Audit of Employee Performance Management (AU1708)

Audit and Evaluation Branch
Natural Resources Canada

Presented to the Departmental Audit Committee (DAC)
December 14, 2017

Table of Contents

• Executive Summary
  • Introduction
  • Strengths
  • Areas for Improvement
  • Internal Audit Conclusion and Opinion
  • Statement of Conformance
  • Acknowledgments
     
• Introduction
  • Audit Purpose and Objectives
  • Audit Considerations
  • Scope
  • Approach and Methodology
  • Criteria
     
• Findings and Recommendations
  • Governance
  • Employee Performance Management Processes
  • Monitoring and Reporting
     
• APPENDIX A – Audit Criteria

Executive summary

Introduction

An effective employee performance management program aims at building a high performance culture by: aligning individual objectives with departmental and government-wide priorities; recognizing and rewarding individual successes; and addressing performance concerns when necessary. Its effective implementation in the public service is intended to create conditions that enable all employees to maximise their individual contributions and ultimately “provide world-class service to Canadians”^{Footnote 1}.

Employee performance management is defined by the Treasury Board of Canada (TB) as a “comprehensive approach that includes the following: setting commitments, performance objectives, and expected behaviours; assessing results; and providing continuous feedback and coaching”. In the 22^nd Annual Report to the Prime Minister on the Public Service of Canada, dated March 31, 2015, the Clerk of the Privy Council identified employee performance management as a prerequisite for an engaged and empowered Public Service necessary for Canada’s success in the 21^st century. The Clerk’s 24^th Annual Report, dated March 31, 2017, also recognizes the continued need to address employee performance management in support of Blueprint 2020.

With approximately 4,000 individuals employed by Natural Resources Canada (NRCan), human capital represents one of the Department’s most valuable assets. The Department’s employees vary in level, experience, and expertise and are crucial to the achievement of its strategic priorities. Employee performance management at NRCan is one of the key elements of its Talent Management approach to support its priority on Growing its Human Capital. Managing performance effectively advances a culture of excellence, supports employees in delivering on their commitments, and ensures the achievement of organizational objectives.

Every three years, the Office of the Chief Human Resources Officer within the Treasury Board Secretariat (TBS), in collaboration with Statistics Canada, conducts the Public Service Employee Survey (PSES) that measures employees’ opinions in relation to: employee engagement, leadership, the workforce, and the workplace. The most recent PSES, conducted in 2014, indicated that although effective employee performance management practices have increased, only 39% of NRCan employees surveyed agreed that unsatisfactory employee performance is managed effectively. This was only slightly better than average, compared to 38% overall for the Public Service.  

The need to foster excellence in service delivery to Canadians and improve productivity was a key driver for the creation of the new TB Directive on Performance Management (the Directive), which came into effect on April 1, 2014. The Directive provides guidance on how to establish an effective employee performance program and process to support a consistent government-wide approach to ensuring a high-performance culture. The Directive applies to all non-executive employees, as a separate process was already in place for executives, under the TB Directive on the Performance Management Program (PMP) for Executives.

The objective of the audit was to assess the adequacy and effectiveness of NRCan’s employee performance management in promoting a culture of high performance, and in compliance with the TB Directive on Performance Management.

Strengths

Adequate governance processes have been established to support employee performance management, in accordance with the TB Directive on Performance Management and supported by periodic monitoring and reporting activities. The Corporate HR Group has also provided processes and tools to support the awareness and implementation of employee performance management.

Areas for improvement

Opportunities were identified to complete oversight activities in a timely manner, and to leverage existing governance processes to more effectively communicate senior management’s commitment to supporting employee performance management. There are also opportunities to develop managers’ and supervisors’ capacity to assess employee performance and provide ongoing feedback so that the process produces quality information that can be integrated with other HR exercises, including Talent Management, Succession Planning, and Learning and Professional Development.

Internal audit conclusion and opinion

In my opinion, while the majority of key governance processes, and tools have been established to support compliance with the TB Directive on Performance Management, there remain challenges to ensuring adherence to policies and guidance. Opportunities were also identified to improve monitoring and reporting to effectively support and promote a culture of high performance.

Statement of conformance

In my professional judgement as Chief Audit and Evaluation Executive, the audit conforms to the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing and the Government of Canada’s Policy on Internal Audit, as supported by the results of the Quality Assurance and Improvement Program.

Christian Asselin, CPA, CA, CMA, CFE
Chief Audit and Evaluation Executive
December 14, 2017

Acknowledgments

The audit team would like to thank those individuals who contributed to this project and particularly employees who provided insights and comments as part of this audit through interviews, internal focus groups, and surveys.

Introduction

An effective employee performance management program aims at building a high performance culture by: aligning individual objectives with departmental and government-wide priorities; recognizing and rewarding individual successes; and addressing performance concerns when necessary. Its effective implementation in the public service is intended to create conditions that enable all employees to maximise their individual contributions and ultimately “provide world-class service to Canadians”^{Footnote 2}.

