ARCHIVED - A Review of Business Planning - Number 2

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Executive Summary

Many Business Plans were, in our opinion, excellent statements of departmental strategy - succinct and cogent. In general the standard was high, given the short time available to develop the Plans.

The concept of Business Planning is still evolving. We found two distinct visions - the first emphasized "adjustment" and the second focused on strategy for the core business of the department. One of the strengths of the first cycle was that departments were free to take whatever approach best fit their needs.

Including flexibility requests in the Business Plans was worthwhile when departments linked the case for the flexibility to the needs of a core strategy. However, there was a mis-match of expectations whereby some departments expected swift decisions on flexibilities. In the future, it would be more realistic to invite flexibility requests in the Business Plan as an agenda for discussions with central agencies that would take place over the following year.

Business Planning improved many departments' visible commitment to results. The best Business Plans made commitments to fiscal targets, re-structuring, and improvements in services, and stated how and when performance on these will be assessed.

Experience from the first cycle indicates that the best plans were presented by departments that had been actively engaged in strategic planning during the previous Fall and Winter. Therefore we suggest that the development of the Plans should be started earlier in the fiscal year.

Individual presentations by departmental Ministers and Deputy Ministers before the Board were a successful innovation. In future years we suggest that an agenda of 5 to 7 presentations would maintain the interest of departmental Ministers and moderate the work-load of all parties.

The TBS "single-window" team approach to reviewing Business Plans was effective, and the model is a good one to follow in the future.

The Ministers and Deputy Ministers who presented their Plans in person to Treasury Board received feedback through that process. However, other departmental managers are keen to have more feedback. They are complimentary about the work of Secretariat staff during the development phase of the Business Plans, but are concerned that feedback was too sparse after the Plans were submitted.

Some departments dealt with confidentiality by having two versions of the Business Plan, one that was submitted to Treasury Board and contained material that was confidential to Cabinet, and a public version that did not. Other departments, taking a more traditional line, held the whole Plan confidential. This limited its usefulness to management.

Recommendations

Our recommendations for the second cycle of Business Planning are:

1. The focus should be kept on strategy and performance commitments. Both departments and Secretariat should resist the temptation to load administrative detail in the Business Plans, even as appendices.

2. The substance of the Business Plan should be widely communicated and used within the department (apart from material that is inherently confidential to Cabinet).

3. The annual call letter for Business Plans should go to departments as early as possible, tailored to specific issues or themes in those cases where individual presentations to the Board are invited, and noting government-wide priorities that should be reflected in departments' Business Plans in the coming planning cycle.

4. Invitations to departmental Ministers to present the department's Business Plan to the Board should be selective.

5. Business Plans should contain performance commitments in each of three areas: budget targets, structural adjustments within the department, and performance on key services. There should be milestones against which performance and progress can be assessed.

6. Departments should have a single up-to-date statement of strategy which should be communicated consistently in all documents, including Business Plans and Outlooks.

7. Departments should use the "lines of business" defined in the Business Plan to organize their operational, human resource, and financial planning within a single consistent management framework.

8. The "one window" core team concept within the Treasury Board Secretariat for dealing with the Business Plans should be continued and re-inforced by training the team leaders in managing complex teams.

9. A new Business Plan should be prepared by a department whenever circumstances change substantially. All should provide a Plan to TBS each year, although only selected ones are invited to present individually to Treasury Board.

10. Treasury Board Secretariat should provide as much timely feedback as possible to the departments on the substance of the Business Plan and on the quality of their planning exercise.

11. Within the departments, the Business Plan should be separate from, and guide the detailed Operational Plan.

12. In the second cycle of Business Planning, and in the longer term, the 'flexibility' concept should evolve into a broader 'enabling role' for TBS.

1. Introduction

1.1 Introduction to this Study

This is a report on Business Planning in the Government of Canada. The review team was instructed to examine Business Planning in 1995 from the points of view of Treasury Board and the departments and agencies of the Government of Canada, and to made recommendations for the future. We collected information from thirty interviews with staff of the Treasury Board Secretariat and from senior managers of ten departments, and examined 53 Business Plans that had been submitted to Treasury Board.

1.2 The Context

In 1994, there were several new initiatives that are contextually important for Business Planning. In February, 1994, the Government introduced changes to Standing Orders of the House of Commons that expanded the scrutiny of parliamentarians beyond one "estimates year", and created a need for departmental information on expenditure trends and priorities. This led to an effort to reform the Estimates which has not yet concluded.

