Internal Audit – Human Resources Performance Management

Final Report

Audit, Evaluation, and Risk Branch

June 2019

Table of contents

Executive summary

Performance management is integral to the success of organizations of all sizes in both the private and public sector. To provide world-class service to Canadians and deliver on its mandate, the Canada Revenue Agency (CRA) must build and maintain a high-performing, diverse, innovative, and versatile workforce. A consistent, equitable, and rigorous approach to performance management allows all employees to maximize their contributions. It also leads to a workforce that strives for performance excellence, whose satisfactory performance is recognized, and whose performance challenges are addressed.

The objective of this audit was to provide the CRA's Commissioner, management, and the Board of Management with assurance that the controls related to human resources performance management are in place and working as intended to support the achievement of the CRA's strategic priorities.

The examination phase of the audit took place from May 2018 to November 2018. The audit team found that overall, the CRA's performance management program has several strengths. For instance, policies, procedures, and processes are in place to administer the program. The process is well established, and employees, as well as managers, understand their roles and responsibilities.

The audit team noted opportunities to improve the corporate policy instruments so that they ensure managers are consistently applying the performance management process and are recognizing and rewarding employees for their success. The training and tools available to managers to support them in the delivery of the performance management program should also be improved to ensure that performance issues are addressed in an efficient and timely manner. Finally, monitoring and reporting activities should be broadened to ensure that the CRA is able to determine whether it is meeting the expected outcomes of the performance management program.

Summary of recommendations

The Human Resources Branch should:

Management response

The Human Resources Branch agrees with the recommendations in this report and has developed related action plans. The Audit, Evaluation, and Risk Branch has determined that they adequately address the recommendations.

1. Introduction

To provide world-class service to Canadians and deliver on its mandate, the Canada Revenue Agency (CRA) must build and maintain a high-performing, innovative, and versatile workforce. The CRA is one of the largest government agencies with 44,930 employees including 3,018 managers and 6 occupational groups with 18 different classifications.

For confidentiality purposes and in order to address any perceived or real conflict of interest, employees from the Audit, Evaluation and Risk Branch were excluded from this audit.

To achieve a workforce that is engaged and contributes to CRA priorities, the CRA needs an effective performance management program that:

The corporate policy instruments that are guiding the CRA's performance management program are:

The Human Resources Branch of the CRA is responsible for the development of strategies, policies, guidelines, and processes related to performance management. It is also responsible for reporting on the performance management program and managing the systems used for employee and management group (MG) performance management. The Branch provides managers with advice, support, and guidance on the performance management program.

Although Assistant Commissioners are accountable for performance management and recognition activities within their branch or region, managers are ultimately responsible for daily performance management activities, including initiating and carrying out all aspects of the performance management process and making decisions within their area of responsibility. Employees are accountable for meeting performance expectations and identifying and expressing their needs to their manager in order to address any gaps.

Addressing performance issues is one of managers' most challenging responsibilities. It can take tremendous amount of time and effort which adds to the already heavy workload and usually involves the collaboration between many different stakeholders such as performance management advisors, labour relations advisors, informal conflict resolution practitioners as well as union representatives. Some situations are complex and carry over multiple performance cycles.

In the CRA's performance management program, managers and employees actively work together to set expectations and monitor progress. The key steps of the process are outlined in Figure 1.

Figure 1: Performance management cycle

Figure 1 – Text version

Performance Management Cycle

  • Expectations
    Employee: September 1 due November 30
    MG: April 1 due June 30
    • core performance expectations are set and learning and accomodation needs are identified
    • talent plans are offered if applicable and developed if acccepted
    • performance improvement plans are created, if applicable
  • Mid-Cycle Review
    Employee: February 28
    MG: September 30
    • manager and employee take stock of progress
    • manager and employee discuss progress and gaps
  • Year-End Assessment
    Employee: August 31 due November 30
    MG: March 31 due June 30
    • manager writes performance assessment and assigns a performance level
    • review committees review performance assessments

Ongoing

Manager observes and gathers information on employee’s performance, provides ongoing feedback, addresses any gaps, and acknowledges employee contributions.

