1984 Report of the Auditor General of Canada

Introduction

8.1 Job classification refers to the processes used to determine the relative worth of jobs in the federal public service. The process involves writing a description of the work performed or to be performed, allocating the job to a specific occupational family and, based on the evaluation of such factors as knowledge and skills required to do the work, assigning the job to an occupational group and level within the occupational family.

8.2 Job classification systems and practices in public and private sector organizations vary considerably depending on such factors as the size of the organization, the complexity and distribution of the workforce and the nature and extent of involvement of employee bargaining agents. They range from systems much simpler than that used in the federal public service to those of equal or greater complexity.

8.3 Job classification can have a major impact on the cost of operating an organization. Because all systems for evaluating jobs involve a degree of judgement in the evaluation of an individual job, they are subject to some degree of error which can result in misclassification - the over or under-classification of the job. Over-classification can result in overpayment for the work performed relative to other public servants. Under-classification can result in underpayment and the possible loss of a trained and valued employee or in difficulties attracting competent employees. Misclassification can also have a significant impact on staff morale if employees do not perceive themselves to be classified, and therefore paid, equitably.

8.4 Since 1976, the Treasury Board Secretariat, the central agency responsible for managing the federal public service job classification system, has conducted two government-wide audits to assess the extent of misclassification. Both audits reported a significant rate of misclassification and, in particular, significant over-classification. The most recent audit, conducted in 1983, indicated that one in five public service positions was incorrectly classified, resulting in overpayment for the work performed. For the sample of positions audited, Treasury Board Secretariat calculated the cost of over-classification at 2.7 per cent of straight-time payroll. Treasury Board Secretariat also concluded that the rate of misclassification had worsened since its first service-wide audit.

8.5 In our 1983 annual Report, we noted deficiencies in the management of job classification in our comprehensive audits of departments and in our service-wide study on constraints to management. The deficiencies included major delays in addressing a misclassification problem that affected a large number of positions in one department. In our study of constraints to productive management in the public service, we found that the public service managers interviewed were generally of the view that public service classification practices were difficult and time consuming.

8.6 Given the significance of known problems in job classification, this year we examined the management of the system at the Treasury Board Secretariat level and in departments. As well, we reviewed relevant management practices in a variety of other public, private and quasi-public sector organizations.

8.7 Federal public service job classification. The current system for classifying jobs has been in place since the late 1960s. The principles governing the system were developed by the Preparatory Committee on Collective Bargaining which concluded, among other things, that the system should permit different approaches to wage and salary administration for different types of employees; provide a logical framework for determining bargaining units and negotiating rates of pay; and permit extensive delegation to departments of the authority to classify positions.

8.8 The current system comprises the following six broad occupational families or categories:

- Management;

- Scientific and Professional;

- Technical;

- Administrative and Foreign Service;

- Administrative Support; and

- Operational.

8.9 These categories are further sub-divided into 71 occupational groups representing a wide variety of occupational skills and work. The system includes about 292,000 positions and applies to approximately 222,000 federal public servants. The excess of positions over employees includes those surplus to requirements as well as a number to provide flexibility to meet changing organizational arrangements and to accommodate hiring temporary employees. The system provides for a variety of approaches to rating jobs depending on the nature of work performed within an occupational group.

8.10 In the federal public service, the terms "job" and "position" are used somewhat interchangeably. "Job" refers to one position or to several essentially similar positions that can be described in one written job description. In this chapter, we have used the term "job" wherever possible and refer to "position" only where the context requires it for accuracy.

8.11 Job classification is closely intertwined with collective bargaining since, generally, bargaining agents represent employees along occupational group lines as defined by the job classification system. The classification system itself is excluded from collective bargaining under the provisions of the Financial Administration Act and the Public Service Staff Relations Act.

8.12 Section 7(1)(c) of the Financial Administration Act assigns Treasury Board the authority to provide for the classification of positions. Responsibility for managing the classification system is vested in the Personnel Policy Branch of the Treasury Board Secretariat.

8.13 In line with the principle of extensive delegation of classification authority, Treasury Board has delegated to deputy heads of departments and heads of agencies the authority to classify most positions. In 1982, more than 98 per cent of all departmental positions were covered by delegated classification authority. Treasury Board Secretariat has retained the authority to classify only the more senior level jobs in the Management Category as well as certain levels in selected occupational groups in which significant classification problems have been identified.

8.14 The principal roles fulfilled by Treasury Board and its Secretariat are developing and maintaining classification standards, promulgating policies and guidelines governing job classification, training and accrediting personnel specialists in job classification, auditing and evaluating the system and providing mechanisms for resolving disputes over classification decisions.

8.15 The policies governing job classification in the federal public service provide for the use of committees to evaluate jobs and require that persons other than departmental deputy heads and associate deputy heads authorizing job classification decisions be trained and accredited by Treasury Board Secretariat. They also provide administrative arrangements for resolving disagreements on classification decisions. In addition, Treasury Board policy requires that the accuracy of existing job descriptions be monitored and that the correctness of classification decisions be periodically audited by departments.

