II

THE YEAR IN REVIEW

Several events over the past 18 months have had a significant impact on the Public Service of Canada.

Constitutional Reform

The process of Constitutional reform dominated the Canadian scene and the Government's agenda for the greater part of 1992. Extensive consultations and negotiations were carried out in an effort to arrive at a constitutional package which both governments and citizens could endorse. Those talks led to the Charlottetown Accord, which was ultimately rejected in the October 26 referendum.

A major issue during this period of constitutional negotiations was the division of responsibility for certain policy and program areas and how these program activities could best be co-ordinated between the federal and provincial governments. Federal public servants provided outstanding advice and support to the Government throughout this intensive period. The results of their work remain important today as the federal and provincial governments continue to collaborate on ways to improve the efficiency of services provided by government to Canadians.

Restraint

After the referendum, attention focused again on the Canadian economy. As part of the Government's strategy to control the deficit and ensure stronger economic growth, the December 2, 1992 Economic Statement reduced operating costs for all departments by three percent for the 1993-94 and 1994-95 fiscal years, and froze the salaries of public servants for two years, through 1994-95.

The April 1993 Budget announced further restraints on expenditures for government operations. Significant cuts to departmental operating budgets, including reserves for contingencies and new initiatives, were announced for the duration of the fiscal framework. These measures reflected the continuing need to reduce the cost of overheads and to maximize the value of program spending.

As a result of the June 25 reorganization (see below), an additional $150 million was cut from operating budgets. And in the February 1994 Budget, further reductions of $1.5 billion in operating budgets over the three fiscal years 1994-95 to 1996-97 were announced.

This continuing program of restraint has a significant impact on government operations, but it also has a direct effect on employees. In the February 1994 Budget, the Government announced a two-year extension to the wage freeze and the suspension of pay increments ⁹ for the Public Service and other federal employees and appointees. This means that the salaries of public servants will have been frozen for five of the six years between 1991 and 1997.

In addition, performance pay for executives has been eliminated since 1991-92 and for Deputy Ministers since 1990-91. Funding to provide for performance pay had originally been taken out of the salary base for those employees. Its elimination has meant an actual reduction in income for these more senior employees in the order of five percent per year for average performers and progressively more for those with above-average performance. This has had a particular impact on the very people to whom we are looking for leadership in departments and agencies.

For unionized employees, the 1994 Budget also included a freeze on pay increments through which employees have normally progressed within a particular salary range up to the "job rate" for the position they hold. Here too, the financial impact on individuals is significant.

Passage of Bill C-26: the Public Service Reform Act

A milestone in the renewal of the Public Service was reached when Bill C-26, the Public Service Reform Act, was passed by Parliament in December 1992 and then proclaimed into law on
April 1, 1993. This marked the first major overhaul of the legislation dealing with the management of the Public Service in over a quarter of a century. The new legislative framework provided a statutory footing for many of the changes in human resources and administrative management envisioned in the Public Service 2000 White Paper.

The Act contains amendments to the Public Service Employment Act, the Public Service Staff Relations Act, the Financial Administration Act and the Surplus Crown Assets Act. It includes provisions in areas such as the deployment of employees, ¹⁰  authority to simplify the job classification system and the streamlining of the staffing process. In addition, fair treatment of employees was enhanced as a result of new provisions on employment equity, the end of probation on appointments other than initial entry to the Public Service, and earlier union membership for term employees.

For the most part, these measures already have produced tangible improvements in the functioning of the personnel system. Deployment, for example, is working - jobs can be filled more quickly; people can more easily move to pursue new opportunities; and organizations can respond more effectively to organizational change.

One area, however, where we have not made the progress for which I had hoped is classification. The direction set by the Public Service 2000 White Paper is the right one, but greater effort is needed to bring the new, simplified system into being. Until we have that simpler system, managers and employees alike will be frustrated by the complexity and delay inherent in our current cumbersome structure of over 70 occupational groups, with many levels within each group.

Government Reorganization

On June 25, 1993, Prime Minister Campbell took office and announced a major reorganization of the government that, in one way or another, affected all departments in the Public Service.