The Office of the Chief Human Resources Officer within the Treasury Board Secretariat (TBS), conducts the Public Service Employee Survey (PSES) annually. The PSES monitors the health of the workplace by measuring employees' opinions. For 2018, the CRA had a participation rate of 67.5%, compared to 57.7% for the total public service, in the PSES. The results for performance management for the CRA were as follows:

These results, which are similar to those of the previous years, indicate that there is an opportunity to make improvements.

2. Focus of the audit

This internal audit was first included in the Board of Management (Board) approved Risk-Based Audit and Evaluation Plan 2017-2020. The Assignment Planning Memorandum was approved by the Management Audit and Evaluation Committee on May 8, 2018.

2.1. Objective

The objective of this audit was to provide the CRA's Commissioner, management, and the Board with assurance that the controls related to human resources performance management are in place and working as intended to support the achievement of the CRA's strategic priorities.

2.2. Scope

The audit covered performance management processes, data, and related reports for all CRA employees, with the exception the Executive Group as their performance management is a different and separate process. For confidentiality purposes and in order to address any perceived or real conflict of interest, Audit, Evaluation and Risk Branch employees were excluded.

The period covered in this audit was from April 1, 2014 to August 31, 2017.

2.3. Audit criteria and methodology

The audit criteria and methodology can be found in Appendix A.

The examination phase of the audit took place from May 2018 to November 2018.

The audit was conducted in accordance with the International Standards for the Professional Practice of Internal Auditing, as supported by the results of the Audit, Evaluation, and Risk Branch's quality assurance and improvement program.

3. Findings, recommendations, and action plans

The recommendations presented in this report address issues of high significance or mandatory requirements.

The Human Resources Branch agrees with the recommendations in this report and has developed related action plans. The Audit, Evaluation, and Risk Branch has determined that they adequately address the recommendations.

3.1. Governance and compliance with policies and procedures

3.1.1 The performance management policy, directive and procedures in place support the CRA Policy Framework for People Management and the achievement of CRA strategic priorities.

The CRA Policy Framework for People Management was approved and implemented in June 2014 and should be reviewed by its 5-year mark, as required for all CRA policies. This policy framework sets out overarching principles and requirements for all corporate policy instruments flowing from it that support people management governance and practices within the CRA. The Human Resources Branch has reviewed and updated the 3 corporate policy instruments related to employee and MG performance management, which are:

The key elements of the Policy Framework for People Management, which are leadership, workforce, and workplace, are present in all 3 of the above corporate policy instruments.

The objectives and outcomes of the policy and directive both focus on:

Overall, the audit concluded that the corporate policy instruments supported the CRA Policy Framework for People Management and the achievement of CRA priorities.

3.1.2 Policies and procedures related to performance management are in place and communicated, and current practices are generally in line with policies and procedures. However, the benefits and value of performance management are unclear to employees.

The corporate policy instruments are readily available to all CRA employees and clearly identify the performance management process. They include detailed steps as well as key stakeholder roles and responsibilities. However, the audit revealed that certain elements of the performance management process should be improved.

Current procedures allow managers to finalize expectations by November 30, which is already 3 months into the performance cycle. Interviews indicated that employees are dissatisfied with this timeline as the delay could impact their ability to achieve individual and team objectives.

The core performance and the effective people management scales used to assess performance, are clearly defined in the procedures and are available to employees and managers on the CRA intranet website. Both scales have levels from 1 to 5, with 1 being the lowest level and 5 being the highest level of achievement. However, during interviews both managers and employees indicated that it is not always clear what the expectations and requirements are in order to achieve and obtain a level higher than a 3. Employees perceive the final assessment level as being subjective. In addition, most do not recognize how performance management benefits them professionally as they do not lead to any formal, tangible recognitions like acting assignments or promotions (other than performance pay or leave for MGs only).