8.16 An important element of Treasury Board policy provides that the salaries of public servants whose jobs are found to be over-classified be maintained, or protected at current levels, even though the level of the position is reduced, until such time as the employee leaves the position through reassignment or other avenues. This means that the overpayment costs associated with misclassification can continue for a protracted period - it also emphasizes the importance to achieving economy in human resource costs of making a correct classification decision in the first place, rather than relying on corrective action.

8.17 In 1979, after its first government-wide audit of job classification, Treasury Board withdrew from all departments the authority to classify positions at certain levels in a few occupational groups with an inordinately high level of misclassification. With the exception of departmental deputy heads and associate deputy heads, Treasury Board also limited the exercise of classification authority to persons accredited in job classification by Treasury Board Secretariat. These modifications had the effect of withdrawing classification authority from line managers where this was the practice and placing it with personnel specialists. In the current system, line managers are responsible for preparing job descriptions, and personnel specialists are responsible for making and authorizing the decision regarding category, group and level.

8.18 In 1982, Treasury Board entered into an arrangement with the Public Service Commission whereby the Commission conducts audits of specified aspects of the classification process in departments on behalf of Treasury Board. Currently, this arrangement covers compliance with selected aspects of Treasury Board policy, including reviewing and updating job descriptions and monitoring the classification process.

8.19 In 1984, after its second government-wide audit, Treasury Board took steps to tighten controls over the authorization and funding of upward classification changes and to implement an information system for monitoring the cost of classification changes. The Board also reinforced the requirement that departments conduct periodic audits of job classification decisions by requiring departments to provide copies of their annual monitoring and audit plans and related reports, including corrective action undertaken. The Board also announced its intention to carry out a more extensive audit of the quality of classification decisions in 1984-85.

Audit Scope and Approach

8.20 The objective of our audit was to assess the extent to which due regard for value for money - in particular, economy - was being demonstrated in the management of federal public service job classification.

8.21 Our examination included a review of classification activities in several departments, as well as the policy and technical framework for job classification established by Treasury Board and its Secretariat. We also reviewed job classification practices in 13 selected private, public and quasi-public sector organizations.

8.22 Treasury Board Secretariat. At Treasury Board Secretariat, we examined the policies, guidelines, directives and relevant management controls governing the classification system. We also reviewed key aspects of the supporting systems, including development and maintenance of classification standards and training of personnel specialists in classifying jobs.

8.23 Departments. We examined systems for classifying jobs in the following five departments:

- Agriculture;

- Consumer and Corporate Affairs;

- Environment;

- National Defence (civilian staff only); and

- Secretary of State.

8.24 In addition, we drew on our comprehensive audit and pilot project findings in the area of job classification in three other departments: Energy, Mines and Resources; National Health and Welfare; and Statistics Canada.

8.25 Our examination in departments included an assessment of management controls over job classification. In most departments, we reviewed a sample of recent classification decisions made in the National Capital area and one or two regions. We also examined the actions taken in each department to correct classification anomalies identified in recent Treasury Board Secretariat and departmental audits. Finally, we interviewed personnel specialists with classification authority and a sample of operational managers who had recent experience with the classification system.

8.26 Other sector practices. To develop a current appreciation of management practices in job classification, we surveyed job classification practices in 13 organizations selected from the private, quasi-public and other public sectors. The organizations reviewed represented a variety of economic sectors as well as municipal and provincial governments, the United Nations and the U.S. government.

8.27 Our survey of other sector practices focused on management practices rather than the type of job classification plan being used. For example, we gathered information concerning the exercise of classification authority, the processes for making classification decisions and views on acceptable rates of misclassification.

8.28 Exclusions. Our audit did not include the classification plan recently implemented for the Management Category because it is relatively new. Nor did we examine the classification of positions subject to Governor in Council appointment because they are relatively small in number and not typical of the major portion of the federal job classification system. For the same reasons, our audit did not include the classification of those jobs where the level is largely determined by the skills, knowledge and achievements of the incumbent or by other factors as in the Research Scientist and Foreign Service occupational groups. Because of the specialized nature of their classification systems, our audit did not include the uniformed members of the RCMP or of the Canadian Armed Forces.

8.29 In view of the two service-wide audits of individual positions carried out by Treasury Board Secretariat since 1976, our audit program did not include testing the accuracy of the classification of individual positions. We did, however, review the methodology and working papers from the most recent Treasury Board Secretariat audit to determine the extent to which we could rely on that work as a service-wide indicator of the health of the job classification system.

8.30 Finally, because of the pervasive and complex linkages of job classification to other human resource management systems and the collective bargaining process, our audit did not include an in-depth examination of the fundamental structural elements of the current job classification system, such as the number and structure of occupational groups and categories.