From September 1994 to January 1995 a Program Review was coordinated by the Privy Council Office. To restructure departmental operations within reduced budgets, Ministers were required to present a plan to Cabinet. Treasury Board Secretariat provided an analysis of the departmental proposals from a Government perspective, and undertook some analysis of 'horizontal' issues that cut across department boundaries.

In January, 1995, Cabinet agreed to a revised Expenditure Management System. Changes included the introduction of Business Plans submitted to Treasury Board, and departmental Outlooks submitted to the Standing Committees of the House of Commons.

1.3 The Concept of Business Planning

The concept of Business Planning is still evolving. The learning process is not finished nor will it be for some time. This is understandable and positive. We believe that the process will best serve the Government of Canada if it remains flexible and creative.

However, because Business Planning is still in a learning phase we were challenged by having found two distinct visions of Business Planning in the course of this Review.

The first vision of the Business Plan emphasized "adjustment". It focused more or less exclusively on large cuts and the structural changes needed to accommodate those cuts. The moment was right for this emphasis in Business Planning because Program Review 1 had just finished and many departments had to make major adjustments in their size, mode of operations and, sometimes their mandate. This approach also had the advantage of emphasizing that Business Plans should be short and strategic, which was an important message in the initial phase of establishing this new instrument.

The corollaries of the "adjustment" vision of Business Planning were that departments should receive attention in proportion to the magnitude of their down-sizing and re-structuring, discussions with the Treasury Board Secretariat and with the Treasury Board should emphasize the adjustments rather than the core business of the department, and not all operations of the departments would necessarily be addressed in the strategy of the Plan if they were not subject to major budget cuts. The "flavour" of the Business Plans written in this mode, was that of a report to Treasury Board on adjustment rather than a strategic plan that the department might have written notwithstanding a central agency requirement.

The second vision of the Business Plan emphasized strategy for the core business of the department. It was more comprehensive (although not necessarily longer or more detailed) and longer-term. This vision emphasized the fundamental need of the department for a concise statement of strategy for the core business (whether or not the department was facing major budget cuts) because the economic, technological, social and political environment was changing so rapidly that strategy is crucial for all departments. The main purpose of such a Plan was fir management use within the department, and the fact that it was submitted to Treasury Board was of secondary importance.

The corollaries of this second vision of Business Planning were that: all departments should make and submit Business Plans since they all face the same environmental changes; a wider range of Business Plans might be discussed directly by the departmental minister and deputy minister before the Board; and the focus of the Plan should be on strategy for the core business, treating adjustments as they impinge on that strategy.

We do not wish to exaggerate the differences between these two visions of Business Plans. In practice, many of the Plans contained elements from both. Nevertheless, we found that the choice of "best practices" in Business Planning depends a good deal on which of these two visions of Business Planning is taken to be primary. When in doubt we have relied mainly on the second vision of Business Plans which sees them as mainly as a means of meeting a departmental strategic planning need, and incidentally to be a good vehicle for discussion with Treasury Board about the core business and strategy of the department.

The reason why we have chosen to rely most on this emphasis is that we read this as the long-term intention of Treasury Board as expressed in the documents on Business Planning. As well, we expect that Business Planning will naturally gravitate to this approach in the future. Cycle 1 was largely adjustment. Future cycles are likely to consist largely of strategies for the core businesses within new circumstances (re-inventing government).

Our working definition of Business Planning then, culled from many documents and interviews, is as follows:

1.4 Business Planning Cycle One

The President of the Treasury Board announced the reform of the Expenditure Management System on February 15, 1995; the Treasury Board Secretariat issued a call letter for Business Plans to about 90 departments and agencies on March 7 with a TBS guide entitled "New Directions: Departmental Business Plans and Outlooks". Departments were asked to submit their Business Plans to Treasury Board by April 15.

The Treasury Board Secretariat formed 31 "core teams" to present a "single window" to each department to approach the Secretariat on Business Plans. The teams were led by Division Directors from the Program Branch, and staffed by specialists from other branches.

Treasury Board staff circulated draft papers among senior financial officers, held workshops at the Canadian Centre for Management Development and across the country, and made presentations to the Treasury Board Senior Advisory Committee (TBSAC), the Public Service Council, the Financial Management Institute, to Privy Council Office, and to the Standing Committee on Industry.

