Guide for Performance Audits and Special Examinations on Performance Management (November 2018)

Audit criterion: The organization has a performance management program in place that enables it to assess employee performance against objectives that are aligned with strategic and operational goals, recognize good performance, and take corrective action to address unsatisfactory performance.

Sources:

NOTE: For audit entities that are not subject to the Treasury Board of Canada Secretariat Directive on Performance Management, refer to the organization’s own performance management policy and directives for criterion sources. For unionized organizations, also refer to their collective agreements for additional criterion sources as appropriate.

Financial Administration Act, last amended 2016 (http://laws-lois.justice.gc.ca/eng/acts/f-11/)

“Powers of deputy heads in core public administration”

(…)

“12 (1) Subject to paragraphs 11.1(1)(f) and (g), every deputy head in the core public administration may, with respect to the portion for which he or she is deputy head,

(b) provide for the awards that may be made to persons employed in the public service for outstanding performance of their duties, for other meritorious achievement in relation to their duties or for inventions or practical suggestions for improvements;

(c) establish standards of discipline and set penalties, including termination of employment, suspension, demotion to a position at a lower maximum rate of pay and financial penalties;

(d) provide for the termination of employment, or the demotion to a position at a lower maximum rate of pay, of persons employed in the public service whose performance, in the opinion of the deputy head, is unsatisfactory;

“Powers of other deputy heads

(2) Subject to any terms and conditions that the Governor in Council may direct, every deputy head of a separate agency, and every deputy head designated under paragraph 11(2)(b), may, with respect to the portion of the federal public administration for which he or she is deputy head,

(b) provide for the awards that may be made to persons employed in the public service for outstanding performance of their duties, for other meritorious achievement in relation to their duties or for inventions or practical suggestions for improvements;

(c) establish standards of discipline and set penalties, including termination of employment, suspension, demotion to a position at a lower maximum rate of pay and financial penalties; and

(d) provide for the termination of employment, or the demotion to a position at a lower maximum rate of pay, of persons employed in the public service for reasons other than breaches of discipline or misconduct.”

Treasury Board of Canada Secretariat Directive on Performance Management, 2014 (https://www.tbs-sct.gc.ca/pol/doc-eng.aspx?id=27146)

6. Directive Requirements
6.1 Deputy heads, or their delegates, are responsible for:
(…)
6.1.3 Establishing an employee performance management program that includes the following minimum requirements:

• a recognition system that recognizes good performance both formally and informally;

• annual written performance objectives for all employees, including commitments that reflect Government of Canada priorities, expected behaviours and learning or development plans;

• a rating scale or scales appropriate to the organization and to employees’ duties and levels;

• annual written performance assessments for all employees (with the exception of employees on probation, who must be assessed within the probation period). Such annual assessments shall be conducted at the end of each fiscal year and rate the employee on an appropriate scale taking into account the results achieved and how they were achieved;

• mid‑year reviews for each employee (with the exception of employees on probation) in the form of informal conversations to review accomplishments in relation to performance commitments, adjust commitments if necessary, solicit and provide feedback and adjust learning plans if necessary;

• active monitoring of probationary periods, including attestation of whether employees pass the probationary period;

• identifying cases of unsatisfactory performance at the earliest opportunity possible and taking one or more of the following actions as soon as possible under the circumstances:

  • developing, and monitoring at regular intervals, an action plan to improve performance;
  • withholding the employee’s next scheduled pay increment;
  • demoting the employee; and
  • terminating employment.

Treasury Board of Canada Secretariat Directive on the Performance Management Program (PMP) for Executives, last modified 2008 (https://www.tbs-sct.gc.ca/pol/doc-eng.aspx?id=14226)

5. Requirements
5.1 Performance Agreements
5.1.1 Employees being paid as executives are to have valid performance agreements.

Appendix B—Requirements for Executive Performance Agreements

1. Alignment

Performance agreements are to demonstrate alignment with

• priorities of the government;

• priorities of the Clerk of the Privy Council as Head of the public service;

• the department’s Report on Plans and Priorities; and

• the performance agreement of the immediate manager, such that each executive’s performance agreement is an operationalization of the immediate manager’s agreement.

Appendix C—Requirements for the Management and Assessment of Executive Performance
(…)

2. Assessment of Performance

2.1 Assessment of performance includes, as a minimum

• An assessment of the executive’s performance against the Ongoing and Key commitments, and including an assessment of how the results were achieved, based on the Key Leadership Competencies and values and ethics;

• at mid-year and end of year, one-on-one discussions between executive and immediate manager, that include constructive feedback and identification of, and support for development and learning needs;

• where performance is judged to be below expectations, timely notification to the executive that change is expected, along with identification of steps to be taken.