Interviews revealed that employees and managers have a perception that a recommended distribution of ratings was being imposed in some regions and branches. None of the corporate policy instruments indicate a need to have an established distribution of performance levels. However, interviews revealed that some managers have been asked to revise performance assessment results to be in line with the recommended distribution. Appendix B illustrates that the distribution of performance ratings has remained relatively stable over the last three cycles, for all CRA employees.

Talent plans are offered to employees who receive the highest rating as a form of recognition. Talent plans can include developmental activities such as formal and informal learning, cross-functional short-term assignments, participation in development programs or committees, and enhanced roles and responsibilities. During the audit, employees indicated that talent plans often result in additional workloads or in activities that are not of interest to them or not seen as advantageous and that they might choose to decline the offer. The audit revealed that employees obtaining the highest rating, indicating that performance results exceed expectations are not being promoted based on the results of their performance assessments and must go through staffing processes in order to be promoted. There are no standardized requirements for the content of the talent plans, which are in place for one performance cycle. Therefore, this may not be the most effective way to recognize top performers.

Employees are encouraged to achieve - but not necessarily exceed - all core performance expectations. This contradicts the program outcome of promoting "a workforce that strives for performance excellence." The outcomes of the corporate policy instruments should be consistent with corporate messaging to ensure that all employees strive for performance excellence.

Recommendation 1

The Human Resources Branch should review and update the corporate policy instruments, tools and communications to increase the value of the CRA's performance management and ensure it is understood by employees.

Action Plan 1

The Employment Programs Directorate is updating the procedures for staffing to simplify requirements for low risk staffing actions and related performance level requirements.

The target completion date is June 2019.

The Employment Programs Directorate is well underway with an internal review of the performance management program using a user experience design process thereby engaging employees in the process with the goal of increasing the value of the CRA's performance management program.

The Employment Programs Directorate is meeting with employees and managers across the CRA to build solutions with regards to the rating scale, frequency of feedback and a focus on development.

The target completion date is September 2019.

The Employment Programs Directorate will test the solutions built by managers and employees with client groups.

The target completion date is June 2020.

The Employment Programs Directorate will update the corporate policy instruments and related tools, such as the expected program outcomes in the policy instruments, the timelines for activities and the Human Resources Information Technology systems with the objective of reducing the administrative burden on managers and employees.

The Employment Programs Directorate will communicate all changes to the performance management program, as well as the value and importance of effective performance management, as part of the bi-annual communication strategies that are currently in place.

The target completion date is April 2021.

3.1.3 The Human Resources Branch has clearly identified and communicated the roles and responsibilities related to performance management. Employees and managers have a good understanding of their roles and responsibilities.

The corporate policy instruments clearly document and define roles and responsibilities for all stakeholders. All performance management-related information is easily accessible on the CRA intranet website. The Human Resources Branch ensures that managers and employees understand their roles and responsibilities by developing both mandatory and optional training material. The audit revealed that managers and employees have a good understanding of their roles and responsibilities related to performance management.

3.1.4 The performance management process is time-consuming for managers and they do not always have the capacity and support required to address performance issues.

In order to ensure managers have a good understanding of the performance management process as well as their roles and responsibilities, the Human Resources Branch has implemented a mandatory online training course for managers. The completion rate for that course was 84% for the period under audit. In addition, there are several other learning products available to managers to assist them with the performance management process, the majority of which are offered online. However, managers indicated that in-depth training on the soft skills required to lead and manage a team, more specifically on having difficult conversations and providing meaningful feedback, was not readily available. As a result, managers might not have all of the tools needed to effectively manage performance.

Managers are responsible for developing expectations, providing regular and timely feedback to employees, identifying performance challenges and providing coaching, documenting all steps taken to address performance issues including conversations and meetings, and encouraging and supporting employees to reach their full potential. As such, properly addressing performance management challenges reduces the amount of time available for managing other employees and ensuring the delivery of the program's mandate. These competing demands can place a significant burden on managers who need to find a way to balance them.

