Proceedings of the Standing Senate Committee on
National Finance

Issue 4 - Evidence


OTTAWA, Wednesday, February 18, 1998

The Standing Senate Committee on National Finance met this day at 5:30 p.m. to examine the Main Estimates laid before Parliament for the fiscal year ending March 31, 1998 (organizational retention and compensation in the public service).

Senator Terry Stratton (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, we must begin as the minister only has one hour with us this afternoon.

Minister Massé, we appreciate your attendance here this afternoon to discuss with us the issue at hand. The matter of compensation came to our attention last October when the first report was aired on the CBC Saturday morning program, The House. More information has become available. I know that you have done some work on this subject.

That is the background. Perhaps you have an opening statement. Please proceed.

The Honourable Marcel Massé, P.C., President of the Treasury Board: Honourable senators, with me today is Shirley Siegel, executive director for the Senior Level Retention and Compensation Branch in the Treasury Board Secretariat. She knows far more about this subject than I, and she is here in case I am unable to answer some of your questions.

[Translation]

It is a pleasure for me to be here today to speak to you about the role of Public Service executives and their compensation. To remain competitive in the years ahead, Canada must clearly continue to rely on the exceptional leadership and innovative spirit of the Public Service. This Public Service must, however, continue to acquire the new skills needed and senior public servants must continue to play a leading role in order to ensure that government programs, policies and services are carried out effectively.

We are currently experiencing a leadership crisis in the Public Service. It is becoming increasingly difficult to recruit and keep the senior level work force that will be needed for the next century. The most experienced and knowledgeable executives are now leaving the Public Service for the private sector. Conversely, very few of the best and brightest university graduates are contemplating careers in the Public Service.

[English]

I should like to say a few words about compensation on a more personal note. When I joined the public service approximately 30 years ago, at that point it was considered a calling as much as a job. It was a calling because the people who were the officials of the senior public service were considered to be rather exceptional role models. Becoming a public servant was considered to be a public service, and to be part of the public service was a subject of pride.

In the last few years I have noticed that there has been a decrease in these characteristics of public servants. There has been a decrease for quite a number of reasons but, in particular, because comparative salaries with the private sector have come down, because there has been more and more criticism of the public sector, there has been in the media a constant harping about the quality of the public service and the quality of the services they are giving.

The result is that right now it is very difficult for the public sector to recruit the best and the brightest. The question of compensation is not the sole issue, but it plays a large role. There is also the question of the good name of the public service.

One thing that we would like to re-establish for the next century is rates of pay that are more comparable to the private sector but, much more importantly, a level of morale in the public service that resembles what I knew 30 years ago when I started, which is a profession that is respected and seen as a calling, a profession that is sought after by people who wish to earn perhaps a lower salary than in the private sector but who wish to spend their life trying to modify and improve the society in which they live.

[Translation]

Demographic trends point to the fact that by the year 2005, between 70 per cent and 90 per cent of senior level executives in the Public Service will be eligible for retirement benefits.

Like all other federal public servants, senior executives have also had their salaries frozen for the past six years. They have also seen their workload increase as a result of downsizing, without any accompanying increase in pay.

[English]

In February, 1997, an advisory committee was established to provide independent advice and recommendations concerning executives, deputy ministers and other Governor in Council appointees. The committee, whose seven members are drawn from business, universities and unions, was chaired by Lawrence Strong, president and CEO of Unilever Canada Limited.

Last Thursday the committee released its first report, which identifies specific priority areas for improving the human resource management of the public service leadership. The most pressing concerns that were identified are the future vision of the Public Service. I have spoken to the need for cultural and human resource renewal, and compensation.

The report recommends pay increases for the 3,500 members for the executives in our public service. The committee's report also recognizes the potential crisis in the quality of the public service leadership which Canada will face in the next millennium through a staggering loss of experience and knowledge in its executive ranks. The committee believes that the failure to act will impose a significant cost on the country's global competitiveness and that this is the most significant public service issue facing the government today.

[Translation]

The advisory committee concluded that executives in the federal Public Service receive less total compensation than their counterparts in universities, municipalities and hospitals and that they are compensated significantly less than executives in the private sector.

The committee recommends that overall compensation for lower-level managers correspond more closely to that of their counterparts in the expanded public sector and private sector when comparable responsibilities are exercised and that the overall compensation level of senior executives exceed the median level in the expanded public sector.

[English]

Over the next four years <#0107> that is, from April 1998 to March 2002 -- the recommendations contained in the report will require an estimated investment of $68 million for federal public service executives and deputy ministers. I mention this figure because this represents 8 per cent of the salary mass. We are looking at an increase in the Public Service in general that will be about 2 per cent over the next four years. Our purpose was that the increase in the salary mass for executives should be on a level with what the bulk of the Public Service receive. This represents an average annual increase of approximately one-tenth of 1 per cent of the government's annual expenditures on personnel costs. This is a relatively small price to pay to ensure that Canada retains its world-class public service leadership.