Employee performance management is defined by the Treasury Board of Canada (TB) as a “comprehensive approach that includes the following: setting commitments, performance objectives, and expected behaviours; assessing results; and providing continuous feedback and coaching”. In the 22^nd Annual Report to the Prime Minister on the Public Service of Canada, dated March 31, 2015, the Clerk of the Privy Council identified employee performance management as a prerequisite for an engaged and empowered Public Service necessary for Canada’s success in the 21^st century. The Clerk’s 24^th Annual Report, dated March 31, 2017, also recognizes the continued need to address employee performance management in support of Blueprint 2020.

With approximately 4,000 individuals employed by Natural Resources Canada (NRCan), human capital represents one of the Department’s most valuable assets. The Department’s employees vary in level, experience, and expertise and are crucial to the achievement of its strategic priorities. Employee performance management at NRCan is one of the key elements of its Talent Management approach to support its priority on Growing its Human Capital. Managing performance effectively advances a culture of excellence, supports employees in delivering on their commitments, and ensures the achievement of organizational objectives.

Every three years, the Office of the Chief Human Resources Officer within the Treasury Board Secretariat (TBS), in collaboration with Statistics Canada, conducts the Public Service Employee Survey (PSES) that measures employees’ opinions in relation to: employee engagement, leadership, the workforce, and the workplace. The most recent PSES, conducted in 2014, indicated that although effective employee performance management practices have increased, only 39% of NRCan employees surveyed agreed that unsatisfactory employee performance is managed effectively. This was only slightly better than average, compared to 38% overall for the Public Service. In response to the government-wide PSES results, the Clerk of the Privy Council stated that the Government of Canada can have the best processes and technology, but these will not be enough to produce the best results for Canadians, unless organizations manage their talent well and work as a high-performing team. 

The need to foster excellence in service delivery to Canadians and improve productivity was a key driver for the creation of the new TB Directive on Performance Management (the Directive), which came into effect on April 1, 2014. The Directive provides guidance on how to establish an effective employee performance program and processes to support a consistent government-wide approach to ensuring a high-performance culture. The Directive applies to all non-executive employees, as a separate process was already in place for executives, under the TB Directive on the Performance Management Program (PMP) for Executives.

In order to support all departments and agencies across the core public administration in adhering to the Directive, TBS also developed an enterprise-wide solution known as the Public Service Performance Management Application (PSPM App). The PSPM App was designed to allow all employees and their managers to use a uniform web interface to complete their performance agreements and to document discussions and ratings related to performance. The Directive requires that all employees: know what is expected of them; have an opportunity to understand how their performance will be measured; and, at least twice a year, receive formal feedback on their strengths as well as support for areas of improvement. Managers are expected to supplement the Directive by making ongoing constructive feedback a regular part of managing their teams. These requirements are illustrated in the TBS table of the ‘Performance Management Annual Cycle’ below, and must also be documented in the PSPM App.

 Figure 1: Performance Management Annual Cycle^{Footnote 3}

Audit purpose and objectives

The Audit of Employee Performance Management was included in the 2016-2019 Risk-Based Audit Plan, approved by the Deputy Minister on March 10, 2016.

The objective of the audit was to assess the adequacy and effectiveness of NRCan’s employee performance management in promoting a culture of high performance, and in compliance with the TB Directive on Performance Management.

Specifically, the audit assessed whether:

• The Department has established and implemented adequate governance processes to support employee performance management;

• Adequate and effective processes and tools have been established and effectively employed to support awareness and consistent implementation of employee performance management; and,

• Adequate and effective monitoring and reporting activities have been established in compliance with the TB Directive and enable strategic integrated decision making (e.g. Talent Management, Succession Planning, Professional Development and Learning, etc.).

Audit considerations

A risk-based approach was used in establishing the objectives, scope, and approach for this audit engagement. A summary of the key inherent risks that could impact the effective management of employee performance include the following:

• Governance processes, including documented roles, responsibilities, and accountabilities, may not be adequate to support the Department’s commitment to promoting a culture of high performance;
• Training and awareness activities may not be established to provide employees with an understanding of what is expected of them and how their performance will be measured;
• Appropriate processes and tools may not be effectively established and employed to evaluate and manage employees’ performance, which may affect employee morale and staff retention;
• Monitoring and oversight of employee performance management may not be adequate to identify performance trends and support informed decision making; and,
• Managers and employees may not perceive the process to be fair or useful for evaluation, professional development, and performance improvement.

Scope

The scope of the audit included departmental activities relevant to employee performance management, including management oversight. The audit timeline covered the period commencing with the effective date of the TB Directive on Performance Management, April 1, 2014, and ending March 31, 2017.​​​

The audit did not include a detailed technical examination of the PSPM App, since the application was developed and is maintained by TBS. Furthermore, the audit did not examine Talent Management processes in detail, since this topic will be the focus of a future audit.