The audit revealed that a lot of time and effort was required to manage challenging performance situations, which might discourage managers from addressing them. Discussing performance issues with employees and identifying root causes is challenging for managers and usually requires the involvement of different areas within the Human Resources Branch (such as performance management advisors, labour relations advisors, information conflict resolution practitioners, and employee assistance program coordinator counsellors).

Performance Management is a component of the Human Resources Service Centre, an online service catalogue and service request system for all human resources programs and services. Performance Management Advisors provide advice and guidance to managers for all questions related to performance management by actioning tickets submitted to them on a first-in, first-out basis. This approach prevents continuity of the administration of an employee file.

The organizational structure currently allows for 6 Performance Management Advisors that provide expert advice and 6 technical support resources, supporting a total of 3,018 managers who are responsible for managing 44,930 employees. Although the volume of service requests fluctuates throughout the year, the workload is significantly high and complex for Performance Management Advisors and creates a significant burden for them to be able to provide adequate service to managers. Managers indicated that the service they have received has been satisfactory but not always timely. However, the audit revealed that it is challenging for managers to interact with different advisors for the same performance management issue.

Recommendation 2

The Human Resources Branch should ensure that managers receive the appropriate support, advice and guidance to handle performance management.

Action Plan 2

The National Human Resources Programs Division will engage program services annually to determine event requirements and review suitable options based on demand for Performance Management Advisors to provide support, advice and guidance to managers.

The National Human Resources Programs Division will seek opportunities to expand existing coaching circles, using a variety delivery options.

The Employment Programs Directorate will promote the Canada School of Public Service in classroom training on performance management in their bi-annual communications to employees and throughout the year using various communication methods.

The Employment Programs Directorate will regularly collaborate with the management community through the CRA's recently introduced on-line "Manager's Hub" in order to increase awareness of performance management program requirements and related support systems and tools.

The target completion date is September 2019.

The Employment Programs Directorate, in collaboration with the Learning and Development Directorate, will conduct a performance management learning needs analysis for managers to identify gaps and provide the support required to carry out performance management related tasks.

The target completion date is April 2021.

3.1.5 The Corporate Administrative System and related tools are not working as intended to facilitate decision making.

Managers use the Corporate Administrative System to document performance expectations, capture key dates within the performance cycle (used for reporting purposes), as well as document the performance report at the end of the cycle. However, the audit revealed that the recording and tracking of ongoing management activities, specifically related to managing unsatisfactory performance, is not being captured in the Corporate Administrative System and is not centralized.

The current system is unconducive to uploading and keeping track of such information. Managers need to document results of ongoing conversations with employees as well as ongoing performance observations outside of Corporate Administrative System. As a result, when there is a change of manager, there is a risk that relevant information is not being shared. This results in the possibility that performance issues will not be addressed in a timely manner.

In addition, the internal audit team determined that the various Human Resources Branch functions (such as performance management, labour relations, and staffing) are not recording and storing employee information in a centralized, secure repository. As a result, there is a risk that key stakeholders might not have access to all the relevant information needed to effectively address performance issues.

Recommendation 3

The Human Resources Branch should ensure that all employee performance management information is captured in a secure and consistent manner and that it is accessible to managers as well as various Human Resources Branch functions.

Action Plan 3

The Employment Programs Directorate will explore integrating and implementing performance management specific case information into the Government of Canada case management system that was recently configured and made available for workplace relations programs in the Human Resources Branch.

The target completion date is September 2020.

3.2. Monitoring and reporting

3.2.1 The monitoring and reporting activities in place do not allow the CRA to measure and determine if the expected outcomes of the performance management program are being achieved for both employees and MGs.