The reorganization created departments that were organized more on functional lines than around particular client groups, and that brought together essential policy and program tools in critical areas such as employment and income security. This consolidation of functions was intended to internalize decisions that had previously required lengthy interdepartmental consultation, thus giving individual Ministers clearer authority over their areas of responsibility.¹¹

The organizational changes announced in June included:

• an overall reduction in the number of departments from 32 to 23;
• the creation or redesign of eight departments;
• the merger or wind-up of 15 others.

All departments were asked to submit plans for administrative streamlining and for the consolidation of regional management structures and operations.

The reorganization resulted in new departments with responsibility for important policy areas that have a significant impact on Canadian society. They include, among others:

Human Resources Development

This new Department provides an integrated approach to Canada’s investment in people. It brings together under one portfolio programs supporting the income of Canadians with employment and human resources programs linked to the requirements of the national economy and labour market.

Industry

The Department of Industry provides broad policy leadership within government on matters related to business and industrial development. It also plays a lead role in improving Canada’s scientific infrastructure and is a key portfolio for Canadian competitiveness.

Canadian Heritage

This new Department was created to support and encourage a strong sense of Canadian identity and heritage based on fundamental characteristics of Canada - bilingualism and multiculturalism - and our diverse cultures and heritage.

 Health

The new Department of Health was created to meet the fundamental policy and funding challenges of maintaining a high-quality, affordable health system for Canadians.

Public Works and Government Services

This new Department provides common services to government in a more cost-effective manner. It consolidates virtually all common services provided to federal departments and agencies.

Central Agencies: Privy Council Office/Federal-Provincial Relations Office and Treasury Board Secretariat/Office of the Comptroller General

Two significant changes affected the central management structures of government: the first was the reintegration of the Federal-Provincial Relations Office into the Privy Council Office, which consolidated support to the Prime Minister across the full range of his responsibilities. The second was the integration of the Office of the Comptroller General into the Treasury Board Secretariat. This preserved and strengthened the comptrollership function within a streamlined budget office. Together, these changes represent a significant streamlining of the institutional overhead of the Public Service as a whole.

The reduction from 32 to 23 departments was accompanied by a corresponding reduction in the number of Deputy Ministers and shortly thereafter a 17 percent reduction in the number of Assistant Deputy Ministers from 319 to 266.

These personnel changes were carried out under my overall leadership, and in the case of those at the ADM level, under the authority of the Public Service Commission. Decisions on the reassignment of ADMs were taken on the basis that these senior officials are a corporate resource whose talents should be developed and used in the broader interests of the Public Service as a whole.

Reductions in personnel, at whatever level, are never easy to decide on and always difficult for the people affected. In this case, decisions were made only after careful consideration, by a committee of Deputy Ministers, of each affected individual and of the present and future needs of the Public Service. Those decisions also reflected the recognition that smaller government requires a smaller group of senior executives to manage it.

Beyond the relatively small number of senior executives who were directly affected, approximately 200 other executives in reorganized departments found their jobs affected. Often this was because the same administrative functions from several departments were being combined under the umbrella of a single new organization. Here again, the Public Service Commission, working with the concerned Deputy Ministers, has been active in facilitating the placement of affected employees in other departments.

In addition, many thousands of public servants whose jobs were not directly touched by the reorganization were affected in other ways. For some, their Deputy or ADM changed; for others, their branch or unit was moved to a new department or their supervisor was reassigned. These changes were disruptive. They carry a cost in dollar terms, and in dislocation and short-term organizational inefficiency, that can only be justified if their longer-range purpose is a good one.

The structures of the Government of Canada before June 25 had grown and evolved in response to the needs of the country in the 1950s, 1960s and 1970s. Those structures also reflected the fact that over the years Cabinet itself had grown to roughly 40 Ministers. By contrast, the changes made in June reflected the realities of government in the 1990s - a smaller Cabinet and a corresponding need for smaller, more efficient government; the need for a more streamlined Cabinet system; the need for greater coherence in new policy areas that cut across traditional organizational lines; and above all, the need to enhance ministerial authority and control over the operations of government.

I believe the organizational changes of 1993 - made by one Government and accepted with some adjustments by its successor - do represent a necessary and positive step for the Government of Canada and for the Public Service. They have made policy and program choices possible today that would have been much more difficult under previous structures. As much as organizational changes can make a difference, the changes of June and November 1993 have better equipped Ministers and their officials to meet the important challenges facing Canada today.