Audit Criteria

8.31 Our examination of job classification was based on the following audit criteria which were developed in consultation with central agency and department representatives.

• Job classification decisions should reflect correct application of valid classification standards.

- classification decisions should be based on an accurate description of the work performed or to be performed;

- classification decisions should be made by persons knowledgeable of the work performed or to be performed and of the application of classification standards;

- classification standards should be reviewed periodically and, if necessary, revised to ensure they accurately reflect the nature of work performed.

• The classification and related cost implications of proposed allocations of work should be considered before such allocations are finalized.

• Classification decisions should be monitored to assess their impact on related jobs; they should be audited periodically to ensure their accuracy; anomalies should be corrected promptly.

8.32 Where appropriate, we also applied the audit criteria concerning the development, implementation and review of policy set out in our 1981 annual Report chapter on payroll costs management.

Observations

8.33 In a well balanced job classification system, the inevitable upward pressures for higher classifications and pay are restrained by effective management controls. Our examination revealed that the public service job classification system is under considerable upward pressure from a variety of sources. It also revealed that countervailing forces, such as good management practices, effective accountability relationships and related reporting mechanisms, relevant policies and good working tools, are not strong enough to offset these pressures.

A System Under Pressure

8.34 Depending on underlying circumstances, classification activities can take a variety of forms ranging from routine changes, such as altering the identification number of a position, to more substantial actions, such as verifying the currency of duties described, to complex actions involving the classification of many new or changed jobs as might occur in a major reorganization. Also, classification changes can be sought to reward employees, facilitate recruitment, resolve perceived pay inequities, or to solve other personnel problems more appropriately dealt with through other human resource management systems. Managers and personnel specialists indicated these factors created significant upward pressure on the system.

8.35 We estimate that more than one out of every two public service positions was subject to some form of classification activity involving minor or more substantive action in 1983. In one department, the number of classification actions was nearly double its allotted person-years and 150 per cent of the number of established positions. Not all actions involved a change in the rating of the position; in four of the departments audited where estimates were available, an average of just over 80 per cent of actions were routine or administrative. Nevertheless, we view this level of activity as high because it is roughly twice that reported by other sector organizations.

8.36 We also observed a number of practices in other sector organizations, not generally present in the federal public service, that serve to hold down the volume of classification requests. These practices included the requirement for executive approval of all organization changes prior to classification action; the extensive use of committees of managers to evaluate jobs; on-site verification by personnel specialists of the job description with the immediate supervisor before classification action; and higher management approval of proposed job descriptions before classification action takes place. We found restraining measures of this type in place in only one of five departments we audited; that department also had a significantly lower rate of classification activity than all others audited.

8.37 Another potential indicator of pressure on the system is the rate of promotion without competition through upward reclassification of jobs. In the four years from 1980 through 1983, there has been an average of about 4,700 of these promotions each year. As a percentage of all promotions, those resulting from upward reclassification increased from 16.9 per cent in 1980 to 22.6 per cent in 1983 - an increase of about 33 per cent. From 1981 through 1983, the number of promotions of all types fell by about one-third, probably as a result of curbs on the growth of government and reduced turnover related to difficult economic circumstances. In the same period, the number of promotions resulting from upward reclassification did not fall proportionately, but by only 12 per cent, indicating upward movement in classification levels at a time when the overall size of the public service was being restrained. The table below displays the actual number of promotions and reclassifications and the change in rate of promotions resulting from upward reclassification from 1980 through 1983.

Promotions Without Competition Resulting From Upward Job Reclassification (as a percentage of all promotions) 1980-83
Year	Total Promotions	Reclassifications	Reclassifications as % of Total Promotions
1980	24,270	4,106	16.9%
1981	30,062	5,132	17.1%
1982	26,360	5,225	19.8%
1983	19,949	4,512	22.6%

8.38 The shift of the employee population in an occupational group from lower to higher levels is yet another potential indicator of pressure on a job classification system. Such shifts may be a legitimate reflection of increasing complexity and diversity of work performed in the organization. Dramatic changes in EDP technology in recent years and a similar evolution in office technology illustrate this phenomenon. However, they may also be a reflection of problems in applying the system or of using the system to serve unintended purposes, such as to increase employee compensation, even though an increase may not be justified by application of the classification standard. We analysed population shifts in a number of occupational groups and found a marked decrease in the proportion of employees at lower levels and a significant increase in the proportion of employees at the higher, better paying levels. These shifts were detected in particular occupational groups in most individual departments audited as well as in several occupational groups across the public service.