[Translation]

The committee recommends that the new salary structure be implemented on April 1, 1998, but it also recommends that the new "at risk" compensation package be phased in gradually between now and the year 2001.

The report emphasizes the importance of revitalizing the public service culture and of focusing on renewal and preparations for the next century. This ties in with other federal Public Service renewal initiatives such as modernizing the role of the comptroller, the Boisclair report and the La Relève initiative.

Reviewing leadership in the public sector is a key component of the program launched five years ago to modernize Canada's Public Service.

[English]

I have given a summary of the report and the reasons why the recommendations therein are important, especially at this time. It will be a pleasure to answer your questions.

Senator Bolduc: It is not every day that we have the President of the Treasury Board appear before us, so I wish to ask a few questions about your field of responsibility generally.

In the last four years, you have made a program review for the whole government. I do not know how many programs you have looked at, but I suspect that, except for a few statutory ones, you have looked at most of the government carefully.

Could you give us the data concerning the number of programs that have been abolished or profoundly modified, or new programs that have been implemented and the impact of those three major changes on the budget itself in terms of money and also in terms of human resources?

Mr. Massé: It is difficult to give you a mathematical figure for the programs that have been abolished or reformed. In most cases, we have asked each department to clarify their objectives in terms of results. That is to say, what they are there for and how much money they are spending on implementing each objective.

In a number of cases, they have taken existing programs and reshaped them. Instead of having three, four or five programs -- and, in one case, instead of having 216 programs to implement one objective -- they have given more responsibility to their executives and placed their people into one group with a certain amount of money. They have made the objectives for that program much clearer. The result has been the abolition of 216 programs and the creation of four major programs with clear objectives where the definitions of the tasks of the employees are much wider.

A number of these program renewal initiatives are continuing through 1998-99. What has been done and what is still being done is a rethinking in each department of the purposes of the department; that is, why they are there and includes a clean-up and a concentration on core activities. This has led to a thinning out in terms of both expenditures and people.

In terms of expenditures, the total program spending in 1993-94 was about $120.6 billion. This year, our forecast is that the total expenditures will be about $103.4 or $103.5 billion for the year.

In terms of actual dollars, this is a considerable decrease in the size of government. We calculate that by the end of program review, the total government sector will have been reduced by about 20 per cent. It may be 19 or 21 per cent, but that is the approximate size.

In terms of the reduction of manpower in the Public Service the downsizing at present is set at approximately 39,000. When you look at the figures that Treasury Board sets out in terms of the number of people employed in the public sector, that figure will have fallen from about 230,000 to approximately 195,000. That is a considerable decrease. This is the first time in 50 years that there has been a decrease of that type.

Our aim was to reform government and we were quite right to put the accent on program review. In reforming government, we tried to get the people who knew best about each department, namely, the people employed there, to re-think their role in terms of results and then to concentrate their resources in order to be able to implement their objectives better.

Senator Bolduc: We have the impression that some ministries have been affected in a major way. For example, the Ministry of Transport has undergone a major overhaul. Certain things have been privatized and NAVCAN has become a quasi-departmental corporation. Most of the ports are being administered by municipalities, and the airports are also being managed by municipal authorities.

In some departments, such as Indian Affairs and Northern Development, we do not see much change, although the aboriginals are asking for many changes. I have the feeling that change has happened at a different rate in different ministries. What is your explanation for that? Is it because there was, within the Ministry of Transport, for example, a royal commission which said that things must change?

Mr. Massé: You are quite right that change has differed greatly between departments. In the Ministry of Transport, the basic idea of the reform was that the competition between modes of transport -- railways, roads and air -- had become so prevalent in the economy that maintenance of the old monopolies by the public sector was no longer justified. In fact, although railways are in some aspects still a monopoly, they essentially do not have the monopoly of transport and they have many substitutes that create competition. Therefore, it is not the role of the public sector any longer to control railways. Hence, we privatized Canadian National.

In terms of airports, because there are now a significant amount of airports remarkably close together, and because links between these airports -- Seattle, Vancouver, Calgary and Edmonton, for example -- can be done easily, we concluded that these facilities could be run much better by the stakeholders who could run them according to local needs and as a means of economic development. That meant that in the Ministry of Transport we concentrated the public sector activities on the issues of safety and security, and laws and regulations. You determine what the common interest is and how it should be applied, and then you set out the laws that rule the way in which the private sector will implement, according to demand and market, the various instruments of transport in the country and the various modes of transport.