The scope of the audit also did not include performance management for Executives, as a separate process exists under the TB Directive on the Performance Management Program (PMP) for Executives.

Approach and methodology

The approach and methodology followed the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing and the Government of Canada’s Policy on Internal Audit. These standards require that the audit be planned and performed in such a way as to obtain reasonable assurance that audit objectives are achieved. The audit included tests considered necessary to provide such assurance. Internal auditors performed the audit with independence and objectivity as defined by the International Standards for the Professional Practice of Internal Auditing.

The audit approach included the following key tasks:

1. Interviews with key stakeholders.
2. A detailed review of key documents including policies, directives, training modules, tools and guidance to support employee performance management.
3. A detailed examination of information and documentation pertaining to departmental planning, monitoring, performance, and reporting related to employee performance management.
4. Conduct of focus groups with separate groups of managers and employees:
   
   The objective of the focus groups was to obtain an overall understanding of employees’ opinions of the employee performance management process, and to identify strengths and opportunities for improvement. Individuals were selected from NRCan’s internal directory, using stratified random sampling techniques to ensure proportionate representation by sector and region. Each group was asked a set of 12 opinion questions regarding overall perceptions of employee performance management at NRCan.

5. Conduct of the Internal Audit and Evaluation Branch Survey on Employee Performance Management:  
   
   The objective of this internal survey was to obtain an overall understanding of employees’ opinions of the employee performance management process, and to identify strengths and opportunities for improvement. The results of the survey were considered in combination with the key tasks described above to complement the findings and recommendations in this report.
   
   All employees who are indeterminate and term (3 months and more), including managers, supervisors, and executives are required to register in the PSPM App. The survey was provided electronically to all NRCan employees. Employees who did not meet the employment criteria for registration or did not have a performance agreement in the PSPM App (including executives) were asked to self-identify and were excluded from the overall survey results. 1035 survey responses were received from the non-executive employee population of approximately 3500.
   
   The survey was conducted from May 15 to May 29, 2017 with support from the NRCan Stakeholder and Public Engagement Branch, within the Communications Portfolio Sector. The survey included 12 opinion questions addressing each phase of the Performance Management Annual Cycle as well as overall perceptions of employee performance management at NRCan.
   
   We would like to thank all respondents for their participation in the survey and all individuals who participated in focus groups.

The conduct phase of this audit was substantially completed in June 2017.

Criteria

The criteria were developed primarily from the key controls set out in the TB Core Management Controls and the TB Directive on Performance Management. The criteria guided the fieldwork and formed the basis for the overall audit conclusion.

Please refer to Appendix A for the detailed audit criteria.

Findings and recommendations

Governance

Summary finding

The objective of the Treasury Board Directive on Performance Management is to “promote a commitment, shared by managers, employees and their organizations, to sustaining a culture of high performance in the public service.” In support of this objective, the Department has established adequate governance processes for employee performance management and clearly communicated roles, responsibilities and accountabilities.

Opportunities were identified to complete oversight activities in a timely manner, and to leverage current governance processes to more effectively communicate senior management’s commitment to supporting employee performance management.

Supporting observations

Adequate governance processes allow for management to exercise oversight and enable the achievement of objectives and priorities. Governance bodies provide leadership and oversight for employee performance management, while also monitoring the overall performance of the program. The audit sought to determine whether:

• Roles, responsibilities, and accountabilities are clearly documented and communicated;
• The departmental employee performance program is established in accordance with the TB Directive on Performance Management (the Directive); and,
• Senior management effectively communicates its commitment to supporting employee performance management.

Roles, responsibilities, and accountabilities

The Department has a clearly documented governance structure for employee performance management, consisting of the following bodies: Executive Committee, Human Resources Renewal Committee (HRRC), both Departmental and Sector Review Panels, and the Performance Management Task Team. The Directive sets out the responsibilities of Deputy Heads and their delegates regarding the administration of a consistent, equitable, and rigorous approach to employee performance management in their organizations. The ADM of the Corporate Management and Services Sector (CMSS) and the Department’s Chief Human Resources Officer hold functional responsibility for departmental human resources, including both employee and executive performance management. The roles, responsibilities, and accountabilities of each of these bodies are clearly documented and communicated through various corporate documents available on the Department’s intranet.

The HRRC provides advice to the Executive Committee and the Deputy Head in setting the Department’s talent and employee performance management strategies. The HRRC is supported by the Performance Management Task Team, which includes members from all Sectors, in identifying emerging issues in employee performance management and acting as sector ambassadors for the two-way communication of information.