8.39 Exhibits 8.1 and 8.2 show the shift from lower to higher levels across the public service in two occupational groups - Program Administration (PM) and Clerical and Regulatory (CR), over a number of years. For the PM Group in 1983, the number of employees at the higher levels, PM-3 to PM-6, had increased by 62 per cent while those at lower levels had decreased by 20 per cent compared to the distribution of the PM population in 1966. This represents an estimated annual straight-time salary cost in 1983 of about $14 million. Similarly for the CR Group, but over the considerably shorter period 1978 to 1983, the number of employees at the higher levels, CR-4 to CR-7, increased by 13 per cent while those at lower levels decreased by 12 per cent. The estimated annual straight-time salary cost of this shift was about $13 million in 1983. We found the upward shifts in these two occupational groups to be significant because, together, the two groups account for about 75,000 public servants - about one-third of the total number of employees covered by the system.

(Exhibits not available)

8.40 Some occupational groups were relatively free of upward shifts in employee population. Exhibit 8.3 shows that the distribution of employees in the Computer Systems (CS) Group remained stable from 1978 to 1983. Exhibit 8.4 shows there has been a slight downward shift in the distribution of employees in the Personnel Administration (PE) Group. We noted with interest that authority to classify positions in these occupational groups has been retained by Treasury Board Secretariat for levels 3 and above in the CS Group since the current system was established and, since 1979, for levels 4 and above in the PE Group.

(Exhibits not available)

A System Under-Managed

8.41 Treasury Board and its Secretariat have taken a number of steps in recent years to improve control over the job classification system. They include increased audit activity, modifications to the delegation of classification authority and withdrawal of delegated authority from departments on a service-wide basis for certain problem groups and levels. Despite these initiatives, our examination indicated significant weaknesses in the direction and technical support provided by the central agency and in management controls at both the central agency and department level.

8.42 Central direction and technical support. As the responsible central agency, Treasury Board Secretariat has promulgated an extensive policy and procedural framework governing job classification in the public service. Our examination revealed non-compliance by departments with several of the more important policies including the requirement to review and update job descriptions on a systematic basis and the requirement to audit the quality or correctness of classification decisions. Although the fact of non-compliance has been known to Treasury Board Secretariat for several years, there has been no concerted effort to ensure a higher level of compliance by departments. Apart from service-wide action affecting all departments, we were unable to find a single instance where sanctions were applied, such as withdrawing or restricting delegated classification authority in individual departments where non-compliance was a known problem.

8.43 Treasury Board Secretariat is responsible for developing and maintaining classification standards. The standards are the technical cornerstone of the job classification system and are designed to facilitate consistency in job classification decisions. There is a standard for each occupational group in which the rating plan - factors and criteria used to determine the relative worth of a job - for the group is outlined. Each standard also contains benchmark job descriptions that illustrate work performed at different levels within the group. It is through applying the rating plan and making detailed reference to the benchmark jobs that the assignment of a job to a level is decided and justified.

8.44 To be fully effective, classification standards must be an accurate reflection of the work performed by members of the occupational group. Treasury Board Secretariat originally attempted to ensure currency of the classification standards through a seven-year cyclical review program. It was unable to maintain this schedule. In practice, Treasury Board Secretariat responds to emerging needs to update or revise standards in accordance with the perceived urgency of the problems being experienced.

8.45 We examined a selection of classification standards that had undergone or were in the process of major revision. We found the process of revision was complex, involving extensive consultation and requiring a long time to complete. We noted that, prior to 1978, the average time required to complete a major revision to a standard was 4.2 years. The three major standards revisions we reviewed and which were in process after 1978 required more than six years to complete. In addition, we found that minor revisions to update benchmark job descriptions lagged significantly.

8.46 Personnel specialists and operational managers interviewed during our audit were of the view that the most important improvement that could be made to the system would be to update the classification standards - in particular, benchmark job descriptions. In our survey of other sector practices, we were informed that benchmark jobs are reviewed every two to three years; none was reported older than five years. In contrast, our review of Treasury Board Secretariat classification standards indicated that many benchmark job descriptions had not been revised in more than 10 years.

8.47 Monitoring, audit and evaluation. As a condition of delegated classification authority, departments and agencies are required to have in place effective measures to control the exercise of that authority. Required measures include monitoring and auditing such aspects of the classification system as the currency of job descriptions and the quality of classification decisions. Also, Treasury Board Secretariat as the manager of the classification system is responsible for reviewing the exercise of delegated classification authority and evaluating the effectiveness of the classification system as a whole.

8.48 Monitoring. Our examination of the monitoring of ongoing classification activity by Treasury Board Secretariat and departments indicated that there is not adequate control over the quality of classification decisions or the cost implications of organization change and its related classification decisions. Neither is there strong control over the costs of operating the classification system, particularly those services provided by personnel specialists in departments.

