ENGINEERING AUDITS

 

Engineering Audits -- An Experiment

 

For a year or two, around 1963, I lived inside General Electric's financial organization.  I was establishing and running a combined technical and business computer center which was organized as part of the finance function.  At that time the financial function was General Electric's strongest function, with a solid company-wide group of well-trained people and an established culture of integrity and service.  I came away from this time with two ideas born of observation of the financial function.  One was the course that was taught by the financial function across the company called "Finance for Non-financial Managers".  This sounded like a fine idea and my subsequent experience in technology management suggested to me that better understanding of technical matters could also be the basis for a course.  "Technology for Non-technical Managers" was thus born and continued to ferment in my head for many years.  This set of essays on the management of science and technology is the eventual result!

The other idea that arose from my time in the financial function came from observing the very serious way in which the financial function audited itself across the company.  This was a major activity and had a major impact on the integrity and competence of financial functions and personnel through the company, both in the organizations being audited and in the personnel assigned for a period of time to the audit function.  When I became Chief Technical Officer for the Bendix Corporation, I had (in addition to direct responsibility for the Corporate Research Laboratory) functional responsibility for about 50 engineering organizations across the company who reported to the General Managers of their divisions but for whom I was expected to provide functional leadership.  I wondered if there was any benefit to be obtained from some sort of "engineering audit" -- not a financial audit but an assessment of engineering management and technical capability  Over the next couple of years we explored this concept and learned a lot.  Below are some of the lessons we learned.

There are important intrinsic differences between finance and engineering.  First, finance is (must be) the same across the company since uniform accounting standards must be observed so that divisional results can be meaningfully consolidated to give corporate financial statements.  Secondly, there are industry standards for how accounting is to be done, which must observed in order to satisfy external financial analysts and, indeed, legal requirements. Thirdly, companies are expected to submit to audits from entirely external organizations at least once a year, so the notion of an audit is well established in financial circles.  None of these considerations is true for engineering, although the underlying basis for engineering is the same everywhere before specialization to various fields of application.

What might an engineering audit be expected to accomplish?  Basically, the intent was to improve the quality of the engineering organization and of the engineering it performs for its divisional business.  This could involve adequacy of the personnel in the organization for the mission of the organization, adequacy of the facilities and equipment available to the engineering organization, management practices and congruence of the engineering organization's goals with the business plan of the division.  So we found a division or two that were willing to experiment and started off.  The initial results were not satisfying and were not well received by the organizations that had put in the effort to prepare for such an audit.  Basically, the problem was that the corporate engineering staff did not have the expertise to carry out such an audit and, furthermore, such an audit by corporate would not easily be accepted by the division engineering staff, no matter how competent the corporate personnel were.  (One of the Bendix divisions used to kid corporate visitors by giving them a small gold tie clip in the form of a mushroom -- keep them in the dark and feed them manure.)  In any case, something different was definitely needed if the idea of an engineering audit was to survive.

 

An important step came from a discussion on these audits held with the management team of the Aerospace Group of Bendix.  They suggested that the acceptance of an audit proceeding would be greatly enhanced if it were conducted on a peer-to-peer basis.  Thus, the audit would be carried out by other Directors of Engineering from other corporate divisions, facilitated by staff from corporate headquarters.  This would have the additional benefit of getting several other Directors of Engineering to think about such matters for a day or two and would serve as a useful educational experience for them: thinking about someone else's problems.  Additionally, we made a practice of having as one of the audit team the Director of Engineering from the division which was next to be audited, so they would know exactly what to expect when it was their turn.

 

Roughly, the format was to take the first day to have the resident Director of Engineering and his associates present to the audit team the strategic plans of the division and how the engineering organization meant to fulfill its role in that plan.  This included reviews of personnel, facilities and equipment. The Director of Engineering also listed the problems he faced and solicited the help of the audit team (his peers from other divisions) on those problems.  A joint dinner than evening helped ease up the conversation. The next day was spent in discussion of the issues that had been raised and in preparation of a report.  This report was completed by the Director of Engineering and presented by him to his General Manager, with a copy to the Chief Technical Officer of the Company (me).

 

This was clearly a major improvement and was the manner in which quite a number of such audits were carried out.  It involved quite a bit of preparation by the Director of Engineering who was being audited and it required several other Directors of Engineering to take a couple of days out of their busy schedules to carry out the audit.  But this form of audit was felt, by those involved, to be a valuable aid in getting some planning and analysis work done that should have been done anyway. And for those carrying out the audit, it was an important broadening experience and a chance to see someone else's problems.  On balance, it appeared to be accepted reasonably well.  Unfortunately, the experiment died (as far as I know) at the time of the Allied Corporation's acquisition of Bendix, which brought an entirely different culture to bear.

 

So the experiment must be regarded as incomplete.  But I have always felt that we were getting close to something useful that deserved to be followed up.  I do not know if anyone else has attempted anything like this at other companies.  The engineering audits in the literature appear to be of safety or compliance with standards -- or, indeed, of the financial aspects of engineering.  But I know of no other audits of engineering management.  But I record our experience here as a stimulus to someone else in case they are inclined to explore in this same territory.