, we’ve realised there is room for smaller and medium practices to do the same, and in fact to be more agile.”

This is one of the things that has led her to believe that transformation requires a diversity of leadership skills. She cites one of her favourite movies, Transformers (the alien robots who are the main characters in the series of Transformers films and cartoons) as an example. “Every Transformer has different skills and abilities, but they work together as a team to defeat their adversaries,” she says.

“To be able to realise transformation, an organisation must understand its talent pool – to know what it is that you are able to master as a collective. You cannot be a ‘Jack of all trades’. You must find your focus point and understand the kind of skill sets you have as a collective that you can master, and which will set you apart. We need to focus on where we can become subject matter experts.”

This includes partnering with other experts and diversifying one’s skills to be able to be value creators for sustainability of one’s stakeholders’ interest. For example, she cites what she calls “EESG”, which stands for economic, environmental, social and governance.

“There are standards being set on sustainability, which requires us as accountants to be able to give some kind of assurance and trusted advice in the future,” she says. “We are operating in a space where we have to embrace other professions, such as environmental experts, technology developers or engineers. But even in embracing them, we have to have some kind of knowledge of what it is that we expect of them. If you call yourself a trusted adviser, to be able to help organisations transform, you have to know what it takes for the organisation to be sustainable.

“When I was younger, I aspired to be what I called a ‘doctor of business’ as a CA. This is because to ensure that the organisation stays healthy you have to do what’s best for a business. In doing so you have to be able to diagnose the problems in its system; you must understand the functions of its organs and understand what it should take for it to be healthy. That means you need to know when you need to call and collaborate with someone like a developer or engineer, and why, and what you need from them. The second shift should be on inclusion of diverse experts in our human capital.”

Her advice to other medium and small practices is to embrace partnership opportunities and to learn from others (which speaks to starting with getting the right information). She says that the right relationship capital in the form of partnerships results in increased intellectual capital.

The other advice she offers is to prioritise a culture of agility. “It’s no use saying you’re agile or you want to be agile if your people are risk-averse and resistant to change,” she says. “You need to drive a culture of innovation from the top of performance achievement instead of the traditional performance management, because it is better to invest in achievement than in management.”

She says this requires clarity in communication and adequate change management processes, which includes an understanding by everyone in the organisation of why change is taking place and how that process will unfold. Then change ‘achievements’ need to be measured at each stage of the process.

“It’s like driving from Johannesburg to Cape Town,” Patricia says. “When you stop over and fill up with fuel, you check your oil and your water and tyre pressure to make sure your car is still in good condition before you continue. Your car is what will get you there.

“In an organisation, it’s your people that get you to the desired changed state. People should be the biggest investment in transforming organisations, followed by other ‘capitals’, such as technology, etc. Yes, you might invest in technology along the way, but it’s your people who operate the technology and who should be able to operate it right. Never leave your people behind because it will be like choosing to walk the long journey when you can drive."