We had a seven-year plan based on the total redefinition of the role of the public sector in the field of transport and we are continuing to implement it. In the end, that will mean a decrease in resources from approximately 28,000 in the Ministry of Transport to 5,000 or 6,000.

The Ministry of Indian Affairs and Northern Development is very different. We have rethought the purpose of the department and come to the conclusion that the ultimate purpose in the field of Indian Affairs is to give aboriginal people control of the programs that serve them. Therefore, in Manitoba, we are trying to slowly give the administration of all these programs to the aboriginal people themselves.

However, the situation evolves differently in the various sectors and across the country. Some groups are ready to take the responsibilities; others are not. If we try to proceed too quickly, we may put in danger the very reforms we are trying to implement. In my view, this is the type of reform in which you must change mind-sets, attitudes and behaviours, and those take longer to change than it took to privatize CN.

We want to move. We know that there is a long-term objective, but we cannot move as quickly in the Ministry of Indian Affairs and Northern Development as in the Ministry of Transport.

Senator Bolduc: That program review brought about also what I would call an effort in program evaluation. Approximately six years ago, this committee spent a whole year analyzing program evaluation in government and found that it had to be significantly improved.

Are you satisfied with the progress in the methodology of the program evaluation? We have always said here that it is good that the government and managers have their own program evaluators in-house, but we also think that it would be good to have program evaluation done outside of the ministry. It may be done by Treasury Board by comparison with the analyses done by the ministries, but it would be fine to have independent program evaluations once in a while. I know that in our cabinet system it is not usually the rule to do that, but perhaps we could ask the Auditor General or others to look at program evaluation from outside.

I do not say that in terms of partisan politics. Do you not think that there should be leadership from the Treasury Board to have program evaluation done for the President of the Treasury Board, for example, by outside people so that the managers in the various departments would experience a little competition also?

Mr. Massé: The answer is probably yes. There have been considerable changes and improvements in the evaluation itself and our methods of evaluating federal programs, but there is still much improvement which must come. In the private sector, this is an area in which a tremendous amount of improvement is taking place at present.

One reason that we are presently implementing what we call performance by results is that in order to evaluate properly you must be able to have objectives that you can measure in terms of discrete and concrete results.

Traditionally, programs were defined in such general terms that you could always say that you had met your objectives. However, when you define them by results and try to quantify your results, not only does performance become a more measurable concept, but you can even base the salaries of your executives on results, which has not been done before in the public sector.

We are introducing performance by result, which means that even Parliament will be able to look at exactly what you mean and know if there has been progress, which was not common in the past with the evaluation methods we had.

Also, in Treasury Board itself, we have introduced what we call a business plan and a business plan review. Every year we review about one-third of the departments, which all have a three-year business plan. In a number of cases, we do use outside consultants.

For instance, in Treasury Board we looked at the efficiency of the work-creating programs. We are familiar with work clubs which claim that 78 per cent of the people who come to them find a job within 18 months, et cetera. What we do not know is what would have happened otherwise, how long they keep their jobs and what kind of jobs they are getting. We are now trying to obtain information on how efficient government programs really are and whether it is worth spending our money on them. That is really the purpose of evaluation.

We use this information to monitor departments regularly over their three-year cycle. At the same time, we give departments incentives to introduce this performance by result. In fact, this year, for the first time, every department will produce its results-based performance reports by the fall. We will then be able to know exactly what they have promised to do and be able to evaluate if they are using their money properly in order to get the results.

Senator Bolduc: I asked that question because you have a proposition to base the salary on performance, to have performance evaluations and pay accordingly. If the program evaluation is not done well, though, the performance evaluation becomes difficult and we do not know how to pay them except to give them a standard salary.

You said in a speech a few months ago that there will be no more large cuts in government, that the finances of the government are good and that we will no longer have a deficit. Do you not think that a ministry like Public Works could be subjected to the same type of approach as was taken with the Department of Transportation? You have a tendency to group professional people in one department. This is an old and traditional way of doing things, and I am sceptical about it.

Another example would be the laboratories. Many ministries have laboratories. We have the impression that the initiative for the work in the laboratories comes from the researchers themselves and not from a command or a demand made by the deputy minister so that he could put them into competition with outside laboratories. These could be fields of inquiry in the management of the government. I should like to have your views about that.

Mr. Massé: Obviously you have a great deal of interest in these matters. We are keeping these two cases under review.

When I said that there would be no more big cuts in government, that was a macro-economic observation meaning that in terms of the study we had done of government and its size in Canadian society, given the needs and the values and attitudes of people, there did not seem to be any more need to reduce the size of the public sector, in particular of the federal government, as a block of expenditures within the economic life of the nation.