8.49 Treasury Board Secretariat monitoring comprises a quarterly review of changes in classification levels resulting from classification decisions in departments in the previous year. The information system, Classification Early Warning System (CLEW), is based on data derived from the public service pay system. When an apparently significant shift is perceived by Treasury Board Secretariat, the department responsible is asked to provide information to Treasury Board Secretariat about the shift in levels. The Secretariat has had some success with this system in detecting and correcting unwarranted shifts; however, the system is deficient because it does not monitor the nature or extent of classification activity directly. Because the CLEW system does not contain data on departmental positions, information from the system cannot be readily reconciled with departmental classification records. Few departments had confidence in or used CLEW data to monitor their own operations. Further, CLEW is not used by Treasury Board Secretariat as a systematic means to monitor longer-term shifts over a four or five-year period that may go undetected in a quarterly review of changes over a one-year period.

8.50 One other Treasury Board Secretariat system, the Official Languages Information System (OLIS), gathers information that could be used to monitor classification activity directly. OLIS, however, cannot be used for classification monitoring purposes because it is overloaded with data on surplus positions. This restricts its use as an effective monitoring tool. Treasury Board Secretariat's efforts to rectify this situation have not been successful.

8.51 The Secretariat's plans to replace CLEW with an improved monitoring system, Classification Action Reporting System (CARS), were aborted in 1983 because the costs of the improved system were not viewed as warranted. As a result, Treasury Board, the central agency responsible for job classification, does not have direct information on the nature or the extent of the activity for which most of its authority has been delegated to departmental deputy heads.

8.52 Treasury Board policy requires departments to establish performance standards and measures for their personnel management activities and operations and to monitor those activities. In departments, we found that monitoring practices for job classification vary widely in terms of scope and effectiveness. Few departments audited had standards and measures in place to monitor the quality and quantity of service provided by classification specialists. This is a matter of some concern; we noted there are about 500 of these specialists service-wide. Most departments did not have good information on the number and nature of classification activities. For example, most could only estimate the overall volume of the various types of job classification activity.

8.53 Because of the lack of sound performance-related information in most departments audited, we could only estimate the quality and quantity of service provided by classification specialists. Our estimates identified several important differences among departments in key areas of classification operations. They included the following:

- differences in the average time required to process a classification decision - the range was from just over 4 weeks to over 11 weeks;

- differences in the average effort required to produce a classification decision - based on estimated hours of personnel specialist and line manager time in one comparison of two departments, the difference was from a low of 20 hours to a high of 61 hours per decision; and

- differences in annual output of classification decisions by each personnel specialist, ranging from a low of 27 decisions to a high of about 68.

8.54 Audit. As discussed previously, in line with its responsibility for auditing the performance of departmental classification activities, the Treasury Board Secretariat has conducted two service-wide audits of the quality, or correctness, of classification decisions since 1976. The rates of misclassification, that is, the percentage of positions found to be classified incorrectly relative to the classification standard, were 17.8 per cent reported in 1978, and 23.8 per cent reported in 1983. In both audits, about 80 per cent of the classification errors resulted in overpaying the incumbent of the position for the work actually performed. On the basis of these two service-wide audits, Treasury Board Secretariat also concluded that the system had deteriorated significantly over the period from 1978 to 1983.

8.55 We reviewed the audit techniques and statistical methods used in Treasury Board Secretariat's most recent audit of the quality of classification decisions and concluded that the audit presents a reasonable picture of the rate of misclassification in the public service at the time it was done. We also concluded that the Secretariat's estimate of the net annual cost of misclassification (the total cost of over-classified positions less the cost reductions of the relatively few under-classified positions) at $125 million, or 2.4 per cent of straight-time payroll, is reasonable. Using Treasury Board Secretariat's raw data, we calculated the confidence limits for this estimate. We determined with 95 per cent confidence that the actual straight-time salary cost could range from $90 million to $157 million a year in 1983 dollars. We noted that this estimate did not include the salary-related costs of employer paid benefits such as contributions to pension and insurance plans and other salary-related entitlements.

8.56 Following its 1978 audit, Treasury Board Secretariat informed departments of their misclassified positions and requested that each be reviewed and that appropriate corrective action be taken. The Secretariat did not, however, vigorously follow-up on its requests for corrective action, and most departments were very slow to address individual problem positions. In a similar example, in one department, corrective action on a misclassified position identified in a 1980 audit, which represented about 1,200 similar positions, had been delayed for over three years. In four departments audited, the average time required to correct misclassified positions identified in the 1978 Treasury Board Secretariat audit ranged from 6 months to 2.5 years. By way of contrast, when senior officers of Treasury Board Secretariat brought pressure to bear on departments early in 1984 to correct misclassified positions identified in the 1983 service-wide audit, corrective action on most problem positions was swift.

8.57 Because of concern over the extent of misclassification reported in 1978, Treasury Board Secretariat undertook individual audits of the job classification process in all departments and agencies. These audits focused on compliance with Treasury Board Secretariat policies and directives and, in some departments, included an assessment of the quality or correctness of classification decisions. These audits revealed significant weaknesses in departmental controls over job classification and led to recommendations to each department for corrective action. We followed up on these recommendations in the departments we audited and found that most departments had responded in the form of a corrective action plan; however, most corrective action to date has been of a housekeeping nature such as clarifying statements of roles and responsibilities. The more substantive recommendations in terms of management improvement, such as the development of performance indicators and improved management information on job classification, have not yet been implemented in most departments.

