1989 Report of the Auditor General of Canada

Main Points

9.1 The government's Incentive Award Plan of six programs is intended to recognize the contribution public servants can make, with their imagination and performance, to the administration of the federal public service. We looked at two of the Plan's programs in six departments to see how they were working (paragraphs 9.13 to 9.15, 9.28 and 9.29).

9.2 Treasury Board Secretariat, responsible for the overall administration of the Plan, and departments and agencies with delegated authority to operate programs, all have roles to play. Those roles are not now being exercised in a way that will realize the Plan's full potential (9.12, 9.16 and 9.27).

9.3 Of the six programs in the Plan, two of them -- the Suggestion Award and Merit Award -- are designed to recognize that the ideas and efforts of employees can have both immediate and long-term benefits for the operation of the public service. These two programs are also important because of their influence by example on other public servants (9.17 to 9.22).

9.4 Only a limited number of departments participate in the two programs, and the number of participating employees is low (9.30 to 9.36).

9.5 There are exceptions, however. A number of organizations have active and successful programs. In these instances, senior management is visibly committed to the Plan and incentive programs to support it have been implemented that go beyond Treasury Board Secretariat policy requirements (9.37 to 9.40, 9.60 to 9.72).

9.6 There is no effective monitoring by Treasury Board Secretariat of Plan programs delegated to departments. Minimal resources have been allocated to the overall administration of the Plan, statistical data collected is of limited utility and the Plan has not been formally evaluated in the last ten years (9.45 to 9.51).

9.7 The Suggestion Award and Merit Award programs are not being used to their potential. This means the contribution that employees can make may not be fully recognized and utilized. It also means that opportunities to increase productivity may be overlooked and significant cost savings may be missed (9.52 to 9.54).

Introduction

Perspective

9.8 Efficiency in government is a popular theme today where the focus is on systems, process, machines, and management involvement. All of these elements require, however, the intervention of public servants acting individually or in groups.

9.9 In the interests of greater productivity, public and private organizations today are striving to improve management and employee co-operation. There are many views on how this can be achieved, but no consensus on the "correct" view, no "right" approach.

9.10 However, it is generally accepted that a judicious blend of incentives will encourage employees to give their best.

9.11 Public service managers are aware of the part that rewards and recognition can play in reaching organizational performance goals. There is a sense that now is the time to improve the present system of employee involvement. Strong and supportive leadership is an indispensable part of this process.

9.12 In recent years, there has been considerable discussion about the decline in morale in the federal public service and its effect on the work environment. A potential exists for making some improvement to that environment through the Incentive Award Plan. It is well worth the effort required to do so.

9.13 It is the policy of the government to recognize significant contributions to the public service made by public servants. Employees are seen as valuable and knowledgeable sources of useful ideas and initiatives.

9.14 The Incentive Award Plan is designed to recognize these contributions.

9.15 Recognition is given for outstanding performance; for meritorious work contributions; for long service; and for submitting practical suggestions -- all having to do with making the federal government work better. The acknowledgment of these contributions is given by way of money or other means.

Incentive Award Plan

9.16 The Plan consists of six programs for which the Treasury Board Secretariat has overall responsibility. This includes the development of policy and procedures, basic program design, and monitoring and evaluation of the Plan's activities. To facilitate administration, the individual programs are separated into two categories of responsibility. One recognizes the needs of the corporate culture of the public service while the other acknowledges the need for autonomy on the part of the participating organizations.

Programs delegated to participating organizations

• Suggestion Award Program
• Merit Award Program
• Long Service Award Program

Corporate programs administered by the Treasury Board Secretariat

• Award of Excellence Program
• Outstanding Achievement Award Program
• Senior Officer Retirement Certificate Program

9.17 Suggestion award program. The Program's purpose is to recognize ideas from employees that will help improve and maintain productivity.

9.18 This program involves the largest number of eligible and participating employees and the most money spent.

9.19 The maximum amount that may be awarded for any one approved suggestion is $10,000, before taxes. According to statistics issued by Treasury Board Secretariat, for the fiscal years from 1986 to 1988, an average of $350 has been awarded to about 2,200 approved suggestions. For the same period, the average savings attributable to a suggestion have been $9,068 -- almost $26 saved for every dollar spent, plus, in some cases, other benefits that cannot be quantified.