Q1—Does the organization have a performance management program in place for employees and executives?

Key interview questions

• Does the performance management program for employees meet the minimum requirements of the Treasury Board of Canada Secretariat’s Directive on Performance Management? Specifically, does it include the following elements:

  • annual written performance objectives for all employees?

  • annual learning and/or development plans for all employees?

  • a rating scale or scales appropriate to the organization and to employees’ duties and levels?

  • annual written performance assessments for all employees (with the exception of employees on probation, who must be assessed within the probation period)?

  • mid-year reviews for all employees (with the exception of employees on probation) in the form of informal conversations to review accomplishments in relation to performance commitments, adjust commitments if necessary, solicit and provide feedback, and adjust learning plans if necessary?

  • active monitoring of probationary periods, including attestation of whether employees pass the probationary period?

  • action plans for employees whose performance is unsatisfactory, including timelines (or more severe measures, such as withholding employee’s next pay increment, demotion, termination of employment)?

  • written records confirming each step taken to manage employees’ performance, along with formal written notification to the employee advising of consequences and next steps?

  • a recognition system that recognizes good performance both formally and informally?

  • talent management plans for employees who have surpassed expectations?

  • an organizational review panel and process to review performance assessments to ensure that talent management plans are established for employees who surpass expectations and action plans (or other measures) are established, monitored, and documented for employees whose performance is unsatisfactory?

• Does the organization’s performance management program for executives meet the Treasury Board of Canada Secretariat’s Directive on the Performance Management Program (PMP) for Executives? Specifically, does it include the following elements?

  • Valid performance agreements for all executives that include the following:

    • the period covered by the agreement,

    • ongoing commitments,

    • performance measures of successful achievement of the commitments,

    • a written assessment of actual results achieved during the fiscal year and the level of key leadership competency demonstrated,

    • the signatures of the executive and the immediate manager when the commitments are approved.

  • At mid-year and end of year, one-on- discussions between the executive and immediate manager, that include constructive feedback and identification of, and support for, development and learning needs.

  • Where performance is judged to be below expectations, timely notification to the executive that change is expected, along with identification of steps to be taken.

  • A rating scale to assess performance against ongoing and key commitments as specified in the Directive.

  • Performance awards (in-range salary movements, lump sum performance awards [at-risk pay, bonuses]) aligned with the rating system.

• Are roles and responsibilities for performance management clearly defined and communicated to managers and employees?

Key documentation

• Performance management program and related documentation (performance plan and agreement templates, etc.) for employees and executives.

• Communications to managers and employees regarding roles and responsibilities for performance management.

Request and review documentation.

Interview

• Officials responsible for performance management; e.g., VP HR, Director/Manager responsible for performance management

• Senior / line managers / supervisors

Assess whether the organization has a performance management program in place for employees and executives that meet the Treasury Board of Canada Secretariat directives on performance management. Also assess whether roles and responsibilities for performance management are clearly defined and communicated to managers and employees.

Document observations and respond to audit question.

Q2—Does the organization ensure that managers and supervisors who are responsible for assessing employee performance receive the training and support they need to manage employee performance effectively?

Key interview questions

• Does the organization identify managers and supervisors who need training in performance management?

• Does the organization ensure that managers and supervisors attend the mandatory course on performance management (Performance Management for the Government of Canada), provided by the Canada School of Public Service? Does it track and monitor course attendance?

• Does the organization provide other training and/or support to managers and supervisors in performance management?

Key documentation

• Documentation and analyses that identify managers and supervisors who require training in performance management.

• Documentation and analyses that show managers and supervisors who have successfully completed training in performance management, in particular, the mandatory course from the Canada School of Public Service.

• Reports to senior management on the results of performance management training for managers and supervisors.

Request and review documentation.

Interview

• Officials responsible for performance management; e.g., VP HR, Director/Manager responsible for performance management
• Senior / line managers / supervisors

Analyze documentation that identifies which managers and supervisors are required to take the mandatory course on performance management provided by the Canada School of Public Service, and determine whether they received it.

Assess whether the organization ensures that managers and supervisors have the training and support they need to manage and assess employee performance.

Document observations and respond to audit question.

Q3—Does the organization monitor its performance management program(s) to ensure it complies with the Treasury Board of Canada Secretariat directives on performance management and is achieving intended results?

Key interview questions

• Does the organization monitor its performance management program(s) to ensure it complies with the Treasury Board of Canada Secretariat directives on performance management? Specifically, does it ensure that all employees have

  • annual written performance objectives (valid performance agreements for executives)

  • annual learning and/or development plans?

  • mid-year reviews?

  • annual performance assessments?

  • a talent management plan if performance surpassed expectations?