8.58 Our review of departmental audit practices for job classification revealed that most departments have established or are setting up some form of audit capability. However, these audit activities seldom included a review of the quality or correctness of classification decisions where duties actually performed are compared to those described in the job description and to the classification standard. Most department classification audit programs simply focused on aspects such as completeness of documentation and compliance with procedures.

8.59 In some departments, the auditing of the quality of decisions is carried out by personnel specialists who are directly or indirectly linked to making the decision in the first place. This compromises the independence and objectivity of the audit. Compounding this problem, Treasury Board Secretariat issued policy guidelines in 1982 reinforcing that assessments of the quality of decisions should be conducted by personnel units rather than by independent internal audit units.

8.60 Evaluation. In addition to the two service-wide audits of positions and the audit of individual departmental classification processes conducted by Treasury Board Secretariat, there have been six major studies addressing or touching on job classification since 1974. Most were commissioned by Treasury Board or its Secretariat. These studies identified problems or made recommendations in such areas as improving the management of standards (in five studies), improving controls and accountability (in four studies), and simplifying the structure of job classification (in three studies). Despite the persistence of this advice, Treasury Board and its Secretariat have not acted on it in a systematic and concerted manner.

8.61 The Treasury Board Secretariat conducted an evaluation of one policy on job classification in 1983-84 - the training and accreditation of classification specialists. However, we are concerned that there were no plans to evaluate, until at least 1986, a number of elements of classification policy where our audit identified weaknesses in content or clarity as well as non-compliance by departments. We include such policy areas as the use of classification committees to evaluate positions, periodic on-site audit of the quality (correctness) of classification decisions, use of occupational group profiles to assess organization change, review of the costs and benefits of organization change and related classification decisions, the requirement for departments to consult with the Secretariat before making significant classification decisions that could affect other departments, and jobbing practices (the use of one job to justify the classification level of one or more similar jobs).

A System Lacking Accountability

8.62 In view of our observations concerning pressures within the classification system and our concerns with respect to the adequacy of the countervailing forces, we examined in some detail the issue of accountability. This included accountability for managing the system at both the Treasury Board Secretariat and departmental levels and accountability for the quality of classification decisions made under delegated authority.

8.63 We compared accountability for the classification system to accountability for several other important public service personnel activities and found marked differences in reporting requirements and practices. The Public Service Commission, for example, is required to report annually to Parliament on its activities with respect to staffing the public service. The Treasury Board is required to report annually to the government on its official languages program. With regard to affirmative action programs for women, handicapped people and native people, the Treasury Board Secretariat is required to report to the Treasury Board or Cabinet on the results of its activities. By contrast, we found no requirement for the Treasury Board or its Secretariat to render any periodic accounting on its stewardship of the public service classification program. The Financial Administration Act, which provides the Board with its authority for classification, states that the Treasury Board "...may provide for the classification of positions". It requires no periodic reporting of activities or results.

8.64 The Civil Service Commission, the agency responsible for classification before the enactment of the current legislation in 1967, was required to report annually to Parliament on its activities. We reviewed the annual reports published prior to 1967 and noted that job classification was included in some detail and provided a basis for the Commission to account for its responsibilities.

8.65 In 1965, the Preparatory Committee on Collective Bargaining set out a number of objectives which governed the design of the current job classification system. We reviewed the Treasury Board Secretariat's current operational objectives for job classification and found that they were not goal-oriented, specific or measurable. In the absence of clearly stated objectives, performance criteria and related measures, it is difficult to see how Treasury Board Secretariat could be held accountable in a meaningful way for managing the classification system. We were particularly concerned to find that Treasury Board Secretariat does not have a specific performance standard with regard to the rate of misclassification. Most other sector organizations we reviewed reported specific standards for rate of misclassification, ranging from an idealistic zero per cent to a high of five per cent.

8.66 With regard to departmental management of the system, policies governing its operation state that deputy heads are responsible and accountable to the Treasury Board for complying with the conditions of delegation of classification authority and for the integrity of the system within their departments. There is no requirement, apart from recent and as yet untested initiatives by Treasury Board and the recent requirement for departments to submit audit and monitoring plans, for a systematic flow of information from departments to the Secretariat or to Treasury Board that would support such an accountability relationship. This is in sharp contrast to the staffing system whereby departments must inform the Public Service Commission of every appointment made under delegated authority to staff. Indeed, there is no requirement for departments to inform Treasury Board Secretariat, even in summary form, of the exercise of delegated authority to classify jobs.

