The Goal’s Relation to Internal Audit

In The Goal, Alex is driven to save his plant by finding a way to make it more profitable.

Throughout the book, Alex’s thought processes, plans, and management techniques can all be

related to those of an internal auditor. From a big picture perspective, Alex’s approach follows

the definition of internal audit. He tries to take an objective approach to improve his plant’s

operations while simultaneously adding value.

Alex speaks with the heads of various different departments. These interviews span

various categories of upper level divisions all the way down to talking to workers on the

production floor. Alex holds multiple talks with his managers of processing, production,

accounting, and inventory control. On the production floor Alex learns valuable information

from workers like his foreman Mike Haley who had figured out how to increase the bottleneck

in heat treating.

Alex and his team identify many risks over the course of the book, although he and his

team never directly rank them like you would seeing a tradition risk matrix. Risks that Alex and

the team identified were usually related to production. These included not finding their

bottleneck, not maximizing their bottleneck, not being able to fill an order on time, and the

potential problems that could arise after each adjustment they made in their production

process. Alex and his team usually knew the outcomes if their risks were not mitigated as they

usually just resulted in resources and production not being maximized which in turn increased

the chances of their plant being shut down.

 There are several times in the book where Alex sets a new operating procedure into

effect and must then check to see if it is working as intended. This is nearly identical to checking

up on a control to see if it is functioning as intended. In order to discern if his new control is

function as intended, Alex has to use several types of evidence from various parts of his plant to

make his judgements. The first is the analytical evidence he gets from Ralph in regards to data

processing. The analytical data proves to be a problem mid-way through the book while the

team is searching for their main bottleneck. Ralph realizes the data they have on machines and

other plant resources has not been updated regularly and is lacks accuracy. As a result of this

analytical failure, Alex and his team turn to on-site observations, testimonials from employees,

and walkthroughs of the plant to find their control issue by looking for a machine that has large

amounts of work-in-progress backed up in front of it.

Alex shows many examples that he has the traits of a good internal auditor. He

collaborates well with all members of the organization. He’s aware of when he needs to recruit

the ideas of others in the organization to give him an informed opinion on areas he is less

familiar with. He shows patience with his engagement clients even when they are being

difficult. When presenting his finding to corporate he conveys his idea with facts and evidence

that are understandable even to someone who doesn’t work in a plant like his.

For processes followed, Alex and his team end up creating a summary of their methods

used for the auditing process of his plan. They name this the five-step process of on-going

improvement. This process works in a similar way that an internal auditor would on a risk

assessment. To enact the process Alex must go through steps similar to that of an Internal Audit

engagement. He has to identify the areas that need auditing, interview personnel related to the
audit and gather data, document his results, and report his findings. He also treats bottle necks

similar to how an auditor handles risks. He first finds the bottleneck, determines its impact on

sales and production, looks for ways to best incorporate the bottleneck in the production

process, then tries to reduce the bottle neck, and finally repeats the process by looking for a

new bottleneck in the system. This final step helps to add continuous improvement to the

plant. From a personal perspective, near the end of the book, despite reaching his goals in

terms of improving the plant’s output and attaining a higher level in the organization, Alex sets

up his own new goals for how to assess and solve a complex issue without creating more

problems within the environment.

Alex shows his management skills many times in the book. Merely asking employees to

do something differently does not create the adoption of new policies. Large scale changes

require clear communication, frequent participation from the manager, and being straight

forward about goals and objectives. Alex also does an excellent job of decreasing the barriers

between the different staff areas in his factory. This allowed more transparency and an easier

flow of information. This is well illustrated in the situation with Mike Haley. Even though Haley

is a few management levels below Alex, Alex has no problem going and speaking with Haley

directly, where he is able to learn valuable information regarding more efficient techniques for

moving parts through the heat treating process. Alex also showed his understanding of change

management and the need to out-source responsibilities when necessary. This occurs when

Alex realizes one of his bottle necks can be mitigated by outsourced to another company while

still being efficient from a cost perspective.

 Ultimately Alex’s main reason for working so hard to help his plant survive is driven by

his want to add value to the company using process improvements and effective management

techniques. He does this by taking an objective look at his plant and using all the resources at

his disposal to do the best job he can at increasing the plant’s production. These motivations

and actions fall in line with both the definition of internal audit along with adhering to similar

ideals that form Internal Audit’s Code of Ethics.

Personally, this book was not only an interesting read but a great help to me for my

current job. I work in a production plant that’s much smaller than Alex’s but many of the same

principals of the theory of constraints are still applicable. I’ve been able to make several cost

saving measures that eliminated previous ways of operating that were too focused on labor

efficiency. There are several parts we run on multiple machines when we have the man power

available. Often when demand is higher we run both machines to make sure we are using all

our labor efficiently. As it turned out through some observations I made one machine was using

20% less material to form a specific part than the other machine creating it. After running some

calculations, I determined that this one machine could meet the yearly demand as long as it

was running constantly, and not just at the time orders were placed. Removing the other

machine did reduce our labor efficiency, but ultimately did not limit final sales volume and

yielded a higher profit margin on the part.