The submission date was April 15. This proved unrealistic in Cycle One, given the time required by departments to understand and respond to the new planning system. Only three Business Plans were formally received in April. Most were submitted in June and July. (See Figure 1). Individual presentations of Business Plans to Treasury Board Ministers started on May 11 with a presentation by Transport Canada, one of the "pilot" departments with which Treasury Board Secretariat had worked closely to develop and test the Business Plan concept.

Plans from five of the "Most Affected Departments" (Transport, Industry, Environment, Natural Resources, and Public Works) were discussed by the departmental minister and the Treasury Board ministers in meetings during the summer. On July 25, another 40 Business Plans were presented to Treasury Board in a single aide-memoire.

Additional individual presentations to Treasury Board ministers are tentatively scheduled for the Fall of 1995, including the Treasury Board Secretariat, Finance, Agriculture & Agri-Food, Fisheries and Oceans, Canadian Heritage, CIDA, National Defence, and Foreign Affairs & International Trade.

1.5 The TBS and Business Planning.

Treasury Board Secretariat (TBS) reviewed the Business Plans in Cycle 1, and Treasury Board Ministers received and discussed them. However, the Board did not approve the Plans in a formal sense, although Treasury Board and the Department of Finance also wished to ensure that departments and agencies have a viable strategy to make the adjustments needed to meet their fiscal targets.

An objective of the Treasury Board Secretariat was to promote creative strategic thinking by the executive managers of departments and agencies, along service or business lines, and to promote intelligent re-allocation of resources according to the logic of a strategy, rather than according to simplistic across-the-board cuts.

As well, the Treasury Board Secretariat had in mind that its staff would benefit from a "window" into the rapidly-changing businesses of departments and agencies. Transaction-by-transaction submissions to the Board are too fragmentary to provide sufficient opportunity to develop an up-to-date and comprehensive understanding of the businesses of departments. As well, some Deputy Ministers we interviewed made comments that indicated that they thought that such an understanding by the Treasury Board Secretariat was important. For example:

In the same way that business planning cuts across the vertically organized "silos" in departments, it also cuts across the Branches of the Treasury Board Secretariat. To meet this challenge, the Secretariat instituted a "one-window" system for dealing with departments and agencies on their Business Plans, wherein a team of analysts for each department, drawn from all of the TBS Branches, dealt with the Plan. The purpose was in part to offer a simple and well-organized point of contact for the departments, and in part to enable members of the team to develop a more comprehensive understanding of the business of the department.

Another objective of the new "Business Plan" instrument was also to simplify the requirements of the Expenditure Management System. TBS stated that it replaced three earlier instruments: the Multi-Year Operational Plan (MYOP), the Shared Management Agendas (SMA), and the Increased Ministerial Authority and Accountability (IMAA) regime. However, the 'replacement' was indirect.

The first call letter for Business Plans stated that "The Business Plan is not meant to include all the other reports the Secretariat requires." The Business Plan does not replace the performance reporting sections of Part III, the financial planning exercise leading to the Main Estimates, nor the detailed operational plans that departments and agencies need for their own internal management and control.

1.6 The Departments and Business Planning

Departments approached business planning in different ways, and produced plans that had different formats and content. One of the strengths of the first cycle of business planning was that departments were free to develop a Plan to fit their needs, rather than being required to work to a standard format.

In the first cycle, some departments used the development of the Business Plan, and in particular the definition and description of "lines of business or service lines", as an opportunity to think strategically about the mission of the department and to cut across the "silos" or "stove pipes" of day-to-day branch administration. Departments are now at different stages of internal integration of Planning, Finance and Operations. In some departments, the 1995 Business Plan was an entirely top-down exercise, directly involving only a small group of planners. In others, the "buy-in" of managers was more extensive. Several executive managers mentioned that a long-term objective for them was the integration of Operations, Planning and Resource Management around lines of business. They expected this process to take time, probably several iterations of the annual business planning cycle.

As well, in the best Business Plans there was an attempt to move beyond an "inputs orientation" which in the past has been common in much government planning. Business Plans based on lines of business having strategic coherence are an important step toward management by results. Specifically, many departments see business planning as an opportunity to:

• improve results-based decision making;
• deal with strategic planning, resources and operations in an inter-connected way; and
• re-dedicate the department towards providing excellent service.

Some departments used Business Planning to communicate with stakeholders, including the department's own staff, central agencies, Cabinet, Parliament, and the public.