Although I cannot promise what ministers of finance will do in the future, we have now reduced spending from about 16 or 17 per cent of gross domestic product for the federal government to the low of 11.8 per cent of GDP. We have reduced enough, given the levels of taxation and competition with other countries in the world. Clearly, we should not reduce the size of the government sector any further. The Reform Party differs in their views of this, but this is the right size for me.

That does not mean that all the parts are the right size. A number of reforms may occur at different rates. You have mentioned a comparison between Transport and Indian Affairs, which is a good example. Transport will continue to shed a number of its previous activities and remain with a core responsibility; it will take a while for Indian Affairs. The Ministry of Indian Affairs and Northern Development may have to grow before it becomes smaller. At present, there are responsibilities in that field with which we may not have entirely dealt.We may not yet be in a position where we can give aboriginals the function of dealing with their programs and eventually achieve a method of paying for it through their own means. These are reforms for the future.

In terms of Public Works, I will not comment any more about that. There are many areas of improvement.

Senator Lavoie-Roux: I agree.

Senator Bolduc: You closed the academy in St-Jean. That hurt at the time, and it still hurts me, because it was recruiting French-speaking young officers for the armed forces. Do you have any recent statistics about how the army succeeds in recruiting francophones? If not, perhaps someone could provide that information later.

Mr. Massé: I will obtain that information for you. The last time I asked about that was one and a half years ago, however I will provide up-to-date statistics.

Senator Kinsella: What is your sense of the optimum size of the public service of Canada as we near the end of this millennium? Do you think we are roughly there?

Mr. Massé: This is a tricky question. At present, we define the public service under Treasury Board as being 195,000 people. I could probably say a number in that range would make sense for the next few years, except that, in reform of the government, we are trying to determine the correct structure for a department like National Revenue or the passport office compared to Finance or Treasury Board.

A number of countries around the world have tried methods to keep the so-called public service as a core public service, and they create structures that are not departments. We call them alternative service delivery agencies. They differ amongst themselves and have a different relationship with parliament and ministers and have different levels of freedom in terms of how they exercise their responsibilities. At the extreme, some may be commercialized but not privatized. That means that they operate according to commercial means but they still have some objectives and responsibilities given to them by the public sector, usually in the case of monopolies or oligopolies. Others will be privatized.

The distinction between the public and the private sector is slowly becoming grey. The easy answer to your question is: The public service will remain between 180,000 and 200,000.

The actual question is that diversification in the means by which the public sector gives its services to the public must continue so that each alternative service delivery agency is better adapted to the type of service it gives.

Senator Kinsella: That is understandable. The culture of the public service, or the core public service that is really in the business of public service -- that is, the service of government -- may be providing the oversight of the delivery of services or activities that may indeed be delivered by the private sector.

Do you think it is time for us to revisit that issue of the culture of public service to distinguish it from the culture of the marketplace?

I noticed in Mr. Strong's study, which we examined in preparation for your visit, that he uses terminology of wanting to compare a public servant's remuneration to that found in the private marketplace. Do you share my value judgment that public service is what the term implies? It is a different activity, it is serving the public. The public service may be in competition with the private sector to get the new graduates from universities. All these other questions, it seems, hinge on how we respond to the basic question of remuneration.

Is public service just that, or have we allowed it to be overtaken in the past 10 years with an over-emphasis of comparison with the private sector?

Mr. Massé: The public servants, in terms of their responsibilities, are very different in many cases from the private sector. You have been in the public service, too.

The role of senior public servants is much more difficult because they serve many masters and are also not only guided by the bottom line. I do not suggest that all businessmen are guided only by the bottom line, but that is their main consideration. They do not stay in their jobs for very long if they are not guided by the bottom line.

In the public service, questions arise about the saleability of the policies put together by civil servants. They face questions about attitudes created in the public by programs which are put into place, for example, human resource programs, which can create dependency. After a number of years, we recognized that we were creating a trade that was socially negative. Therefore, we had to reform our own programs, not because they were not giving the services required, but because they were structured to create a dependency, a trait which should not have been created by the public service sector.

That understanding of societal issues, that responsibility for thinking ahead and structuring programs in a way which positively affects social behaviour, that is an aspect of the public service which is not seen to the same extent in the private service.

At the same time, many required skills for the public sector, such as those of computer analysts, are exactly the same skills as those required in the private sector. When we recruit those people who must apply identical skills, we should apply market criteria to determine how to reward those people for the work that they do.

However, once you get into the EX categories, which are the subject of the Strong report, aspects arise more often which specifically relate to the public sector. In other words, they involve an understanding of society and its way of evolving. They imply a certain view of history and a certain view of governance which is not a private sector view. Different skills are required. Those people must have a desire to modify their society in a certain way. That same requirement applies to politicians in most cases, and I have a positive view of politicians. I do think of senators as politicians.

