In addition to the target-oriented individual assessment of short-listed candidates that is included in every search assignment, we offer management audit services. Here, we carry out a preventative strategy-oriented assessment of the competencies, potentials and areas of development/developmental requirements of a company’s management team.

The following sections briefly describe the basic idea behind management audits, possible and objectives, examples of our methodology and procedures and of the results and benefits achieved. They are followed by a summary.

Management Audit

- Assessing management potential with a view to strategy -

Successful company management requires more than ever the ability to anticipate internal and external changes and to deal with them quickly and effectively. The manager who wants to be ahead of his time and gain a competitive edge needs evaluation and management tools that go beyond the immediate horizon. An independent Management Audit serves as a sort of "artificial horizon" for the analysis and assessment of management resources.

The yardstick for assessing the future effectiveness of senior management needs to transcend countries, businesses and individuals. Rather than measuring everything against the existing internal standards and structures, it is the strategic goals and market dynamics that set the benchmarks for the optimal make-up of the management team.

Any soccer team is monitored from game to game, changed according to the situation, and periodically replenished or strengthened. The team line-up and task distribution is continually adapted according to the respective opposing players, their tactics, the current game and league position as well as the expectations of the public and the management.

Just having a large number of top players does not automatically lead to being the top team. It is the suitability of the individual, game by game, in relation to the team as a whole that counts, enabling strategies to produce the outcomes planned.

This is the background against which the plan and the method of the Managment Audit were developed.

A Management Audit is neither an ultimatum-style performance test for top managers nor an experiment in self-discovery for the upper levels of management. It is a goal-oriented assessment of the extent to which corporate strategy and management skills coincide, worked out by accepted outside experts using an interactive process in consultation with the management team.

In most cases, this assessment has considerable consequences in the areas of organisation and personnel policy. It is therefore crucial to the success of the Management Audit that there will be open and honest discussion with a view to communicating the goals and intended benefits of the project within the company and, especially, to all participants.

Each year, financiers and investors receive a financial audit from a chartered accountant. This retrospective snapshot of financial data provides a prognosis for results for the forthcoming period, with the assumption of relatively constant operating parameters.

In times of constant and often dramatic change, predictions based on the past become less and less relevant. A management team that has operated successfully up until now cannot guarantee continued management success if there are serious changes in the business environment, the corporate structure or the strategic approach. Each member of the management team can only be used for a limited number of strategies and management situations. Each change in strategy and each significant change in the internal structure or external factors needs to be accompanied by an examination of the suitability of the management team. In considering difficult problems, objectivity and the "helicopter view" provided by external experts should be included in the considerations.

The following are some possible reasons and areas of application for an external Management Audit:

Corporate mergers and acquisitions
The fact that about two thirds of all corporate acquisitions do not produce the desired effect is undoubtedly due to the lack of a professional assessment of the management resources and of objectivity in putting together the management team.

Joint ventures and strategic alliances
The sensitive nature of management issues involved in joint ventures is often underestimated. If there are inadequate qualifications and a lack of balance in the two management teams, if the joint venture partners lack staying power or don't have an instinctive feel, this can be identified by a Management Audit and avoided, benefiting all those involved.

New markets and technologies
A reaction to large-scale market changes caused by new technologies, new environmental circumstances and laws, new sources of supply or the removal of trade restrictions should always be prefaced by the question: Is the current management team in a position to ensure the continued existence of the firm under the new conditions?

Changes in the board of directors or executive board
In the event of a change in the top levels of management, the successor can determine by means of a Management Audit to what extent the abilities of the managers are in harmony with the company's strategic goals and the demands of the market.

Succession to a key position
Important decisions on succession should also be taken with the help of a Management Audit of the potential candidates. An objective appraisal of the internal and external options as well as the professional oversight of the management change are particularly important for succession in small businesses.

Periodic stocktaking
A check on management efficiency also provides an opportunity for a periodic stocktaking, especially in businesses with complex management structures.

Questions could be formulated as follows:
• Is the management directing and using the company's areas of strength in the best possible manner?
• Do the managers "synergistically" combine the strengths of teamwork and their own individual performance?
• Is the formal and/or informal interplay of the management team efficient, or is it weighed down by "token" activities and counter-productive infighting?

It is normally the board of directors or the supervisory board or, in a conglomerate, a divisional manager who initiates the Management Audit. In a small business it may be the owner and/or the advisory board or the meeting of shareholders. The principle aim of a Management Audit is to achieve a greater efficiency in the implementation of strategic programmes through the best possible use of all available "heads".

The concept of the Management Audit is essentially based on the following findings:

1. A specific range of relevant management situations and necessary management tasks can be derived from the strategy and structure of a company.

2. A particular manager can only work successfully with a finite number of strategic plans and structural conditions. Abilities cannot simply be supplied on demand and can only be learnt to a limited extent.

3.Failure in a management task is most often caused by a mismatch between the individual and the situation in the context of the given strategic and structural conditions.

The central issue is suitability within a given set of circumstances rather than "absolute" qualification. Such suitability should be understood as a delicate balance between strategy and the individual. The determinants of "situational" suitability can be represented as follows:

The particular advantages of the Management Audit consist of three basic aspects:

1. The consensus-based approach leads to an organically developed "commitment" to a particular strategic direction and its associated aims. This leads to a significant reduction in losses from friction during initial application and to a very considerable rise in the success ratio, for example in acquisitions, alliances and restructuring processes.

2. A Management Audit creates the "missing link" between strategy, manage-ment team and market. The assessment of management resources takes place not only with reference to definite strategic patterns but also in comparison with "best-practice managers" on the outside. The results are market-oriented recommendations for the best possible or the alternative use of top executives and, for example, suggestions for targeted compensation systems or new developments in management organisation.

3. In the expert discussions which are an integral part of the Management Audit, it is possible to identify shortcomings in technology or methodological skills. But in the same way skills which have not yet been adequately recognised can be identified and put to use as a part of strategic goal-setting. This aspect is especially valuable in cases where the internal assessment approach is individualistic rather than team-oriented. (The best are kept "under lock and key" and the weaker "promoted out of the way".) A Management Audit can also contribute to a rational separation of promotion and payment, so that as far as possible the highest skills are used in each case for the tasks relevant to the overall strategy. Independently of that, the best "performers" can be paid the highest rewards for their achievements. Such effects almost always find a consensus - this bringing the process full circle.

A Management Audit designed in this way is a useful "aid to navigation" in every respect. It is as useful to the "airline's" board of directors as it is to the flight managers and the crew of the aircraft. Consensus on the given situation, the desired objectives and the most sensible path to follow leads to greater security, speed and efficiency. Professional guidance and connection to external points of comparison reduce the risk that subjective feelings will dominate and that one will assess one's own position unrealistically.