Departmental and Sector Review Panels have been established in accordance with the Directive to provide oversight of consistency and fairness of performance assessments, utilizing the following existing governance structures:

• The Departmental Review Panel is comprised of the Executive Committee and includes the Deputy Minister, Associate Deputy Minister, and all Assistant Deputy Ministers and equivalents.
• Sector Review Panels are comprised of existing Sector Senior Management Teams that include Assistant Deputy Ministers and Directors General.

Requirement to establish an employee performance management program

The Directive sets out minimum requirements to establish an employee performance management program, including processes, oversight, and monitoring. Most of the process requirements are captured via the TBS enterprise-wide solution, otherwise known as the Public Service Performance Management Application (PSPM App). The PSPM App was designed to allow all employees and their managers to use a uniform web interface to complete their performance agreements and to document discussions and ratings related to performance. In this way, the system maintains records of the distribution of employee performance ratings within the organization, and PSPM App completion rates.

The establishment of the Departmental Review Panel and a process to review performance assessments is an integral part of the oversight of the employee performance management program prescribed by the Directive. At a minimum, the Departmental Review Panel must annually review cases of employees who have either surpassed or have not met expectations. It is also expected that the Sector and Departmental review panels provide oversight for a consistent and fair approach to the application of employee performance management practices across the Department and within Sectors. Sector Review Panels are expected to be completed by May of each year and common themes and recommendations are expected to be presented to the Departmental Review Panel approximately one month later. Most Sector Review Panels had not been conducted in a timely manner, with four of nine occurring six months or more after the year-end cycle in the first two years of the TB Directive. For the 2015-16 cycle, three of nine Sector Review Panels and the Departmental Review Panel had not been conducted prior to the initiation of the 2016-17 Sector and Departmental Review Panel process in May 2017.

The Directive also requires that organizations complete an Annual Self-Assessment of the quality of the organization’s employee performance management exercise. The 2015-16 Annual Self-Assessment, prepared by Corporate HR in partnership with the Performance Management Task Team, confirmed that the Department has fully implemented the Employee Performance Management Program but identified several opportunities for improvement including: senior management engagement, completion of review panels, and the need to enhance managers’ capacity to effectively manage employee performance. The 2015-16 Annual Self-Assessment had not yet been presented to governance bodies at the time of the audit.

Communication of senior management commitment to employee performance management

Employee performance management is one of the key elements of the Department’s Talent Management approach to supporting its “Growing our Human Capital” priority. Managing performance effectively advances a culture of excellence and supports employees in delivering on their commitments to ensure the achievement of organizational objectives. Senior leadership and commitment set the standard for all performance in the organization.

The 2015-16 Annual Self-Assessment noted that senior management engagement in most sectors has generally been good, correlating with higher performance agreement completion rates. Senior management has clearly communicated a commitment to supporting implementation of the employee performance management program; however, this communication has focused on completion targets and deadlines rather than on the quality of employee performance assessments.

Focus group sessions were held during the audit with separate groups of managers and employees to assess the perception of senior management engagement. During these sessions both managers and employees expressed the perception that not all senior executives are fully engaged in the employee performance management program. Examples cited include executives not completing their employee performance management responsibilities for their direct non-EX reports in a timely manner and not making their direct reports accountable for completing their employees’ performance agreements in a timely manner. 

The Managers’ Community is a forum for identifying emerging challenges facing NRCan managers and defining proactive and creative ways to address them together, as well as to create opportunities for managers to come together to develop new partnerships and support each other. Initial steps have been taken by Corporate HR to assist managers with the performance management process. Following the introduction of the new performance management directive, the Managers’ Community held a session on having effective performance management discussions. As such this would be an appropriate venue to expand efforts in identifying and addressing the common challenges faced by managers in implementing employee performance management. The current Champion is the Associate Deputy Minister, and the ADM CMSS is the Co-Champion. Given the senior leadership and intended audience of the Managers’ Community, this forum is well positioned to communicate senior management’s commitment and support to employee performance management.

Risk and impact

A perceived lack of commitment and engagement from senior management to uphold the quality of employee performance management program may cascade downwards, negatively impacting employees’ engagement and commitment to building and sustaining a culture of high performance.    

Recommendations

1. It is recommended that the Co-Champions of the Managers’ Community effectively leverage this forum to raise awareness of the importance of employee performance management to achieve the departmental priority of ”Growing our Human Capital” and senior management's commitment to building and sustaining a culture of high performance in the Department.

2. It is recommended that Sector Heads, in collaboration with the Chief Human Resource Officer, ensure the timely completion of Sector and Departmental Review Panels.

Management response and action plan

Management agrees. In response to recommendation 1:

A session will be led by senior executives (or Managers’ Community Co-Champions) to provide group coaching for managers, on how to hold effective performance and career conversations and facilitate group discussions with HR to identify what additional tools and support managers need.

Positions Responsible: Co-Champions of Managers’ Community

Timing: End of November 2017

Also in response to recommendation 1, creation of a mandatory work objective for all managers pertaining to People Management requirements with clear and measureable performance indicators.