For these positions, market criteria may not fully apply. The Strong report talks about a considerable difference, sometimes up to 50 per cent, between the top civil servants and the CEOs of large enterprises. I am ready to accept that. Job satisfaction is not created only by money. Your job satisfaction as a top civil servant comes from the fact that you feel you are participating in change in your society.

Senator Kinsella: Do you think there might be some merit in questioning the dichotomy which is in place between the management cadre, that is the EX categories, and either the professional or technical categories? Is there some merit in our revisiting the categorizing of our public servants into "a management cadre" of the EX group, and "others"?

You have all of the collective agreement processes which must apply. Perhaps my question is not sufficiently tested by reality. I do wonder whether, in building the public service of the 21st century, we should revisit the categorization of public servants.

Mr. Massé: The answer is, yes, in a way. We are trying to introduce the universal classification which would permit us to grade people better than in the present classifications.

I understand the purpose of your question. There are a number of categories, economists, for instance, or lawyers, where you can use the private sector criteria in order to define the function and pay the salary. Sometimes these highly specialized people may be paid more than the executive category. I have no problem with that because the market criteria will give you the comparison criteria and the value of their services as set by society through the marketplace.

By the way, program managers, the PM class, is six or seven categories below EX class. Program managers play a management role which is very close to the management role that you see in private sector enterprises. There, also, you can compare the responsibilities they have, how many people they supervise, the budgets which they administer, and you can set criteria for rewards which are very similar to the private sector.

It is at the EX level that a different type of judgment on decisions and programs is exercised. As you go up in the EX category, more and more, the recommendations and advice that you give must reflect a wider view of society, rather than the specific skills that you have which can be compared to the private sector.

There is a fundamental difference between most of the categories before the EX level and the EX level itself. Only at the EX level do you have these special demands on people that require different types of understanding and responsibilities and a different type of reward.

The Strong group makes that basic distinction. You will remember that they say the difference between the private sector and the EX is about 4 per cent and that the two should be almost equal and leave it at that.

Mr. Strong and his group recommend a different treatment of people as you go up. That is justified because the nature of the work changes at that level.

Senator Forest: You mentioned, for example, the privatization of CN. I happened to be on the board when it was privatized and I was on the board until I came to the Senate. During that time, we saw tremendous downsizing in the number of employees, from approximately 32,000 down to 22,000. It is now below that level. The bottom line is great, but how far can we go without that being counter-productive in terms of staff morale and safety?

As I read through these reports, I saw a real concern about the morale of our people in the public service. Not only have their salaries been frozen, but they are also doing double duty, in a sense, because so many have been let go. When we see how many of our brightest and best are leaving, I wonder if we have gone too far. We have met our targets, but have we gone so far that it will cost us more to rebuild our public service than if had we done a little less cutting? That is my concern.

Mr. Massé: These are always difficult judgments. No one has the absolute truth in this field.

In terms of CN, the decisions taken seem to be justified by the market if you look at the results. My feeling is that what has happened is probably about right.

In terms of the general decrease in the public service, in some areas there is no doubt that the reforms may have gone too far and will have to be brought back to a better level. This will vary from department to department. In other areas and departments we have not yet gone far enough. In other words, depending on the group of people you find in a department -- and these are pretty coherent groups of thousands of civil servants who have developed a certain way of looking at their department -- it takes longer for the changes to happen. In some areas, we still must go further than we have. There are areas where the changes have shown us that we must operate differently and perhaps have different numbers of people.

I have no desire to abolish jobs for the pleasure of abolishing jobs. This is not my purpose. The purpose of cost recovery was not to get additional money that would permit us to continue with the same activities. What has happened in transport with the shipowners is that once they were charged costs, they came to us and they said that if they were to be charged for navigational aids, they wanted to be able to tell us how many they needed and of what quality. In fact, one company exporting iron ore throughout the world needed ice breakers to help them on the St. Lawrence River during the month of January. They told me that if they had to pay for it, they did not need 30 days without ice. They bunched their ships together, shipped the whole thing in three days, and paid one-tenth what it would have cost for the ice breakers. Things are not that simple, but that is a good example.

In terms of navigation aids, they told us, "You can now use a satellite technology that means at the extreme you could eliminate all your navigational aids and have a very different price for us." We formed groups of stakeholders, together with civil servants, who now discuss not only what the Coast Guard does, but the technology it uses and what kind of service it gives. We are now beginning to reduce costs immeasurably, giving the benefits to those who would have paid the costs. Finally, we have a much better way of determining what service is to be rendered. Is a Chevrolet or a Cadillac necessary? What technology is to be used? What rate of change in the technology should take place, and who is responsible for part of the costs?

In these areas, we will end up with a Coast Guard that is much smaller, but we could not have done it without the reform itself.

