An organization’s reputation is important.  In the private sector it can account for twenty-five percent of its book value.  It can also make the difference between market dominance and slow decline. For government there is no good way to quantify reputation. However, having a good reputation may mean the difference between obtaining the needed funds and continuing to beg.

A reputation is based on the perception of stakeholders. While ephemeral, it is generally grounded in specific organizational attributes. For government, fiscal responsibility, moral attributes such as integrity, and honesty and procedural and technical competence are key determinants of reputation.  However, because it is a perception, that perception could be changed by a single or series of risk event.  Some of the risk events commonly noted as being detrimental to a government’s reputation are; fraud, fiscal mismanagement, investigation by regulators or law enforcement, lying about behavior or organizational actions, and ineffectual response to a major risk event. A risk event seldom mentioned, but one particularly important to government is the management audit.

Management Audit

A management audit is a review of specific management practices or organizational activities conducted by a third party.  The third party can be internal or external. The use of management audits is growing. It is part of what is called the “Audit Society”. This growth is facilitated by the digitization of information and the ability to compare similar practices and similar organizations.

Because management audits deal with two key determinants of a government’s reputation, procedural and technical competence, there will be a reputational impact. An example of how a management audit tipped the scale in favor of an organization is the Oregon Department of Transportation (ODOT).

Oregon Department of Transportation

In this last Oregon legislative session there was a major transportation bill. This bill contained revenue increases and was tied to ODOT’s budget. It was deemed, by Governor Brown and the Oregon Transportation Commission, that an independent audit was needed to assuage concerns about the Department’s management capabilities.  These concerns were echoed by Catherine Mater, a past Chairwoman of the Oregon Transportation Commission, and the department’s oversight body, in an editorial.  She felt that while budget approval was needed, it would not happen as long as questions” loomed about agency management”.

Governor Brown hired McKensey and Company to conduct a management audit. Their assessment was based on benchmarking specific ODOT performance measures against states similar in size, scope of operation and geography.  It also conducted an analysis of 37 organizational health practices. The analysis showed ODOT was above the median. For ten of the health practices ODOT was in the top quartile.

In second editorial, shortly after the McKensy audit, Catherine Mater concluded that with the audit in hand, the legislature should approve the agency requests, which is what the legislature did.

Conclusion

The turnaround in attitude was a direct result of the McKensey audit.  Particularly significant was the determination that ODOT was above average compared to the benchmarked states. While it is difficult to say what would have happened had the audit results been negative, what is undeniable is that the results tipped the scale in ODOTs favor.  It got the needed funding and budget approval. In this case, the risk event had a positive reputational impact.

Bio:

James Kline is a Senior Member of ASQ, a Six Sigma Green Belt, a Manager of Quality/Organizational Excellence and a Certified Enterprise Risk Manager.  He has over ten year’s supervisory and managerial experience.  He has consulted on economic, quality and workforce development issues.  He has also published numerous articles related to quality in government and risk analysis.