9.20 Merit award. The Merit award is granted to those who have made significant contributions to the work of their organization or who have shown exceptional work performance.

9.21 This program may grant awards of between $500 and $3,000 to individuals and up to $6,000 to groups. Employees who are part of bonus or performance pay plans can receive only non-monetary recognition -- and then only up to a maximum value of $100. Under the Merit Award Program the average pre-tax award in 1987-88 was $520 to about 430 recipients.

9.22 These two programs are designed to include all members of the public service. Those in the management category may receive only non-monetary recognition.

9.23 The Long Service Award recognizes employees who have served 25 and 35 years in the public service.

9.24 Award of excellence. Started in 1986, this program represents a second layer of recognition. It is given to a small number of those who have already been recognized under either the Suggestion Award or the Merit Award Program.

(Exhibit 9.1 is not available)

9.25 The most meritorious recipients are invited to Ottawa, and in a special ceremony a minister of the government presents their awards. The objective is to give wider publicity to the contributions public servants are making to improve the economy and efficiency of government operations. One of the recipients of the 1989 awards was an employee of the Department of Supply and Services who saved over $12 million by negotiating reduced charges from United States government agencies.

(Photo not available)

9.26 The names of the final two programs describe the basic criteria that apply to them. The Outstanding Achievement Award is directed at management category public servants for distinguished service and accomplishments in the course of their careers. The Senior Officer Retirement Certificate is presented by the Governor General in a public ceremony to retired public service executives of senior rank.

(Exhibit 9.2 is not available)

9.27 Deputy heads of participating organizations have been delegated responsibility for funding and administering positive and effective programs. They are expected to seek the participation of their employees in improving government operations. Ministers are also called on to support the program. Senior managers are expected to support the program visibly, not only by participating in award ceremonies but also by issuing periodic policy statements.

Scope

9.28 This audit examined how Treasury Board Secretariat administered the Incentive Award Plan and how participating organizations executed their delegated responsibilities for some individual program components. We also sought to understand why some departments were participating more actively than others in the full range of programs the Plan offers.

9.29 We focussed on the two main programs delegated to departments, the Suggestion Award and the Merit Award.

Findings

Low participation rate may be resulting in lost opportunities for cost savings

9.30 The rate of participation in the Suggestion and Merit Award programs by organizations and by employees is low.

9.31 Only 34 of approximately 140 eligible departments and agencies participated in the Suggestion Award program in 1987-88. (In practical terms, the Treasury Board Secretariat has contact with about 50 departments and agencies.) Their employees participated at a rate of 1.1 suggestion for every 100 employees. Over the past five years the rate has averaged almost 0.9 percent.

9.32 The National Association of Suggestion Systems, an organization supporting employee involvement programs, publishes annual statistics of its members' activities, in both public and private sector North American organizations.

9.33 The Association reported that in 1987, in the United States federal government, 3.9 suggestions were submitted for every 100 employees. The same report noted that other governments, some in Canada, reported an average of 1.0 submission for every 100 employees. North American employment sectors reported these rates per 100 employees:

Finance and business	13
Insurance companies	17
Consumer goods	14
Public transportation	5

Compared to these organizations, the public service is being tapped for fewer potential suggestions for improving efficiency. While the organizations with which this comparison is made are not exactly the same as the public service, they have similar administrative and paper burden workloads associated with large organizations.

9.34 Participation was also low in the Merit Award Program. In 1986-87 and 1987-88, 17 and 18 departments and agencies respectively, out of about 50, used the program or parts of it. Of the six departments we examined, four had given the award in the past two years, involving 317 employees and about $170,000 in awards.

9.35 In other words, little use is made of one of the two ways available to monetarily and directly reward employees and managers.

9.36 The reasons for the low participation rates cannot be determined precisely. Limited resources at the corporate as well as the departmental level may be one reason. Treasury Board Secretariat devotes two persons and modest funds to the overall program while departments dispense varying resources to this area. This leads to a number of questions regarding the management of a program that has not been formally evaluated in over 10 years, such as:

• are the rewards sufficient?
• is senior management committed?
• is there too much red tape?