Senator Forest: There have been press reports of the large increase that has been recommended for the upper echelons of the public service. We know that in order to keep good people, we must pay those kinds of costs; that is the demand of the market place.

At the lower level, what is the comparison between the people in the public service and their counterparts in the private sector? Is there that much of a differential?

Mr. Massé: In most areas, it is very close to market rates.

By the way, when I received the report and saw the increases recommended for senior civil servants, I asked exactly that question. I even repeated it today to my officials. I asked them to give me the data to justify a statement that in the bulk of the public service below the EX level, the rates being paid to our various categories of workers under collective bargaining is at or close to the market rate. I was assured -- and I have looked at some of the data, but they will get the rest of the data -- that we pay rates that are either at or higher than the market rates in a great majority of categories.

[Translation]

Senator Lavoie-Roux: Can you tell me what psychological effect this has had on staff who have moved on to other sectors of activity? Have they received any help?

Before Christmas, I was returning on the bus to Montreal and someone recounted to me a rather demoralizing tale about people who have been affected by job change.

Mr. Massé: Every individual reacts to change differently. Let me tell you about something positive that happened in my riding. Several months ago, on St. Joseph Boulevard, I encountered a former public servant who crossed the street to talk to me. I was on my way to the shopping center. This is what he said to me: "Mr. Massé, I lost my job because if you". I was sorry to hear him say that, although I was not exactly expecting any compliments either. However, he also said this to me: "Losing my job was the best thing that ever happened to me.

I was intrigued. He proceeded to tell me his story: "I was a former EX-1 with the Department of Natural Resources. I was more or less satisfied with my job and I had decided to stick it out until retirement. I am 53 years old and I took advantage of the early retirement program. I have always enjoyed automobiles. One day, as I was walking along St. Joseph Boulevard where many car dealerships are located, I stopped in at four places, and asked if they needed a salesman. The first three dealerships said no, but the fourth decided to hire me on commission. I have been working there for four months and I have never been happier in my life. I enjoy my work. What with my pension and my earnings as a salesman, I make more money than I did before."

This is one specific example. It springs to mind because it is a positive experience and it happened to someone in my riding. We have to remember that the vast majority, over 85 per cent, of those who left did so voluntarily under a government program. This means that they benefited either from early retirement, or received a cash out equivalent to anywhere from 12 to 18 months of salary. Some quite simply spent their cash outs and found themselves without a job. Some of these people are no doubt bitter about what happened to them.

The vast majority found work elsewhere, and invested the money they received. They managed to find a job for which they were qualified.

The government was concerned about minimizing the number of problems that people encounter when they are forced to change jobs.

Each department has on staff psychologists who have helped employees a great deal. Generally speaking, in terms of personnel management, departments have shown a remarkable amount of compassion.

Relatively few negative stories have been reported by the local newspapers and media, even though over 10,000 people in the region lost their jobs. This is evidence that the transition has gone very smoothly.

Of course, some employees did encounter personal problems. We have tried to minimize the number of such cases.

Senator Lavoie-Roux: My seat mate on the bus from Ottawa to Montreal was a psychologist. I forget what her exact title was, but that is for the best, because you could perhaps identify her. She was quite concerned about the number of people experiencing problems adapting to their new situation. I understand that support services were available to them. However, these services will no doubt disappear because there will be no further work force reductions.

Mr. Massé: There will always be re-adjustments in the public service, even if there are no further work force reductions. The downsizing process is just about over. Some minor adjustments remain to be made in 1998-1999. However, as I mentioned, I do not anticipate having to resort to anything like a program review in the next few years.

Senator Lavoie-Roux: Those employees who leave seem to be happy. However, if we worry too much about handling the people who are leaving with kid gloves, this is going to cost us money in other ways.

[English]

The Chairman: You have now been here for one hour.

Mr. Massé: The time has passed quickly.

The Chairman: Yes. May we prevail upon Ms Siegel to remain here for some questions? Thank you for attending here this afternoon, Mr. Massé.

Mr. Massé: Thank you.

The Chairman: On page 7 of the advisory committee's first report, the last sentence said, in so many words -- and Senator Bolduc pointed this out -- that since several human resource initiatives have fallen well short of expectation, it is critical that current efforts be translated collectively into tangible results. I suppose that means, in other words, an implementation plan.

I wish to go back to the focus group study done by the Public Management Research Centre. Senators Forest and Lavoie-Roux referred to the issues that are difficult to deal with. For example, on page 13 of the Public Management Research Centre focus group report on leadership, it states:

Executives expressed disappointment in the lack of leadership in current senior management positions. It was felt that senior managers lacked vision, vigor, passion, and, specifically, decision-making abilities. In today's changing environment, it was viewed as imperative to have individuals leading the Public Service who have the ability and commitment to inspire and communicate a vision to their staff.