Positions Responsible: Chief Human Resources Officer

Timing: March 2018

Management agrees. In response to recommendation 2:

Sector Heads will ensure that Sector Review Panels are completed within the timeframe established by the CHRO. HR will prepare a summary report noting key trends and opportunities for improvement and will report on results at the Executive Committee (ExCom). 

Positions Responsible: Sector Heads in collaboration with the CHRO

Timing: July 2018

Employee performance management processes

Summary finding

Overall, the Department has established processes, training and tools to support the awareness and implementation of employee performance management. Opportunities were identified to improve consistency in the application of these processes and tools with regards to ongoing performance feedback, and the use of rating scales, learning plans, action plans, and talent management plans. Opportunities were also identified to improve the accountability and develop the capacity of managers to effectively manage employee performance.

Supporting observations

The TBS ‘Performance Management: 2015-16 Year-End report’ states: “People are the bedrock of successful performance management. They have the most crucial role to play in using the process and the technology for their own development and career goals, and to advance the success of their teams and organizations. They ensure that the performance management process is followed, that the data is entered into the PSPM App accurately and in a timely manner, and that decisions are driven by sound evidence.”

The audit sought to determine if managers and employees are supported in their roles in employee performance management through the following:

• Appropriate processes and tools have been established and employed consistently to support employee performance management;
• Awareness and training activities have been developed and communicated to provide all employees with a clear understanding of the process and objectives; and,
• Training and support is provided to managers to effectively assess employee performance.

Processes and tools

The Directive sets out certain minimum requirements for the establishment of processes and tools to support employee performance management, which are documented in the PSPM App including the following:

• Annual written performance objectives and assessments for all employees;
• Mid-year reviews for each employee;
• Active monitoring of probationary periods; and,
• Identifying cases of unsatisfactory performance at the earliest opportunity possible and undertaking appropriate action.

During the audit focus group sessions with separate groups of managers and employees as well as an internal survey of all employees, were conducted to assess the involvement of both groups in the development of performance objectives and learning and development plans. 

The initial establishment of written performance objectives is critical to the employee performance management process as it forms the basis for evaluating employee performance linked to organizational objectives and priorities, and for providing both positive and corrective feedback throughout the year. The results of focus groups and the audit survey indicated that most employees considered themselves to have been involved in developing their performance objectives. Over the next three years NRCan job descriptions are being standardized to accurately reflect the work that each individual performs. As this project proceeds, it is expected that work objectives feeding into the employee performance management process will also be updated.

NRCan deadlines for completing each step of the process are as follows: beginning of year objectives by April 30^th, mid-year reviews by September 30^th and end of year assessments by March 31^st. Statistics on completion rates and probationary periods are monitored on a weekly basis during the beginning, mid-year and year-end performance cycles. As of May 1, 2017 approximately 76% of the 2016-17 end of year assessments had been completed by managers, and 10% of beginning of year agreements had not been completed. Some managers and employees expressed concerns during focus groups and interviews regarding these deadlines, as they conflict with other priorities. Nonetheless, the process is meant to be ongoing throughout the year, and the PSPM App may be updated at any point during the year to reflect changes to priorities and work objectives, and to document performance discussions and feedback. Ensuring ongoing feedback throughout the year and regular updates to the system may reduce time pressures at year-end and increase the quality of the process.

At the onset of the 2016-17 employee performance management cycle, 18% of employees, who are registered in the PSPM application, did not have documented learning plans. The results of focus groups and the audit survey indicated that most employees were actively involved in establishing learning and developments plans in collaboration with their managers. Nevertheless, it was stated during focus groups that learning activities, including acting positions and assignments, were not always completed as a result of conflicting operational requirements or time restrictions.

Ongoing feedback is critical to successful employee performance management. Currently there is no mechanism in place to monitor whether managers/supervisors are providing ongoing feedback other than the information that is captured in the PSPM App. Focus groups indicated that the practice of providing ongoing and regular performance feedback is inconsistently applied across the Department. Additionally, only 49% of survey respondents indicated that their “supervisor provided clear corrective feedback for performance areas of concern throughout the year”. 

At the end of the year, managers conduct formal end-of-year assessments to rate employees based on the achievement of their work objectives, and generic competencies using a five point rating scale. The internal audit survey results indicated that 73% of respondents agreed that the “year-end assessment was aligned with their work objectives and reflected their performance throughout the assessment period”.

General awareness and training

All employees have a role to play in the employee performance management process, whether it be for their own development and career goals, or in support of their direct reports. In order to perform these roles effectively, there must be a clear and mutual understanding of the intended objectives and the criteria by which performance is evaluated.