A further departmental objective was to achieve new authorities (flexibilities); and a simplification of the departmental inputs to the Expenditure Management System.

2. Best Practices in Business Plans

2.1 Adjustment or Core Business Strategy

In Section 1.3, we discussed the different "visions" of Business Planning, with one emphasizing short-term adjustment and the other emphasising longer-term strategy for the core business of the department. In practice, the Plans were not entirely one or the other. Even those submitted by the "most affected departments", which might have been expected to focus entirely on adjustment under the circumstances to some degree addressed both . The link to Program Review 1 was good in most Plans. Structural and resource changes, and expected changes in the operating environment were linked to mission, priorities and direction. This essential link between strategy and the core mission of the department should be maintained. In regard to Business Plan 2, one deputy minister said to us:

2.2 Simplicity

Best Practice 1: The best Business Plans were service and adjustment-focused, linking strategy to the vision and mission of the department and to major service goals within fiscal constraints.

Many Business Plans were, in our opinion, excellent statements of departmental strategy - succinct and cogent. In general the standard was high, given the short time available to develop the Plans. The Treasury Board Secretariat asked that Business Plans be short and simple to keep them focused on strategy rather than operating detail and to make them manageable reading for Ministers. Since some Business Plans are presented by the Minister and the Deputy Minister in person to the Treasury Board, they cannot be unwieldy.

However, there are pressures for the Business Plan to expand. One Deputy Minister said to us in an interview that...

Pressures to expand the Business Plan are evident in the Treasury Board Secretariat as well. For example, departments have been asked by the Secretariat to include a list of prospective capital projects in the 1996 Business Plan. In most cases such a list provides operational rather than strategic information.

In general, we believe that most needs for the consolidation of information and instruments within the Expenditure Management System, and the Secretariat's need for information of an operational kind, can be met by instruments other than the Business Plans. The Business Plan should remain focused on strategy and on major performance commitments relating to strategy. If the consolidation of other planning and reporting requirements within the Expenditure Management System is desirable, then annexes to the department's Operational Plan (submitted to Treasury Board on request), or to a departmental Performance Report in the Fall would be preferable to adding bulk to the Business Plan. Too much detail in the Business Plan is likely to obscure its strategic focus.

Best Practice 2: The best Business Plans focused on strategy and commitments, and are un-obscured by operational detail. The department had an Operational Plan and a Business Plan, and did not confuse the two.

2.3 Flexibility Requests

The first call letter for Business Plans (March 7, 1995) noted that "Business Plans provide an opportunity to reduce the workload of departments and the Secretariat with respect to the Treasury Board", and the TBS guide invited departments to "identify areas where more flexibility is required to alleviate program and management constraints in order to achieve targets." (March 1995)

Of the 53 Business Plans we reviewed, 19 contained flexibility requests. Eight contained requests for vote structure changes - mostly requests to consolidate multiple votes into a single vote. Twelve contained requests for authority to re-spend revenues generated by the department. About the same number requested exemptions or adjustments in the "transfer pricing" provisions for shifting funds to salary use from other budget categories, and/or flexibility in moving funds between "capital" and "operating" areas.

Virtually all of the 19 Plans requested increased authority in order to carry forward funds into a new fiscal year. A few Plans requested higher limits on departmental managers' authority to approve grants and contributions, or related program administration authorities. Most of the 19 Plans requested greater flexibility in human resource management. Some requests could only be granted under the sole authority of the Treasury Board, while others required the concurrence of the Department of Finance and/or Parliament. Some required amendments to the Financial Administration Act.

In our opinion, having included the flexibility requests in the Business Plans was worthwhile in that it provided an opportunity for departments to link the case for the flexibility to the needs of the departmental strategy. As well, flexibility requests provided a decision-making focus to the discussions with Treasury Board which would otherwise not have been there because the strategic plan itself, while received by the Board, is not formally approved by it.

However, the importance of the flexibility requests should not be overstated. The link between flexibilities and the core strategy of the department was often not close. One deputy minister to whom we spoke captured the opinion of most when he said that the flexibilities were: "...not trivial but not vital either - basically housekeeping".

One result of the inclusion of flexibility requests in the Business Plans which was not fully foreseen was the disproportionate amount of time and attention these consumed in the discussions between the Treasury Board Secretariat and the departments. There is a danger that flexibility requests might displace more important discussions of departmental strategy. Another undesirable result of including the flexibility requests in the Business Plans was that the response of Treasury Board to the departments on the Business Plans was delayed while discussions and negotiations on flexibilities went forward.