8.67 In each department audited, we interviewed personnel specialists and operational managers with recent experience in classifying jobs. Personnel specialists are responsible for the quality (correctness) of classification decisions; operational managers are responsible for program and related costs. Neither saw themselves accountable for the cost implications of organization changes and related classification decisions. We noted a similar division of responsibilities between personnel specialists and operating managers in private sector organizations; however, we also observed that the onus on the manager for profitability created a powerful incentive to be aware of and to minimize salary costs. During our review of practices in other sectors, we noted that one provincial government had implemented a system for reporting periodically to individual deputy heads and to the deputy ministers of the responsible central agency on the potential salary cost implications arising from job classification decisions in individual ministries. Provincial officials reported that the system had produced good results in motivating senior managers to be aware of and to control increases in salary costs resulting from organization and classification change.

8.68 The Treasury Board policy concerning classification delegation requires departments to consult with Treasury Board Secretariat before implementing classification decisions that may involve potentially significant increases in salary expenditures. There is no other reference in classification policies to the salary costs of classification decisions other than the statement that the deputy head is responsible for the "integrity" of the system. It can only be inferred that salary costs are included. We view this as a serious omission in policy direction.

8.69 In May 1984, the President of Treasury Board announced, as a direct response to the findings of the 1983 Treasury Board Secretariat audit, a series of initiatives, one of which specifically addressed the issue of accountability. This initiative involves establishing an index number for each department or agency derived from average salary costs and approved person-years. Changes in job classification levels will be reflected in a department's index number and will be monitored on a monthly or quarterly basis by Treasury Board Secretariat. The concept is being developed in a small group of departments and may lead to delegation of classification authority in departments to senior managers who will be held accountable for the exercise of that authority through monitoring of their salary cost index.

8.70 This initiative, if it proves viable, should lead to improved accountability for job classification decisions within departments and between departments and the Treasury Board. It will not, however, address directly most of the deficiencies we have noted in management practices, nor will it ensure sound administration of the classification system.

Conclusions and Recommendations

8.71 We have set out our findings with respect to what we believe to be significant upward pressures on the public service job classification system and with respect to identified deficiencies in the management of the system at both the Treasury Board Secretariat and departmental levels. We have also outlined significant weaknesses in accountability for public service job classification.

8.72 There is a serious imbalance between upward pressures on salary costs arising from the classification of jobs and countervailing restraining forces. This imbalance is shown by:

- the increase in the rate of upward reclassification of positions leading to promotion of the incumbent without competition;

- the shift in the distribution of employees from lower levels of several occupational groups to higher-paid levels; and

- a significant rate of error in the classification of jobs that has resulted in close to one employee in every five being overpaid, relative to other public servants, for the work actually performed.

8.73 This deficiency is serious because its effects tend to degrade the credibility of the job classification system in the minds of those directly affected by it - employees, managers and personnel specialists. To be effective, a job classification system must be seen to be fair, objective and equitable; where it is not seen in this way, staff morale suffers because of the perceived inequities, and misuse of the system increases to address them. Diseconomy results.

8.74 We believe that the fundamental cause of the weaknesses identified in this audit is that departmental managers, who initiate and influence job classification decisions, feel no sense of ownership or responsibility for the classification system. Because departmental managers view the classification system as a central agency "personnel" system, and because increases in salary costs arising from upward job reclassification have been funded automatically by Treasury Board, managers have not been motivated to control the effects on salary costs of organization change and related classification decisions. In our view, effective corrective action requires that managers be motivated to be aware of and to control these costs.

8.75 A public service employee is entitled to be paid for duties performed and responsibilities fulfilled. It is our view that public service managers have a responsibility, as trustees of public funds, to ensure that full value is received for salary dollars spent. This means that public service managers must be motivated to consider the benefits to be derived from proposed changes in organizational arrangements and related classification decisions in terms of their associated cost implications. In practical terms, public service managers must be aware of, and control, the effects on their organization of incremental classification change which, over time, can dramatically affect the costs of program delivery.

8.76 We are of the view that sweeping, fundamental changes in the structure for public service job classification are neither necessary nor desirable, for the following reasons:

- The close integration of the job classification structure with that for collective bargaining means any changes in the former would have significant effects on well established relationships for the latter.

- Any move toward a major recentralization of authority for classifying jobs at the central agency level would be inconsistent with the well established management philosophy in the Canadian public service that responsibility and authority are delegated to departmental deputy heads to the maximum extent feasible.

- The costs of major structural change to the current system and the consequent disruption in the workplace would likely be great.

- There are significant opportunities for improvement within the present structure.

8.77 We do not advocate more procedural controls or further constraints over the job classification system. What is needed, in our view, is improved effectiveness in the existing control framework together with incentives for managers, personnel specialists and the responsible central agency to ensure that the classification system is managed with due regard for value for money.