  • an action plan if performance was unsatisfactory?

• What information systems (electronic or paper-based) exist to document performance management activities and results?

• Does the organization maintain records on the distribution of employee and executive performance ratings? If so how (e.g., spreadsheet, HR information system)?

• Does the organization have data quality systems and practices in place to ensure the integrity of HR data, including performance management data?

• Does the organization monitor the administration of performance awards (in-range salary movements, lump sum performance awards [at-risk pay, bonuses]) to ensure that performance awards are

  • in line with performance ratings?

  • awarded based on reasonable measures and indicators of performance?

  • consistent and fair?

• in the case of executives, compliant with the Treasury Board of Canada Secretariat’s Directive on the Performance Management Program (PMP) for Executives?

• Does the organization monitor its performance ratings to ensure they follow a normal distribution (i.e., roughly 5–10 percent are below expectations, 80 percent meet expectations, and 5–10 percent exceed expectations)? (This is required by the Treasury Board of Canada Secretariat’s Directive on Performance Management and the Directive on the Performance Management Program [PMP] for Executives.)

Key documentation

• Completion rates on the following for the last two fiscal years (organizations are required to submit this information to the Treasury Board of Canada Secretariat as part of the Management Accountability Framework):

  • talent management questionnaires (for EX-03 to EX-05)

  • performance objectives

  • Mid-year reviews

  • Annual written performance assessments

  • Talent management plans

  • Action plans

• Distribution of employee and executive performance ratings for the last two fiscal years.

• Documentation that explains the performance pay and awards available to eligible employees and performance awards provided to employees for the last two fiscal years.

• HR information system documentation (e.g., user manuals, guides, data quality reports) where performance management data is collected and maintained.

• Employee survey results.

• Performance appraisal-related complaints and grievances.

• Reports to senior management on the number of employees with a performance improvement plan who met objectives.

• Other relevant documentation, e.g.

  • senior management committee documentation (agendas, minutes, presentations and reports discussed, records of decisions);

  • HR committee meeting documentation;

  • relevant internal audits or evaluations of the organization’s performance management program(s).

Request and review documentation.

Interview

• Officials responsible for performance management; e.g., VP HR, Director / Manager responsible for performance management

• Senior / line managers / supervisors

Perform a walkthrough of key HR information systems (electronic or paper-based) that collect and maintain performance management data to determine what information exists, its quality, and how it is used and reported on, if this was not already done in the planning phase.

Analyze a sample of employee and executive performance assessments and determine whether they comply with the Treasury Board of Canada Secretariat directives on performance management.

Analyze the distribution of employee and executive performance ratings for the last two fiscal years and determine whether the ratings follow a normal distribution (roughly 5–10 percent are below expectations, 80 percent meet expectations, and 5–10 percent exceed expectations).

Analyze the administration of performance pay and awards to employees for the last two fiscal years and determine whether they

• are in line with performance ratings;

• are awarded based on reasonable measures and indicators of performance (for example, achievement of intended outcomes of a project, program, or function; achievement of service standard targets could be considered reasonable measures of performance. An example of a measure that is not reasonable to assess performance against is cash flow because it can create a negative incentive.);

• comply with the Treasury Board of Canada Secretariat Directive on the Performance Management Program (PMP) for Executives and the organization’s own policies and directives in this respect (if applicable).

Assess whether the organization monitors and evaluates its performance management program(s) to ensure it complies with the Treasury Board of Canada Secretariat directives on performance management, is achieving intended results, and is making adjustments if required.

Document observations and respond to audit question.

Q4—Does the organization annually evaluate its performance management program(s) per the Treasury Board of Canada Secretariat Directive on Performance Management to determine whether it is achieving intended results, and make adjustments as required?

Key interview questions

• Does the organization conduct an annual assessment of the quality of its performance management exercise (as required by the Treasury Board of Canada Secretariat Directive on Performance Management)?

• Are the results of this assessment reported to senior management?

• Does the organization make adjustments to its performance management program(s) as required?

Key documentation

• Annual review of the performance management program(s) for the last two fiscal years.

• Reports to senior management on the performance management program(s), including any proposed improvements and adjustments.

• Other relevant documentation, e.g.:

  • senior management committee documentation (agendas, minutes, presentations and reports discussed, records of decisions);

  • HR committee meeting documentation;

  • relevant internal audits or evaluations of the organization’s performance management program(s).

Request and review documentation.

Interview

• Officials responsible for performance management; e.g., VP HR, Director/Manager responsible for performance management

• Senior / line managers / supervisors

Assess whether the organization evaluates its performance management program(s) to determine whether it is achieving intended results, and make adjustments as required.

Document observations and respond to audit question.