Another reason may be insufficient marketing of the programs to senior management. Whatever the reasons, it is apparent that potential benefits to the organizations and to the employees are probably being lost.

Some programs working well, others not

9.37 There is a wide variety of practices used to implement incentive awards in the six departments examined, ranging from innovative, successful programs in some organizations to limited activity in others.

9.38 Organizations with active and successful programs have usually linked them to a philosophy of management that emphasizes the importance of people. They have had strong support from their Deputy Ministers, who have been actively involved in the programs. In addition, these organizations have taken other incentive initiatives that go beyond the original policy. Participation rates are higher.

9.39 In March 1989 the Canadian Centre for Management Development published a paper, "A Management Model," a consensual review of management from the viewpoint of a Deputy Minister. Of the seven elements deemed essential to successful management four involved people. The four elements were:

• leadership,
• motivated, competent and productive staff,
• innovation, and
• effective internal communications.

These same elements play a part in the Incentive Award Plan, particularly the Suggestion Award and Merit Award programs. The Suggestion Award program, for example, is about innovation, communications and productivity and invites supportive leadership.

9.40 An example of leadership is Employment and Immigration Canada, which has a dynamic incentive award program in place. Some of its chief features are worth noting to understand why the program is more successful than others (see paragraphs 9.60 to 9.72).

(Exhibit 9.3 is not available)

9.41 Departments and agencies where activity was low were often operating with fewer resources applied to the program. To our mind, the level of resources appeared to be a measure of the support given to the program by senior management. However, employees and managers even in departments with low activity recognized the importance of incentive programs directed at their employees.

9.42 One reason advanced for lack of interest in the Suggestion Award program was the low financial reward. The financial awards are not high and they are taxed, so the net effect in most cases is not significant. The factor of "recognition," however, should not be lightly dismissed.

9.43 Departmental co-ordinators, on whom much of the immediate responsibility for the administration of the program rests, are carrying out their duties diligently given the time and resource constraints and the degree of management support provided. We noted no major deficiencies in compliance with policy. All organizations examined had adequate file systems where files were current, complete, and provided for follow-up as necessary.

9.44 However, we found that most organizations could not analyze results of their programs by region, organization, employee level, type of suggestion, etc., or establish track record profiles of any kind. Thus, data valuable to the management of the programs were not available. Annual reports are generally prepared for management, containing the information required by Treasury Board Secretariat. No other analysis is usually prepared.

Treasury Board Secretariat involvement ineffective in departmental programs

9.45 The Treasury Board Secretariat is devoting minimal resources to the Incentive Award Plan. There is no effective monitoring or evaluation of departmental programs and statistical information is limited.

9.46 As a reflection of the policies of decentralization and restraint, resources in the Secretariat are limited to two person years and a direct operating budget of $119,000 for 1988-89. This is down from five person-years in 1984-85.

9.47 The Secretariat is advised by the Incentive Award Board, a committee of senior departmental and central agency managers, which also acts as a forum for the discussion of problems. The Secretariat is frequently telephoned for help with departmental questions arising from the Plan and, by way of promoting the Plan and employee achievements, it has distributed two video productions throughout the Public Service. Finally, the Secretariat has recently received two awards for its promotional materials.

9.48 However, there are some deficiencies in the co-ordinating role and perhaps in the support role played by Treasury Board Secretariat. For example, no courses are available to departmental co-ordinators or managers. Also, the role of the Secretariat is perceived by staff of the departments we examined to be weak and of limited help. We were also told that:

• Treasury Board Secretariat is not working as a facilitator or networker though the policy suggests that it should. It is not communicating information and data to departments, or pursuing the clarification of policy and simplification of manuals.
• There is no formal and automatic mechanism for passing a valuable suggestion on to other government departments that might be interested in using the idea or adapting it to suit their purposes, although the policy suggests that deputy heads have this responsibility.
• Promotional material received from Treasury Board Secretariat is considered to be of low quality and not persuasive.

These somewhat mixed signals -- reasonable arrangements at the centre with problems felt at the periphery -- suggest some need for improved communications within departments and between departments and the Secretariat.