In a few cases, the Treasury Board approved flexibility requests. Others it referred to the Secretariat staff to arrange negotiations with other parties involved. In general, departments that asked for flexibilities now say that the result was less than they expected. There was a mis-match of expectations. In retrospect it seems that expectations of the departments that swift decisions would be made on flexibilities as part of the business planning process, were not realistic. In the future, it would be more realistic to invite flexibility requests in the Business Plan as an agenda for discussion with central agencies over the following year.

Before the second cycle of business planning begins however, the Treasury Board Secretariat should give the departments which have outstanding flexibility requests a full accounting of the work going forward to bring these requests to a resolution.

Best Practice 3: In the best Business Plans, flexibility requests were supported by a business case that showed the linkage between the authority requested and the success of the department's strategy.

2.4 Performance Commitments

We found three types of performance commitments in Business Plans:

• commitments to meeting financial targets;

• commitments to completing major initiatives such as down-sizing, divesting assets or privatizing operations; and

• commitments to improving services and the measurement of service performance.

When Business Planning was in the design stage there were discussions about the role in performance commitments and reporting. In Cycle 1 departments were asked to state their performance commitments and how they would measure achievement. They were not asked to actually report on performance. However, in Cycle 2 it would be natural for Treasury Board ministers to wish to discuss with their departmental colleagues progress made on performance commitments in Cycle 1.

The place of performance reporting in the Expenditure Management Cycle is presently evolving quite quickly. For example, in 1995 for the first time, the President of Treasury Board will submit a report to Parliament on Performance Review. Simultaneously, there are three pilot projects underway to test whether an annual departmental "Performance Report" in the Fall is feasible and useful. The Quality Service Initiative is also increasing the role of performance reporting in Business Plans.

"Significant improvements are required in how departments articulate performance objectives and activities in the business plans. The Initiative is not an add-on to the Business Plans but an inherent approach to how departments plan for and report on their delivery of services. As part of the annual departmental business plans, departments would be required to prepare a three to five year outline of specific actions that would be taken to improve the level of client satisfaction and the quality of services delivered to Canadians. As part of the outline, departments will further develop and implement a comprehensive client consultation strategy. Departments will then be required to report on measured improvements to client satisfaction through the annual Business Plans starting in 1996."

In Cycle 1, many Business Plans were strongly oriented towards adjustment, so "performance" should probably have shifted more towards achieving major task milestones, rather than having remained focused on the service performance indicators traditionally associated with performance measurement. However, even commitments to meet the fiscal targets were not always linked to specific tasks and performance milestones in the Plans.

In general, what the Business Plans did contain was reminiscent of the Part IIIs - names of data that could possibly be collected in order to measure the services provided by the department, and lists of reviews (studies) that the department intended to undertake in the future. The connection between these and the department's strategy was often vague.

About one quarter of the Business Plans list the review priorities (audits and evaluations) of the department. Only in fewer cases do these planned reviews relate clearly to the major adjustment themes of the department. We only found clear 'indicators' of service quality discussed in five business plans. Several others noted that these were being developed by the department but were not yet available.

Clearly there is scope for improvement in all of these areas. One manager whom we interviewed characterized his department's Business Plan in a way that, in our opinion, it applied to many:

An interesting question is whether the next cycle of Business Plans should include reports of progress against commitments made in the first cycle. This would favour the interests of Treasury Board ministers. However, a reasonable time must elapse between the performance commitment (in the Business Plan) and measurement of results. The definiton of "reasonable time" will vary with the particular commitment. In general, if a performance commitment is made in the Business Plan of one year, perhaps the Fall of the following year would be a good time for Treasury Board to interest itself in specific performance (that is, 16 months would pass between commitment and reporting of results).

Fall reporting of performance has a further advantage of timing. Spring is the best time to finalize Business Plans, but it is normally September before definitive information about costs and about achievements in the previous fiscal year becomes available. The potential importance of relating the two makes us think that the Fall is the best time for performance reporting.

Subject to the outcome of the current experimentation with different performance reporting instruments and approaches, we expect that a Spring Business Plan and a Fall Departmental Performance Report would complement each other well, and that most performance commitments and all performance reporting of a service-level nature should be part of the Performance Report and not part of the Business Plan.