I should like to hear your views on how you are addressing that issue and how you can measure that. This is not something that will be a short-term measure, but, in implementing the plan, how will you deal with this issue?

Ms Shirley Siegel, Executive Director, Senior Level Retention and Compensation Branch, Treasury Board Secretariat: The issue of leadership is a critical one. The focus group reports that you looked at are views of specific individuals based on their own experience.

The Chairman: I understand that. Nevertheless, all of us around this table have heard about that specific issue, by hearsay for the most part. However, when you read it, it becomes something of concern.

Ms Siegel: This is something that gripped the committee because of the number and quality of people who have left the public service already, for whatever reason, and gone to various sectors of the economy. That need gripped them. That is why this first report, focuses on what they thought were the highest priority issues, namely, renewal in the public service, the need for clear vision and leadership to set that vision, and the need for appropriate compensation. You must be able to retain not only the quality of leadership that is important to every one of us as executives, but also be able to attract it.

In the report, they tried to present a strategy for dealing with that issue of keeping that leadership group which all of us would say is important for the future. That is why they emphasize those three elements.

The Chairman: The compensation factor offers only short-term satisfaction. Once they have had that for a few years, that may not be enough. This ties to page 15, dealing with espousing risk-taking through risk-averse structures and processes. While the system wants the senior levels to take risks, when they do and fail, they are sent to Coventry. That would appear to be a problem.

Again I ask the question: If you want a new senior level bureaucracy and you want them to take risks and, as a result of taking risk they fail, how will you get past that fear?

Part of the problem is they will not take risks, they will not gamble, they will be very conservative and you end up with a stifled group.

Ms Siegel: In part, that is what the committee was getting at when they asked that a large part of the compensation be based on a variable, at-risk portion. They were concerned that in establishing an at-risk portion of compensation that you have measurable, tangible objectives that could be used and then you are reinforced, through compensation, for having achieved those. You get, in some cases, what you reward. What they saw was a need for a new performance management culture and establishment of a clear and better relationship between senior managers and the people who manage them, and then setting in place a compensation program that reinforces that and measures true results and compensates people appropriately.

Part of that section of compensation was designed to get at some of those issues and to reinforce those kinds of behaviours.

The Chairman: Would risk-taking be encouraged?

Ms Siegel: If that is what is required in a particular job, yes. It is based on setting objectives that are appropriate to the business of the department.

The Chairman: Are those objectives mutually agreed to?

Ms Siegel: The plan has not been fully developed, but that is the idea, that they would be mutually agreed to between the supervisor and the executive, as it were, in this case. There would be tangible results that are looked at and that you would be compensated accordingly when the plan is fully developed. What was important to the committee as well is that you put trading in place so that you change the culture. Training is not a panacea for everything, but you invest considerably in terms of training people, in terms of how to assess results and how to set targets, so that you have a greater chance of success.

The Chairman: The minister alluded to the fact that when the senior levels of employees are removed by retirement in the coming years, and I quote from page 15 under "Youth":

...there will barely be a skeleton of dedicated employees left to lead the Public Service in the next century. In addition, it was noted that the federal government, in its efforts to reduce public spending, has failed to balance the need to downsize against the need to supply the organization with new blood.

That is the youngsters coming in. How are you looking at that challenge?

Ms Siegel: Again, I do not wish to emphasize compensation too much. However, the ability to attract new blood is partly a function of the ability to compensate people for skills which are desired. Compensation is part of it. What they saw is a critical erosion or a potential erosion in the next number of years. When the committee saw those numbers -- and I can still see their faces when they looked at those figures and saw the demographic picture -- and they were very struck by that. They said you need to be able to attract and retain a quality leadership and part of that is compensation. There are many other things, there is setting the vision so people have a sense of where the organization is going. In large part, it is compensating them so you can attract and keep them there.

The Chairman: I also believe there is a huge challenge in changing the attitudes of the youngsters. When they look at coming to the public service it is held in low esteem and the biggest challenge. It is a challenge to raise that esteem in the public's eye to attract those people because higher salaries are possible in the private sector from Hewlett-Packard, for instance, or one of the other desirable companies to work for, whereas the public service is not held in that same level of esteem. That is my concern.

Ms Siegel: That is why they do not only address compensation, they address public service renewal, they address the issue of vision. That is important. When younger people wish to join the public service they need to see what a career in the public service means and where we are going. That whole issue around the vision is important. As I say, compensation is only one aspect but it is a critical aspect because we know who we are competing with.

The Chairman: I am assuming Mr. Strong's committee will meet and submit a report in each subsequent year?

Ms Siegel: Yes. They have identified subsequent work in this report and their mandate is for three years, so they are here for the long haul. They are very committed and have devoted an inordinate amount of time to this exercise and anticipate being there for the three-year mandate to continue their work.