The Election of and Transition to a New Government

On October 25, Canadians elected a new Government. Just as on similar occasions in the past, the Public Service showed its professionalism and competence in helping the new administration to take office and to pursue the agenda on which it had been elected.

When the new Government took office on November 4, the Prime Minister announced further changes to the structure of government, notably the creation of a new Department of Citizenship and Immigration, and the reestablishment of the Department of the Solicitor General. The Prime Minister also named a Minister, the Honourable Marcel Massé, with specific responsibilities for Public Service renewal. This appointment was an important signal of the Government's commitment to the Public Service as an institution, and to its future effectiveness in serving the needs of the Government and of all Canadians.

Restructuring within Departments

To be successful, organizational change must be carried out in a manner that is at once expeditious, orderly and responsible. This was the approach we took. A further premise of the implementation process was that there would be no disruption in service to Canadians. That commitment has been met by all departments concerned.

Implementation has been carried out on two fronts. In individual departments, the process of restructuring ¹² each affected organization has been led by Deputies and their management teams. To oversee and direct the entire implementation process, an Implementation Board was created, consisting of Deputy Ministers from line departments and central agencies, under my chairmanship and with the support of a small secretariat in the Privy Council Office. The Implementation Board was responsible for ensuring that what had been decided and announced in June was implemented properly and expeditiously so as to minimize the period of disruption and uncertainty for employees and their clients.

To lend further expertise to the restructuring process, in September 1993, the Prime Minister created a new Advisory Committee on Government Restructuring which now reports to the Minister responsible for Public Service Renewal.

The Advisory Committee was asked to provide advice on the restructuring of government, with a focus on the reduction of costs, increased effectiveness and enhanced service to the Canadian public. It has met on roughly a monthly basis and has provided very useful advice on a number of issues.

As originally conceived, the implementation of the reorganization and restructuring was to follow a three-phase process:

Phase I: Administrative Consolidation

For the new departments, Phase I involved putting new structures and management teams in place. For all departments, it meant preparing for administrative consolidation and the streamlining of operations. Within a matter of weeks, departmental structures and management teams were in place; by early fall, plans for the consolidation of administrative functions were complete and by the time of the writing of this Report they are largely in effect. The end of Phase I planning was marked by the signing of performance agreements between myself and each Deputy Minister. These agreements clearly spelled out performance expectations and anticipated savings.

Phases II and III: Operational Rationalization and Fundamental Reexamination of Programs and Services

The ultimate objective of these two phases had been to create a more results- and client-oriented Public Service by streamlining regional structures and applying new information technologies to enhance service and reduce costs.

The arrival of the new Government brought an understandable pause in the process, as Ministers took stock of their new portfolios, and the Government as a whole weighed important decisions on the review of programs and federal-provincial roles.

The February 1994 Budget sets the framework within which departments have been directed to review programs and to develop new and more cost-effective approaches to the delivery of services. In this process, strategic investments in information technology will be crucial to success. Already the Government has committed itself to $2 billion in cost-avoidance savings over the coming five years through the application of information technology and the modernization of internal systems.

In this context, the recent appointment of a Chief Informatics Officer (CIO) in the Treasury Board Secretariat signals the Government's determination to provide leadership in moving forward the application of information technology and better information management across the Public Service. In March 1994, the President of the Treasury Board published the Blueprint for Renewing Government Services Using Information Technology, prepared by the Chief Informatics Officer for consultation both inside and outside government.

Planned major initiatives under the leadership of the CIO include:

• locally shared support services;
• shared personnel, finance and materiel management systems;
• business processes re-engineering;
• government-wide systems infrastructure development.

Two further developments affecting individual employees deserve mention. First, in an effort to ensure the successful placement of as many affected employees as possible, as of July 21, 1993, strict controls were placed on external hiring into the Public Service. In the context of the February 1994 Budget, those controls were extended indefinitely. As noted above, another provision in the Budget, again aimed at preserving jobs in the face of overall reductions in operating costs, was a further extension of the statutory wage freeze until the end of fiscal year 1996-97.

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