9.49 Treasury Board Secretariat needs to take advantage of the courses and meetings offered by the National Association of Suggestion Systems, of which the Government of Canada is a member. Some departmental co-ordinators have attended such meetings.

9.50 Statistical data that would illuminate aspects of the programs, particularly the Suggestion Award program, is limited. Data are collected to provide the Secretariat with the overview statistics it requires; data telling something about the origin of the suggestion, the organizational unit involved and its geographical location, the employee category and level, and details on the substance of the suggestion are not available. Such data would be useful in planning and marketing the award programs. Furthermore, generic government problems and solutions could be identified.

9.51 Treasury Board Secretariat is required to periodically monitor and evaluate the Incentive Award Plan, the effectiveness of its terms and conditions, and compliance with its rules. No formal evaluation has been conducted in the past 10 years.

Conclusions

What can be done to make it work better?

9.52 The existence of an underutilized suggestion and merit award system in the federal government, particularly as it affects the non-management categories of employees, means that employee participation and grass-roots identification of performance improvements may be lost. It further means that the skills of employees may not be fully used and, thus, their efforts are not being sufficiently recognized. The loss of opportunities to recognize employee efforts may contribute along with other factors to an undermining of morale and of a sense of personal involvement, satisfaction, and job commitment.

9.53 Opportunities to achieve greater productivity may be overlooked and significant cost savings are probably being missed. In the Suggestion Award program, for example, assuming that approved suggestions and gross savings would increase in proportion to any increase in the number of suggestions received, and bearing in mind the present low level of activity, doubling the number of suggestions (from the current figure of 1.1 per 100 employees in the 34 participating departments and agencies), would double the potential gross savings to approximately $14.5 million. If the overall ratio were to match Employment and Immigration's 3.2 per hundred employees, the gross savings could increase to $21 million. Most of these savings would continue year after year.

9.54 Although only 34 organizations actively participate, there are about 140 within the public service that could benefit from the program. This is one measure of the size of the opportunity.

9.55 During our audit there was strong recognition on the part of many managers and employees that much more needs to be done in the area of employee rewards and recognition -- that tangible and intangible benefits would be significant and that employees need to be encouraged to contribute their ideas. Reward and recognition programs initiated by management can play a part.

9.56 Other representatives claimed that achieving the ideal of free and easy movement of ideas in hierarchical organizations is probably impossible. Employees are naturally cautious about advancing ideas that may appear to question management's implicit approval of the way things are presently done. Nonetheless, attitudes towards the program were generally positive. Many felt that an incentive plan, alive and well, demonstrated a healthy corporate culture.

9.57 There are no easy answers for making the Plan, or its individual programs, work better. But we offer the following recommendations in the belief that their implementation would aid in encouraging greater participation and visibility that would help free the creativity and enthusiasm of public servants.

9.58 Treasury Board Secretariat should:

• develop methods to regularly remind all deputy heads and senior management about the range of employee involvement tools available through the Incentive Award Plan and of the necessity of employee participation in identifying productivity improvements.
• encourage more experimentation in incentive programs. In fact, many of the departments we examined had developed some of their own incentive programs with Treasury Board Secretariat assistance.
• determine what statistics are needed to identify the sources of suggestions, the active occupational groups, and the subjects where improvements are being suggested. The Secretariat should consider establishing a shared computerized data base for that purpose.
• examine whether the present monetary award arrangements can be improved.
• examine whether less traditional rewards may be used.
• try networking and other procedures to ensure that valuable, cost-efficient and productive ideas are brought to the attention of other departments for their possible use.
• develop stronger links with the departmental co-ordinators and upgrade the quantity and quality of their training programs, which should involve managers.

9.59 Departments and other participating organizations should:

• make rewards and recognition a management priority.
• commit resources corresponding to the priority given.
• ensure that managers and co-ordinators participate in training sessions.
• develop suitable promotional campaigns in support of the programs.

Example

A plan that works - Employment and Immigration Canada

9.60 Breakthroughs and originality. The Department of Employment and Immigration is an example of a department where the Incentive Award Plan is linked to a broader philosophy of management that encourages employee recognition and rewards as an ongoing management practice and as part of the organization's culture.