General awareness and training activities have been developed and communicated to all NRCan employees in support of the employee performance management program. Corporate HR has created a “Guide on Performance Management” available on the NRCan Intranet which includes links to tools and resources such as: Managing Employees’ Performance, Potential and Development; Effective Performance Conversations; Tips on Giving and Receiving Feedback; Checklists for Having Difficult Performance Conversations; and others. The Guide also provides tips and examples to establish SMART objectives, as well as sample objectives for several occupational groups to assist managers in developing SMART objectives for their teams. There are also relevant courses available through the Canada School of Public Service (CSPS).

There are no processes or tools in place to assess the effectiveness of the training programs offered to NRCan employees regarding employee performance management programs and processes. Despite the tools and guidance available, it was consistently identified that employees and managers need more training and support to clearly understand the rating scales and the assessment of competencies.

Management training and support

Managers play the most crucial role in employee performance management, and must therefore possess the competencies necessary, including coaching and mentoring skills, to manage a diverse workforce. Therefore, it is especially important that managers/supervisors receive adequate training and support to manage employee performance effectively. To be effective, training requires an investment of time and an organizational culture that recognizes the benefits of investing in employee performance management.

The Directive requires that all new managers and supervisors responsible to evaluate employees performance must complete “Performance Management for the Government of Canada (G140)”, an online course provided through the CSPS. The NRCan Learning Team maintains a record of all managers, supervisors, and executives who have completed the mandatory training and identified that, as of May 2017, 24% of them had not completed this training.

Managers indicated they have many competing priorities and do not feel like they have the time or support to execute the employee performance management process properly. As a result, managers do not feel comfortable to make a fair assessment and rating of employees’ performance for various reasons including a concern about challenges and grievances; the additional administrative process associated with poor performance ratings; and a general lack of confidence in the performance assessments. 

Focus groups with managers indicated that many have been advised to rate the majority of employees as “succeeded” (average) with very few as exceptional or poor. It was noted that this practice was not communicated or encouraged by the corporate HR group. Managers interviewed stated the current rating has a negative impact on employee morale and motivation, citing unclear messaging about what a “succeeded” rating represents. This is counter to the objective of the Directive and raises concerns about the fairness of the process. Research suggests that fairness is strongly associated with employee commitment which in turn has many organizational benefits including increased job performance.

Results of internal audit focus groups, Sector Review Panels, and the 2015-16 Annual Self-Assessment consistently identified a need for more training and development in setting and assessing performance objectives, measuring and assessing competencies using the competency rating scales, and providing support and guidance to help with having difficult conversations and career coaching.

The Directive also requires that managers/supervisors be assessed on their performance in managing their employees in accordance with the Directive. Completing performance assessments is a management task for which there should be clear and consistent expectations for all managers. There is currently no established accountability for the timely completion of performance assessments, and there is no standard work objective for all managers/supervisors regarding employee performance management.

Risk and impact

Absence of the consistent application of employee performance management processes may negatively influence employees’ perception about the transparency and fairness of the employee performance management program.

Without proper training, awareness, and support from HR, managers will not be able to manage employee performance effectively and contribute to promoting a culture of high performance.

Recommendations

3. It is recommended that Sector Heads in collaboration with the Chief Human Resources Officer ensure that clear and consistent expectations are established for all managers for following and supporting the employee performance management process.

4. It is recommended that the Chief Human Resources Officer, in collaboration with the Performance Management Task Team, ensure that managers are provided with the support, oversight, feedback, and coaching that is required to develop their capacity to properly conduct the employee performance management process.

Management response and action plan

Management agrees. In response to recommendation 3:

The Senior Director Corporate HR will:

• Prepare communications to be sent from the DM and Sector Heads.
• Promote Performance Management tools and trainings.
• Continue to monitor and report to ExCom and Sector Heads on completion of performance cycle activities.
• Support branch discussions for managers to discuss ratings, talent management plans, performance improvement plans to improve consistency in the ratings and in the opportunities.

Sector Heads will clearly communicate to their management teams their expectations that performance management be treated as a priority, leveraging the communication materials prepared by HR.

Positions Responsible: Sector Heads in collaboration with the Senior Director, Corporate HR

Timing: July 2018

See also response to recommendation 1 regarding creation of a mandatory work objective for all managers pertaining to People Management requirements with clear and measureable performance indicators.

Management agrees. In response to recommendation 4:

The Senior Director Corporate HR will organize an Action Learning Group Pilot to support managers in all areas related to managing employees and performance; and implement as appropriate.

HR (in collaboration with the Performance Management Task team) will develop, review and update the Management Action plan to include solutions to the issues and needs identified during the November session with the Managers’ Community.

Position Responsible: Senior Director, Corporate HR

Timing: January 2018

Monitoring and reporting

Summary finding

Data generated from employee performance management programs has enormous potential value to influence strategic decisions on: Corporate Training Plans; HR Plans including succession planning and talent management; and Learning and Development Programs. Currently the employee performance management program is mostly a stand-alone process with limited integration of qualitative performance data in strategic decision-making. 