In general, despite limitations the first cycle of Business Planning contributed to departments' visible commitment to results. In particular, the best Business Plans showed a commitment to specific major changes, and to some results-oriented creative thinking about "business lines". In the review of Business Plans, the Ministers of Treasury Board expressed great interest in performance indicators.

Best Practice 4: The best Business Plans made commitments to fiscal targets, re-structuring, and improvements in services and stated how and when performance would be assessed.

2.5 Cross-cutting Perspectives

Business Plans represented an opportunity to integrate the Government's efforts by taking a cross-cutting perspective in at least three ways.

• Departmental lines of business cut across organizational boundaries. This can be important when "stove pipe" (vertically organized) structures have resulted from amalgamation of units from more than one previous department.

• Some policy issues that cut across departmental boundaries (for example sector-wide issues in justice).

• Some government-wide systems that are important to strategy - for example, computer-based service delivery systems.

Progress was made in all three areas, but generally there is still a long way to go. For example, some departments have strategic 'lines of business' in name only that are not yet integrated with appropriate organizational structures and human resources, financial system architecture, or management information systems. "The Business Plans were largely 'vertically oriented'. Horizontal issues were raised in a few cases, but were not a focus."

The role of Treasury Board and TBS in regard to these three is evolving. For example, in 1994, the Comptroller General concurred with the Auditor General that: "over the years, members of Parliament have expressed difficulty in obtaining relevant and understandable information on sectoral activities of the Government...".

Sector analysis might help in the decide upon which departments should be invited to present individually to Treasury Board in a particular year. The Board could hear presentations from departments and agencies grouped by sector so that a cross-cutting perspective could enrich each discussion. For example, a justice theme might involve presentations over two months by the Department of Justice, the Parole Board, the Department of the Solicitor General, the Royal Canadian Mounted Police, and related agencies.

Another cross-cutting theme in all Board discussions of Business Plans might be federal/ provincial jurisdiction and harmonization. A final cross-cutting theme is that in addressing 'horizontal' TBS should consider whether there are attractive service delivery alternatives outside the present structure of departments and agencies.

All of these cross-cutting analyses would take considerable preparation by TBS staff and other central agencies, but might be amply rewarding for both the departments and Treasury Board Ministers.

Best Practice 5: In the best Business Plans, departments used 'lines of business' as a tool for integrating strategy across internal organizational boundaries.

2.6 Departmental Outlooks

Assessing the experience with departmental Outlooks was not part of the mandate of this study. However, since Outlooks were designed as part of the new Expenditure Management System and complemented the Business Plans (by covering much the same topics as the Plans but for a different audience), they should be considered together after the Review of the experience with the first cycle of Outlooks currently being conducted by the Privy Council Office.

Changes to Standing Orders of The House of Commons in February, 1994 empowered the 22 Standing Committees to review multi-year expenditure plans of departments and agencies. This created a need for information about the departments' longer-term intentions. The Outlooks were initiated to meet that need. The first Outlooks were prepared in 1995. Departments and agencies were invited to submit their draft Outlooks to the Privy Council Office, Legislative, House Planning/Council Section, for review and comment before submission to the Standing Committee.

The purpose of Outlooks was to "assist parliamentary committees to carry out their new responsibilities for reviewing future year expenditure trends and priorities, so as to provide better, more timely information to the public on program results achieved by departments and agencies".

However, the work of the Standing Committees with Outlooks may be constrained by the requirement that they report to the House on Estimates by May 31 (one month after the deadline for submission of the Outlooks). Other issues worth consideration include:

• How many departments and agencies should produce Outlooks? About half of departments and agencies submitted Outlooks in 1995, including all of the major departments (about the same number that submitted Business Plans).
• Should more Standing Committees take the opportunity the Outlooks present to discuss departmental strategy and spending priorities with the Minister?
• Is the amount of work for a Committee to review an Outlook thoroughly unreasonable?
• How much feedback should departments reasonably expect on the Outlooks?

In Fall 1995, departments and agencies have been given the option of using an Outlook as the introduction to their Part III of the Estimates. This would allow the Standing Committees an additional 60 days approximately to consider and comment.

3. The Process of Business Planning

3.1 Frequency

There are three frequency issues:

• When should the Plans should be renewed?

• How frequently should they be submitted to TBS?

• How frequently should individual departmental ministers and deputy ministers appear before the Treasury Board.?