9.61 The Department has been exploring ways to create a healthier, more efficient organization while maintaining high-quality service. In 1986 it announced a "Philosophy of Management", the outcome of management workshops that had taken place across Canada. This philosophy is the cornerstone on which the Department is now managed. It emphasizes that people are the organization's most valued resource, a philosophy to which senior management has committed itself.

9.62 In 1987, the Department established three task forces to give effect to this philosophy. One task force dealt with recognition and rewards. The results of its work were published by the Department and made available to all employees. The current Incentive Award initiatives in the Department are an outcome of this work.

9.63 A foundation well laid. The departmental incentive award programs are based on three principles:

• A commitment by senior management to visibly support the recognition and reward program.
• Good management practices to ensure that every employee is fully valued and treated with respect.
• Credit given to managers for using the Plan to recognize and reward excellence.

9.64 Active suggestion award. The Department has an active suggestion award program for soliciting and recognizing innovative ideas to improve departmental programs. The Department's level of participation is among the highest in the federal government. Of the 34 organizations reporting in 1986-87, Employment and Immigration Commission stood first among large departments in the percentage of participating employees and the cash awards given by the program. For every 100 employees, 3.1 suggestions were submitted, compared to an average of less than one in all the other participating departments.

9.65 Reaching out to regions. In some departments suggestions are evaluated only at Headquarters. In Employment and Immigration, regional review committees evaluate and approve suggestions that are specific to the region. This helps to assure a link between the management process and all employees.

9.66 Merit awards used flexibly. In 1988-89 Employment and Immigration awarded 89 merit awards. Of these, 57 were certificates and non-monetary awards up to a value of $100; the remaining 32 were certificates, cash, and merit award pins to recognize exceptional performance. With the concurrence of Treasury Board Secretariat, the authority to approve monetary awards up to $1,000 has been delegated to the regional and national headquarters group levels and the authority to approve non-monetary merit awards valued up to $100 has been delegated to the local level on a trial basis. This allows managers at all levels to become involved, as well as encouraging the frequent and timely recognition of smaller but genuine accomplishments.

9.67 Teamwork deserves recognition too - outstanding team award. In 1988, the Department initiated an award to the outstanding teams in Canada Employment and Immigration Centres, as well as at Regional and National Headquarters, with a one-time allocation of $15,000 for operations and maintenance expenditure. Through a self-nominating process, teams who felt they met the selection criteria were reviewed by a national selection committee consisting of a panel of eleven regional managers and one member from outside the Department. The participation of all members of all teams that applied was recognized and the Deputy Minister personally made the presentations at the winning teams' worksites.

9.68 Long service pin. Besides the regular plaques and medallions granted for long service, the Department also issues an Employment and Immigration pin. The Department is currently exploring further rewards for employees with significant length of service.

9.69 Exploring other possible ways. In addition to these formal programs, senior management has been encouraged to meet with employees to discuss reward and recognition initiatives specific to the values that teams recognize as being important in their own areas of work. In Employment and Immigration, managers are held to account for their activities in this area when their performance is appraised.

9.70 Sometimes a thank you goes a long way. The formal programs are viewed as only part of much broader set of management practices that encourage ongoing recognition and rewards. The Department recently completed an evaluation which showed that there are many practices in place to recognize employee contributions, including non-monetary rewards. Some managers have found that employees appreciate something as simple as a "thank-you" note as a token of recognition for extra effort.

(Photo not available)

9.71 Publicity gets attention. These programs have high visibility in the Department. In addition to providing a related handbook, the Department has used a number of channels to communicate with employees, including desk drops, mailers with paychecks or direct deposit statements, posters, newsletters, videos and repeated reminders from senior management expressing its support for the programs. The Department is planning an ongoing awareness day to give more visibility to these programs.

9.72 Bringing it together. Employment and Immigration has made a concerted effort to create a culture that fosters awareness of the value of people in the workplace. The senior management team has acknowledged that one critical element in creating this environment is the recognition given to employees for their contributions to the goals of the organization. The practices that are currently in place demonstrate that the Department has made considerable progress toward these goals.