Overall, it was observed that although monitoring and reporting activities have been established in compliance with the TB Directive, they are not completed in a timely manner to inform decision making. The focus of monitoring and reporting activities has been on system completion rates, rather than on qualitative data that would enable strategic integrated decision making.

Supporting observations

The audit sought to determine whether:

• Periodic reviews are conducted to assess the quality of the employee performance management process;
• Effective reporting exists to ensure that senior management receives timely information to allow adequate monitoring and strategic decision making; and,
• Results of employee performance management processes are considered in the context of other HR activities.

Periodic reviews to assess quality of process

Periodic reviews to assess the quality of the employee performance management process (e.g. transparency, fairness, and consistency) ensure that the resulting data is of sufficient quality to support strategic decision making. Various mechanisms for the conduct of periodic reviews in support of monitoring and reporting have been established in the Department, including annual Sector and Departmental Review Panels, the Annual Self-Assessment, and regular reporting of completion statistics by Corporate HR to Senior Management.

Sector Review Panels are responsible for conducting an annual review of the performance cycle by May of each year and covering topics such as: oversight, direction, support, and compliance. Results of the Sector Review Panels are subsequently analyzed for common themes and recommendations by Corporate HR, and are expected to be presented to the Departmental Review Panel approximately one month later. As noted previously, the Sector Review Panels have not been conducted in a timely manner, or at not all in some cases, for the 2015-16 cycle prior to the initiation of the 2016-17 Sector and Departmental Review Panel process in May 2017.

The completed Sector Review Panel assessments varied greatly in the depth of discussions regarding the quality of the process, including the assessment of whether the process is transparent, fair, and consistently applied. There was limited discussion about whether Sectors had mechanisms in place to ensure employee performance is well managed; however, these discussions highlighted many opportunities for improvement as discussed previously in this report. At the 2014-15 Departmental Review Panel only common themes and recommendations based on the discussions of the Sector Review Panels were presented. There was no overall assessment of the process and no Departmental Review Panel was convened for the 2015-16 cycle.

The Annual Self-Assessment is another process, required by the Directive, to assess the quality of the Department’s employee performance management exercise. The 2015-16 Annual Self-Assessment was conducted in a timely manner by Corporate HR, in collaboration with the Performance Management Task Team, but has not yet been presented to HRRC. The Assessment highlighted that accountability for the quality of the documentation in the PSPM App rests with employees and managers. It also described several areas for improvement including the engagement of senior management, the completion of Review Panels, and support and training for managers.

The PSES is currently the only platform available for employees to voice their concerns and provide feedback on the employee performance management program implemented in the Department. Internal audit focus groups consistently identified a perceived lack of fairness and consistency with the process. Concerns about fairness were also reflected in the internal audit survey results as only 49% of respondents agreed with the statement “I believe that performance practices are fair and equitable”.

Effective reporting to senior management

Effective reporting ensures that senior management receives timely and relevant information in support of monitoring and strategic decision making. Corporate HR generates timely reports during the various cycles of employee performance management (i.e. beginning, mid-year, and year-end) and shares these reports with senior management to allow for adequate monitoring; however, the focus of these reports is on system completion rates and does not currently include meaningful metrics and analysis to support strategic decision making. There are also known data integrity issues with government wide PSPM App completion rates for 2016-17 as the PSPM App pulls employee data from the PHOENIX pay system. Analysis from NRCan Corporate HR indicates that the error variance rate is approximately 5%.

In addition, the Performance Management Task Team established an ‘After Action Review Action Plan’ following the first year of the Directive’s implementation. The report highlights areas for improvements including support and commitment from senior management, and the need for more training, support, and resources. Specific activities/actions are presented in the plan with corresponding responsibilities and timeframes. The ‘After Action Review Action Plan’ was presented to HRRC in January 2016 and obtained its support. As a result the Corporate HR group developed and provided links to additional resources through the “Guide on Performance Management” available on the NRCan intranet. The Corporate HR group has provided training and information sessions to managers in support of effective performance management. Further, Manager’s community held workshops on having meaningful performance conversations. 

Integrated decision making

Data generated from employee performance management programs has enormous potential value to influence strategic decisions on:

• Corporate Training Plans – Training priorities, amounts to be invested, which informal learning programs require more focus, etc.;
• HR Plans – Planning internal mobility to ensure the right people are in the right positions to maximize organizational performance in support of succession planning and talent management; and,
• Learning and Development Programs – Deciding which programs are needed most, deciding who should participate, etc.

The system application itself also has built in functions to support development and tracking of Action Plans, Talent Management Plans, and individual Learning and Development Plans. Overall the employee performance management process at NRCan is mostly a stand-alone process which is not linked effectively to other HR activities including: Classification; Talent Management; Recruitment and Selection; Learning and Development; and Workforce Planning.