8.78 Recent initiatives announced by the President of Treasury Board to gather information on classification changes in departments, to undertake another service-wide audit of the quality of classification decisions, and to implement measures to ensure that departments absorb salary cost increases arising from classification changes from existing budgets will likely address some of the problems revealed in our audit. However, we are not confident that these measures go far enough or that they will address the more fundamental management issues.

8.79 To address these problems, we believe that concerted action is required to ensure the following:

- more effective controls over the quality of classification decisions and the cost implications of organizational change and related classification decisions;

- more effective review of work actually performed relative both to work described and to classification standards; and

- more effective accountability at all levels for the management of the system.

Controls Over Quality and Cost Implications of Decisions

8.80 In our opinion, the quality control framework within which classification decisions are made must be reviewed and significantly improved. It is far more cost-effective and conducive to good employee relations to ensure that a decision is correct when it is made than to undertake corrective action after an error is made. In the quality control framework, we include the adequacy and currency of classification standards and policy direction with regard to such key elements of job classification as using committees to evaluate jobs and requiring departments to consult Treasury Board Secretariat before making significant decisions that could affect other departments. These elements of policy should be reviewed in terms of their content, clarity and effectiveness and either reinforced or, where they are inappropriate to effective control of classification decisions, revised or cancelled.

8.81 Treasury Board Secretariat and departments should ensure that classification decisions are subjected to rigorous and effective quality control measures before they are implemented.

8.82 Ways must be found to ensure that both the short and longer-term cost effects of proposed new organizational arrangements and the related classification decisions, particularly upward reclassification, are known and subject to review. Such reviews should include assessment at the departmental level of the costs and benefits of the proposed decisions relative to alternative ways of organizing and allocating work. Visibility and control over the costs of classification change could be greatly facilitated if the documents requesting and authorizing a classification decision included reference to the projected costs of the classification change.

8.83 The Treasury Board Secretariat and departments should develop measures to ensure that consideration is given to the cost implications of organization changes and related classification decisions.

Review of Work Performed

8.84 In the current system, on-site review of the relationship between work actually performed and the written job description, and the relationship of both to the classification standard (audit of the quality of decisions), is conducted by the Treasury Board Secretariat in individual department audits or service-wide. Departmental activities in this area, although a requirement of Treasury Board policy, are not extensive, nor are they integrated or co-ordinated with the audit activities of Treasury Board Secretariat.

8.85 To assess the health and integrity of the system, the Treasury Board Secretariat needs to develop a systematic, integrated and co-ordinated approach to the periodic audit of job classification decisions. Such an approach would require that departments comply with Treasury Board policy concerning on-site review of classification decisions and that the Secretariat co-ordinate the total audit effort to provide for meaningful year-to-year comparisons of performance at the level of the individual departments as well as service-wide. This approach would also help to avoid wasteful duplication of audit effort. It would provide a rational basis for determining whether the rate of misclassification is stable, improving or deteriorating and for determining the nature of appropriate corrective action to ensure that value for money is obtained in the classification of jobs. In conjunction with this co-ordinated audit effort, the Treasury Board Secretariat needs to develop specific and measurable targets for reducing the rate of misclassification.

8.86 Treasury Board Secretariat should develop and implement a systematic, integrated and co-ordinated approach to periodic audit of the classification system and use the results to assess the performance of the system and the need for any corrective action.

8.87 Where classification problems, including inadequate departmental performance, are identified, Treasury Board Secretariat should be prepared to act directly and decisively to ensure that the problems and the factors that led to them are addressed by departments. Where appropriate and necessary, Treasury Board should be prepared to apply sanctions, including restricting or removing delegated classification authority from individual departments.

8.88 Treasury Board and its Secretariat should ensure that classification problems are corrected effectively and promptly through the application of sanctions where appropriate.

Greater Accountability for Management

8.89 Considerable effort has been expended over the past few years in assessing the effectiveness of the current classification system. The Treasury Board and its Secretariat have moved in some areas to strengthen management controls. We believe that these activities should continue and be reinforced. We are also of the view, however, that accountability for the integrity of the system is the most fundamental issue that must be addressed. Further, we believe that accountability at all levels would be greatly strengthened if means were devised to provide greater visibility of job classification and its cost implications.

8.90 As we noted earlier, the importance given to other human resource programs, such as staffing and official languages, has resulted in annual reporting by the responsible organization to Parliament or to government. In our view, the importance of the job classification system in terms of its linkage to organization change and its implications for payroll expenditures warrants similar visibility.

8.91 We believe that an annual report to Parliament by the Treasury Board and its Secretariat would do much to enhance visibility, increase scrutiny and ultimately improve accountability for the public service job classification system. A report, based on information provided by deputy heads, could set out the system's key operating characteristics, such as the nature and extent of classification activity by department and across the public service. It could also address the related cost implications of this activity, the overall performance of the system in terms of the rate of misclassification, and steps taken to address problem areas.

8.92 Treasury Board should report annually to Parliament on the activities and performance of the public service job classification system.