Senator Kinsella: On page 26 of the report they give a number of reasons for the managers leaving the public service. I wish to focus our attention on that particular phenomenon of the loss of the management cadre to the public service. My question is this: How much of the loss of the EX category or the upper SM categories do you think would have been due to the attractive severance package that was made available? Was there any measure made of that?

The reason I ask the question is that, as the minister mentioned and as we know from experience, a large number from the management category who did leave, left Friday afternoon and on Monday morning they were a consultant. The minister alluded to the person he met in the shopping centre. They had a severance package and they were able to use that.

To what extent are we losing people? Part of the concern is that we are not able to retain our better managers.

Ms Siegel: For the large part, the cuts, or the people who have left, have been based on the program review reductions and the shifts in terms of structure of organization. Many people have left because of those reasons. When departments looked at what changes they needed to make because of program review, certain programs were affected and those people were also affected.

I would not argue that some good people left because they had other opportunities and they could take advantage of the departure packages. However, it is not only that. Compensation is just one thing. There are many good people who are still in the public service. Compensation is only one factor; it is not necessarily a determining factor. People were impacted by program review cuts and parts of organizations do not exist any more and those people who were in those organizations had the opportunity to take advantage of those packages which facilitated their transition to other things. There are the happy stories and there are also stories of people who were not as happy.

Senator Kinsella: I have spoken to many former colleagues in the public service and they said they lost the people they did not wish to lose. People they did not want to see go took the buy-outs.

Turning to another issue which you have alluded to, there are things other than compensation. What role does the Canadian Centre for Management Development play nowadays? How important is that centre to the management group as something to say, "Well, gee, we have an institution like that and that is important?" What is it doing?

Ms Siegel: They have a large number of courses which are mandatory for executives in terms of entry into the group. They still play a key role in terms of development of executives. They have a number of innovative sessions with private sector leaders, they bring in speakers on a variety of timely subjects. They have a key role now.

Development and learning, those are concerns which have been raised by executives. It is something which must be addressed. It is not only one agency that can serve the needs. CCMD has a key role, departments have a key role in terms of fostering development and paving the way for executives to take courses and to experience other assignments, be it in other jurisdictions or the private sector. There is much that goes into that. CCMD has a key role.

Senator Kinsella: Do you know when the CCMD was last evaluated?

Ms Siegel: I cannot speak to that at all.

Senator Kinsella: The Ottawa Citizen, in an article on February 13, 1998, makes the statement that the package -- and this is referring to the package for the senior managers' compensation -- is expected to increase the $260 million salary bill for its 3,300 executives by 8 per cent over the next four years. Are we talking about 3,300 executives?

Ms Siegel: Yes, approximately 3,200.

Senator Kinsella: The present package would cost $260 million?

Ms Siegel: The investment, in terms of what the Strong report puts forward, is an additional $68 million.

Senator Kinsella: That is over four years?

Ms Siegel: Yes.

Senator Kinsella: That is about $18 million a year?

Ms Siegel: It is $17 million.

Senator Kinsella: That is about the budget for the Canadian Centre for Management Development.

[Translation]

Senator Ferretti-Barth: I would like to know if the La Relève program introduced by the Clerk of the Privy Council, Mrs. Bourgon, is still in place and what kind of results have been achieved? You talk about those who have left. Has this program been helpful in terms of recruiting new public servants?

[English]

Ms Siegel: That program has been important. It is a key initiative. It has resulted in a significant emphasis on human resource planning and all the issues we are talking about. It is still ongoing. It is a critical priority.

In the report, Mr. Strong and his committee have recommended that you integrate the whole gamut of initiatives -- that is, the compensation and all the things that have been proposed -- with the priorities of La Relève. Everything is being moved forward with a certain rhythm and integration. It is very much alive. La Relève does not only deal with executives, it is for the renewal of the entire public service. There are many important initiatives that have resulted from La Relève and will continue such as issues around pride and recognition and improving the sense of pride and recognition.

[Translation]

Senator Ferretti-Barth: The advisory committee was very critical of this program. That is why I am asking you today if it is still in place. If so, have the results been positive? Will the program be used again in the future?

[English]

Ms Siegel: The La Relève initiative is not an initiative which has a start and a finish. It has ongoing renewal. This is part of it. There are many departmental and central agency initiatives which support that. There are ongoing task forces and committees which are coming up with new ideas on how to renew the Public Service. It is very much alive. However, it must come together in one integrated package.

The advisory committee report speaks to an overlap with La Relève or how they can be seen to clarify their mandate, but it is an important part which fits well with the renewal and the revitalization under La Relève. I still find it exciting. Much has been done and much more must be done.

The committee adjourned.