Internal Audit and Leaders

Using Internal Audit to Identify
and Build Future Leaders
Boise Chapter Institute of Internal Auditors
Mark Pearson
Director, Internal Audit Services
Packaging Corporation of America
October, 2014
"I am convinced that nothing we do is more
important than hiring and developing
people. At the end of the day you bet on
people, not on strategies."
Lawrence Bossidy, Former CEO, Allied Signal
• PCA and PCA internal audit overview
• The metrics: how successful have we been?
• Why use internal audit to develop leaders?
• Key challenge: optimizing the roles of internal audit
• Recruiting future leaders
• Developing future leaders
Introduction to PCA
• Headquartered in Lake Forest, Illinois
• Acquired Boise Inc. on October 25, 2013
• With the acquisition annual sales grew to $5.5 billion,
and the number of employees to 14,000
• Operates 8 mills and 98 corrugated product plants
• Fourth largest producer of containerboard and
corrugated container products in the Unites States
• Third largest producer of uncoated freesheet
(primarily papers for the office) in the United States
• Traded on the NYSE as PKG
Introduction to PCA Internal Audit
• From the Audit Committee approved charter: Internal
audit is an independent and objective assurance and
advisory activity of Packaging Corporation of America
(PCA). It assists PCA in accomplishing its objectives
by bringing a systematic and disciplined approach to
evaluate and improve the effectiveness of the
organization's governance, risk management, and
internal control.
• Staff of 16 located in Boise, Idaho, and Lake Forest
• Director reports to the Audit Committee of the Board
and administratively to the CFO.
Internal Audit Vision
We are considered by our stakeholders as trusted and impactful
We are a center of excellence in recruiting, developing, and placing
high potential future leaders.
We comply with the Standards for the Professional Practice of
Internal Auditing and employ leading assurance and advisory
We are considered world-class by stakeholders and peers.
Our team has deep knowledge of the business and appropriate
professional standards and regulations.
We are diverse, technology savvy, trained in leading process
improvement and problem solving techniques, and skilled in using
advanced analytics.
Examples of Successful Alums
• Dave Kunz: Vice President, Northwest Region
• Erik Fredriksen: Controller, Nampa Container
• Javier Cardiel: Controller, Hexacomb
• Tim Kusmertz: General Manager, Louisiana Timber
• Gretchen Gauthier: IT Manager of Planning and
• Billy D’Souza: Manager of Finance and Systems,
Transportation Group
Successful Alums: Related Companies
• Tom Carlile: CEO, Boise Cascade
• Wayne Rancourt: SVP, CFO, Boise Cascade
• Tom Corrick: EVP, Wood Products, Boise Cascade
• Dan Hutchinson: VP, Operations, Boise Cascade
• Diane Crompton: VP, Finance Systems, OfficeMax
• Collette Simo: Senior Director, Internal Audit, Office
Successful Alums: Other Companies
• Rob McNutt: CFO, Expera Specialty Papers
(formerly CFO, Boise Inc.)
• Rob Saper: General Manager, Supply Chain, True
• Shelley Nash: Previously VP, Operational
Excellence, New Page
• Sanjay Singh: VP, Internal Audit, Starbucks
• Colin Connor: VP, Internal Audit, Kapstone
• Joey Hale: Director, Internal Audit, Simplot
• Yulia Gurman: Director, Internal Audit, RPAI
Why Internal Audit?
• Best seat in the house: learn the business,
operations, processes, people, culture.
• Develop key skills: Communications, executive
presence, project management, problem solving,
decision making, process improvement, sales,
conflict resolution, team leadership.
• Address skill obstacles that could flatten/derail a
• Exposure to hiring managers.
• Pool for high impact special projects.
Key Challenge: Optimizing the Roles
-Support SOX 404 & 302
-Support compliance in other
key areas
-Perform control assessments
-Assess and monitor risks
-Support investigations of
ethics violations
Improvement &
-Assess key processes
-Perform high impact
special projects
-Identify process
improvement opportunities
-Recruit & develop
high potential
-Place candidates in
key positions
Internal Audit Services| Page 11
Optimizing the roles
• Maintain a core of seasoned professionals who
know the company and profession.