The audit revealed that the Human Resources Branch's monitoring and reporting practices are limited to tracking and reporting to the Treasury Board of Canada Secretariat (TBS) as part of the Management Accountability Framework assessment process on completion rates and ratings distribution. There is no monitoring on the quality of the completed performance assessment reports. More specifically, the CRA reports annually to the Treasury Board Secretariat on completion rates for setting expectations, completing mid-year reviews, and completing annual written performance assessments. The CRA compares these rates to established targets. In addition, as part of its Annual Report, the Human Resources Branch reports on these completion rates and the distribution of performance ratings. The CRA does not currently have a monitoring and reporting framework with defined key performance indicators.

However, these reported completion rates could be misleading since there are no controls in place preventing managers from indicating that expectations were set, mid cycle review discussions had taken place, and year-end assessments were completed without an official sign off by employees.

At the regional and branch level, monitoring occurs in the form of review committees. While the review committees are consistently in place, the monitoring is limited to a sample of assessments completed and is focused on comparing the written performance assessments and ratings.

Recommendation 4

The Human Resources Branch should establish a monitoring and reporting framework that includes relevant key performance indicators to ensure that the performance management program is meeting expected outcomes.

Action Plan 4

The Employment Programs Directorate will remind employees about how they can view their performance assessments and action logs in the Employee Self Service portal in order to verify the information entered by their manager and follow up if needed.

The target completion date is September 2019.

The Employment Programs Directorate will review and update the policy outcomes of the performance management program based on the results of the current Performance Management Redesign project.

The target completion date is April 2021.

The Employment Programs Directorate will develop and establish a monitoring framework that will include a defined governance structure and performance indicators.

The Employment Programs Directorate will develop and establish an annual reporting framework that will capture and compile data for ongoing or periodic reporting.

The target completion date is April 2022.

Gaps within the new framework will be identified and addressed after a full cycle of the annual reporting.

The target completion date is April 2023.

4. Conclusion

The objective of this audit was to provide the CRA's Commissioner, management, and the Board of Management with assurance that the controls related to human resources performance management are in place and working as intended to support the achievement of the CRA's strategic priorities.

A consistent, equitable, and rigorous approach to performance management allows all employees to maximize their contributions. It also leads to a workforce that strives for performance excellence, whose satisfactory performance is recognized, and whose performance challenges are addressed.

Overall, policies and procedures are in place and communicated with employees and managers. However, the audit team noted opportunities for improvements to ensure that employees and managers understand and apply all elements of the performance management process in a consistent manner and understand its value.

Support and guidance is in place, however certain elements can be improved to ensure that managers are well-equipped to address challenging performance issues.

A monitoring and reporting framework could ensure that the guiding principles of the performance management program are measured and met.

5. Acknowledgement

In closing, the Audit, Evaluation, and Risk Branch would like to acknowledge, recognize, and thank the Human Resources Branch for the time dedicated and the information provided during the course of this engagement.

6. Appendices

Appendix A: Audit criteria and methodology

Based on the Audit, Evaluation, and Risk Branch's risk assessment, the following lines of enquiry were identified:

Lines of enquiry

1. Governance and compliance with policies and procedures

Criteria

  • 1.1 Policies, procedures, and processes related to performance management support the achievement of CRA priorities
  • 1.2 Policies and procedures are clearly defined, communicated, and understood
  • 1.3 Roles and responsibilities are clearly defined, communicated, and understood
  • 1.4 Appropriate support and guidance is in place for employees and managers to foster performance excellence and to address performance challenges

Lines of enquiry

2. Monitoring and reporting

Criteria

  • 2.1 Monitoring activities occur to ensure policies and procedures are working as intended and applied consistently
  • 2.2 Performance management reporting requirements allow for appropriate oversight and evaluation of results, and a feedback loop is in place to address areas of concern

Methodology

The methods used for examination were:

Appendix B: Distribution of Performance Ratings

Employee performance ratings – Text version
Employee performance ratings
  Level 1 Level 2 Level 3 Level 4 Level 5
2014-15 0.48% 2.03% 51.65% 27.50% 5.69%
2015-16 0.48% 1.83% 54.55% 26.75% 5.48%
2016-17 0.50% 1.71% 57.85% 26.03% 4.83%
Manager core ratings – Text version
Manager core ratings
  Level 1 Level 2 Level 3 Level 4 Level 5
2014-15 0.12% 0.59% 40.44% 44.02% 14.83%
2015-16 0.03% 0.67% 39.23% 44.61% 15.45%
2016-17 0.11% 0.45% 38.17% 42.56% 13.35%
Manager EPM ratings – Text version
Manager EPM ratings
  Level 1 Level 2 Level 3 Level 4 Level 5
2014-15 0.12% 1.17% 47.51% 38.89% 12.31%
2015-16 0.09% 0.88% 47.83% 39.13% 12.07%
2016-17 0.16% 0.81% 49.81% 37.25% 11.97%

Appendix C: Core performance scale for employees and management group

Core performance scale levels and descriptions for employees and management group
Level Description
5

Performance results exceeded expectations

4 Performance results achieved all expectations and sometimes went beyond expectations

3

Performance results achieved all expectations
2 Performance results mostly met expectations and sometimes were below expectations
1 Performance results did not meet expectations

Appendix D: Effective people management performance scale for management group

Levels and descriptions for the effective people management performance scale
Level Description
5

MG delivered on all effective people management (EPM) objectives and consistently went above and beyond expectations in leading and influencing the opinions, attitudes and behaviours of others.

MG's innovative or inspiring actions or behaviours had a significant, broad-based and enduring positive impact on people and results.

MG demonstrated the competencies indicated in their job competency profile exceptionally well.
4

MG delivered on all EPM objectives and on occasion went above and beyond expectations in leading and influencing the opinions, attitudes and behaviours of others.

MG's innovative or inspiring actions or behaviours had a high degree of positive impact on people and results.

MG consistently and clearly demonstrated the competencies indicated in their job competency profile with some notable strengths.

3

MG delivered on all EPM objectives.

MG's actions or behaviours had a positive impact on people and results.

MG consistently and clearly demonstrated the competencies indicated in their job competency profile.
2

MG delivered on the most significant elements of EPM objectives; some gaps identified between the MG's performance results and the expectations for effective people management.

MG's actions or behaviours for the most part had a positive impact on people and results; improvement is required in some areas.

MG needs some improvement in demonstrating the competencies indicated in their job competency profile consistently.
1

MG did not deliver on EPM objectives; significant gaps identified between the MG's performance results and the expectations for effective people management.

MG's actions or behaviours rarely had a positive impact on people and results; significant improvement is required.

MG needs significant improvement in demonstrating the competencies indicated in their job competency profile consistently.

Appendix E: Glossary

Terms and definitions
Term Definition
Corporate Administrative System Corporate Administrative System (CAS) is the commercial software from SAP that has been customized for the CRA to handle Finance and Administration and Human Resources data and processes. CAS is a system consisting of a combination of functional modules, integrated through a central database to allow CRA to perform all its major business processes in one system providing real time data.
Corporate policy instruments Corporate Policy Instruments are internal CRA documents that govern the organization, administration, and management of the CRA. The performance management corporate policy instruments are: the Policy Framework for People Management; the Policy on Performance, Learning, Development, and Recognition; the Directive on Performance Management and Recognition; and the Procedures on Performance Management and Recognition. 
Executive group The executive group is comprised of jobs located no more than 3 hierarchical management levels below the Commissioner and have significant executive managerial or executive policy roles and responsibilities or have other significant influence on the direction of the CRA.
Management group The management group consists of positions whose primary purpose is managerial. These positions are considered part of the organization’s management team and are accountable for exercising managerial authority to accomplish the objectives of the organization. The management group is responsible for managing human resources. It also includes employees in the Human Resources Branch management positions that the CRA has deemed to be equivalent to management group positions.
Managers Team leaders, managers, executives, and other employees with supervisory responsibilities.
Talent plans Talent plans are prepared along with expectations at the beginning of a new performance cycle for employees who received a level 5 on their most recent assessment and for MG’s who received a level 5 in both Core and Effective People Management.

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