Corporate HR performs some analysis on workforce performance data generated from Talent Management and Learning and Development Plans, but it is limited to the number of Talent Management Plans offered and accepted by gender and classification, the average investment per employees in terms of cost and hours for learning activities, and the most popular learning categories requested by employees. It was mentioned that the results of these analyses indicate the need for improved and consistent input of information in the PSPM App to enhance intelligence gathering. 

Furthermore, the Talent Watch list is prepared outside of the PSPM App by Corporate HR. As a result, this list might not correlate with the information in the PSPM App since employees on the Talent Watch list are nominated by their managers if they are considered ready for an executive promotion and might not necessarily have a Talent Management Plan or vice versa. The challenge with Talent Management Plans is they are being managed at the individual level and not at the departmental level, resulting in a misalignment of internal mobility for acting positions and assignments.

Risk and impact

Lack of an assessment to ensure the quality of the employee performance management process, and whether it is fair, transparent, and consistently applied limits the Department’s ability to make informed decisions to support necessary changes to attain the objective of promoting a culture of high-performance.

Absence of a more fluid process to analyze workforce performance data and meaningful reporting to senior management regarding employee performance management limits NRCan’s ability to make strategic HR decisions.

Recommendations

5. It is recommended that the Chief Human Resources Officer:

1. Conduct an analysis to identify processes to integrate and leverage qualitative performance data from similar and related processes (e.g. Learning Plans and Talent Management) to drive operational and strategic HR decision making; and,
2. Implement such processes as determined to be technologically feasible and cost effective. 

6. It is recommended that the Chief Human Resources Officer provide guidance to Review Panels on adopting a holistic view of employee performance management and on how to clearly assess the quality of the entire process. 

Management response and action plan

Management agrees. In response to recommendation 5:

The Senior Director Corporate HR will

1. Conduct an analysis of all information sources related to Performance Management, Learning and Development, Talent Management, Succession Planning and Performance-based Staffing to identify areas of focus. The analysis will serve to improve qualitative data available and develop options to maximise the value of the Performance Management Program across the organization. This analysis will be presented to ExCom for decision in fall 2018 along with a proposed timeline for the implementation of proposed initiatives.

Position Responsible: Senior Director, Corporate HR

Timing: May - December 2018

2. Implement options that are approved by ExCom as being both technologically feasible and cost effective.

Position Responsible: Senior Director, Corporate HR

Timing: Will align with implementation dates as outlined in the presentation and approved by Executive Committee

Management agrees. In response to recommendation 6:

HR will modify approach for Review Panels to focus on key statistics and talent management discussions. 

Position Responsible: Senior Director, Corporate HR

Timing: December 2017

HR will include the results of the information analysis (in response to recommendation #5) in Review Panel materials in order to gear conversations towards the qualitative versus quantitative information and the development of sectorial approaches to optimize the Performance Management Program.

Position Responsible: Senior Director, Corporate HR

Timing: December 2018 

Appendix A – Audit criteria

The criteria were developed primarily from the key controls set out in the Treasury Board’s (TB’s) Core Management Controls and the TB Directive on Performance Management. The criteria guided the fieldwork and formed the basis for the overall audit conclusion.

The objective of the audit was to assess the adequacy and effectiveness of NRCan’s employee performance management in promoting a culture of high performance, and in compliance with the TB Directive on Performance Management.

The following audit criteria were used to conduct the audit:

Audit Sub-Objectives	Audit Criteria
Audit Sub-Objective 1: To determine whether the Department has established and implemented adequate governance processes to support employee performance management.	1.1 It is expected that roles, responsibilities, and accountabilities of various stakeholders are clearly documented and communicated.
	1.2 It is expected that the employee performance management program is established in accordance with the TB Directive on Performance Management.
	1.3 It is expected that senior management effectively communicates its commitment to supporting employee performance management.
Audit Sub-Objective 2: To determine whether adequate and effective processes and tools have been established and employed to support awareness and consistent implementation of employee performance management.	2.1 It is expected that appropriate processes and tools have been established and employed consistently to support employee performance management.
	2.2 It is expected that awareness and training activities have been developed and communicated to provide all employees with a clear understanding of the intended objectives and the criteria used to evaluate performance.
	2.3 It is expected that managers receive the training and support required to manage employee performance effectively.
Audit Sub-Objective 3: To determine whether adequate and effective monitoring and reporting activities have been established in compliance with the TB Directive and enable strategic integrated decision making (e.g. Talent Management, Succession Planning, Professional Development and Learning, etc.).	3.1 It is expected that periodic reviews are conducted to assess the quality of the process, to ensure that it is transparent, fair, and consistently applied across the Department.
	3.2 It is expected that results of employee performance management processes are considered in the context of other Human Resources activities (e.g. Talent Management, Succession Planning, Professional Development and Learning, etc.).
	3.3 It is expected that effective reporting exists to ensure that senior management receives timely information to allow adequate monitoring and strategic decision making.