• Establish and continually improve the key
components of success: right plan, right processes,
right people.
• Establish and maintain standard methodologies and
templates: make it easy to train new team
• Effective orientation of new team members.
• Strong training program.
Key Processes
Right Plan
Management Input
Updated Continually
Structured Framework
Right Process
Proven Audit Methods
Use of Technology
Advanced Audit
High Payback Reviews
Effective Reporting
Right People
Effective Recruiting
Training &
Thoughts on Recruiting
“Eagles don’t flock, you have to find them one at a time.”
Ross Perot
"I hire people brighter than me and I get out of their way."
Lee Iacocca
"If each of us hires people who are smaller than we are,
we shall become a company of dwarfs. But if each of us
hires people who are bigger than we are, we shall
become a company of giants."
David Ogilvy, former advertising executive considered “the father of
“If you pay peanuts, you get monkeys."
Chinese Proverb
Successful Recruiting
Strong support from executive management,
operational management and human resources
Willingness to go over budget staffing levels should an
“eagle” surface.
Constant focus on identifying possible future
Sell, sell, sell: Sell your function to key stakeholders,
recruiting sources, and potential candidates inside and
outside the company.
Effective college recruiting programs
Thoughts on Development
"Development can help great people be even better--but if I
had a dollar to spend, I'd spend 70 cents getting the right
person in the door."
Paul Russell
"A good manager is a man who isn't worried about his own
career but rather the careers of those who work for him."
H. S. M Burns, Former President of Shell Oil company
Successful Development
Leverage existing corporate programs
- Succession planning
- Leadership development
- High potential development
- 360 degree feedback
- Training
- Reverse mentoring
Develop annual and multiyear individual development plans
Leverage other resources:
- Professional associations and related leadership opportunities
- Temporary developmental assignments
Strong formal and informal feedback
Characteristics of successful leaders
Established strong relationships
Consistently high performance
Team building & leadership skills
Willing to take risks
Able to adapt
Problem solver
Source: Center for Creative Leadership
Internal Audit Services, October 2010 18
Derailment Themes
Problems with interpersonal relationships
Not meeting business objectives
Inability to build & lead a team
Inability to change or adapt during transition
Source: Center for Creative Leadership
Source: The Center for Creative Leadership
Internal Audit Services, October 2010 19
Successful Executives…
Had more diversity in their track records
Maintained composure under stress
Handled mistakes with poise & grace
Focused on problems & solved them
Got along with all kinds of people
Source: Center for Creative Leadership
Source: The Center for Creative Leadership
Internal Audit Services, October 2010 20
Derailed Executives…
Had problems with interpersonal relationships
Had difficulty molding a staff
Lacked follow-through
Showed over-dependence
Had strategic differences with management
Source: Center for Creative Leadership
Source: The Center for Creative Leadership
Internal Audit Services, October 2010 21
Take Charge of Your Development
Personal Vision
Create a
Morgan W. McCall, Jr., High Flyers: Developing the Next Generation of Leaders
Boston: Harvard Business School Press, 1998, p. 206.
Morgan W. McCall, Jr., High Flyers: Developing the Next Generation of Leaders
Boston: Harvard Business School Press, 1998, p. 206.
Internal Audit Services, October 2010 22
What is a high-potential employee?
Characteristics of the high-potential employee:
• Ability
• Aspiration
• Engagement
• Performance Evidence
Definition: High potential employees consistently
and significantly outperform their peer groups in a
variety of settings and circumstances….They show a
strong capacity to grow and succeed…They deliver
strong results, master new types of expertise, and
recognize that behavior counts.
Adapted from Corporate Leadership Council, CEO Executive Board research
Developing and implementing a risk-based audit plan
meets only the basic expectations of our stakeholders.
To truly add value:
• Be a trusted and impactful advisor.
• Help improve the business, processes, and controls.
• Help management identify and respond to key risks.
• Recruit and develop the leaders of the future.

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