The easiest issue to dispose of is renewal frequency. In our opinion, the Plans should be renewed whenever circumstances change sufficiently and not addressed mechanically on an annual cycle. For example, a new minister might bring a different priority to the fore, or a change in the operating environment might require a re-thinking of strategy.

At a minimum, we recommend that the Plans normally be renewed annually. We expect that the pace of change will continue and may accelerate in the coming years, and therefore annual attention to overall strategy will be important for all departments. One manager we interviewed said:

When Plans are renewed we recommend that they be renewed as a new, complete Business Plan and not as a fragmentary "up-date" addendum to the old Plan.

The appropriate frequency of submission to Treasury Board depends on the value of regular appearances of departmental ministers before their Treasury Board colleagues, and on work loads. This year, Treasury Board ministers asked that the initial list of 5 individual presentations to the Board be doubled. However, it was difficult to schedule that many presentations. In future years, five to seven individual presentations each year might be a reasonable agenda.

When should the call letter for Plans be issued?

Experience with the first cycle indicates that the best plans were presented by departments that had been actively engaged in strategic planning during the previous Fall and Winter, rather than those that waited for the February call letter to engage in the exercise. As well, some departments, especially those with significant regional operations or a headquarters located outside of Ottawa, found the time-frame unrealistically short, given the consultations needed with multiple levels of managers. Therefore we suggest that the development of the Plans should be started earlier in the fiscal year.

We suggest that a call letter be sent to departments as early as possible in the Fall noting the up-coming requirement for a Business Plan the following April 15, and noting that the TBS one-window teams are available to work with departments.

Several departments whose managers we interviewed intend to extend the depth of the business planning exercise in the department, emphasizing the "buy-in" of more levels of managers than was achieved in the first round. This takes time. An early call letter would acknowledge this.

The date for submission

This year only four departments submitted Business Plans by the deadline, while almost half made submissions after a month and the other half after two months. In the second cycle, departments asked to present individually to Treasury Board should submit their Business Plan at least one month before the presentation date. Given the experience now gained, all other departments submitting their Business Plans for TBS review and comment should find the April 15 deadline practical.

Recommended Practice: Business Plans should be continuously updated in the department when important circumstances change.

3.2 Who Should Prepare the Business Plan?

Call letters for Business Plans went to about 90 departments and agencies of the Government of Canada. Of these, 53 including all of the major departments, submitted a Business Plan.

The Board might not wish to invite as many individual presentations each year as it did in the first year of business planning, to maintain the interest of departmental Ministers and to moderate the work-load of all parties. However, this is a matter for the Board to decide each year.

The decision regarding the departments with whcih the Board wishes to engage in individual discussion in a particular year should be made early, preferably before the call letter for submission of the Business Plan. Some departmental managers stated to us that it was an irritant not to know for months whether their department would be invited to present individually to the Treasury Board or not.

One option is for the submission of a Business Plan to be mandatory for all major departments and agencies, and for any others who have been specifically invited to present individually to Treasury Board that year, and voluntary for all others. On balance however, submission of a Plan each year in a time of rapid change does not seem excessive.

Another option is for most departments to submit their Business Plans to the Treasury Board Secretariat rather than to the Treasury Board. Only those departments individually presenting to the Board in a particular year would present a Cabinet-confidential Plan. The TBS would review and comment on Plans and would recommend which departments should be invited to present individually.

Recommended Practice: All departments should submit a Business Plan each year, but TBS's emphasis should be on a manageable number of selected departments who are invited to present their Business Plans individually to Treasury Board during May and June.

3.3 The Single Window/ Team Approach

The single-window team approach of the Treasury Board Secretariat in dealing with the departments on business planning was effective in Cycle , and we think that the model is a good one to follow in future.

However, there has been a high turn-over of TBS team leaders as a consequence of the Treasury Board Secretariat itself being a "most-affected organization" in the current budget cuts. Maintaining corporate memory and building on lessons of the first cycle will take planning. Therefore, although the team leaders coped well in the first cycle, some specific training (at least one workshop for team leaders on best practices in cross-Branch team management) would be worthwhile in our opinion.

Departmental managers are less aware than Secretariat staff of the role of the single-window. In the second cycle of business planning the single-window team concept should be given somewhat more visibility to the senior department managers, perhaps by being mentioned in the call letter.

Recommended Practice: The TBS 'single window' teams from all Branches should continue to be the contact between the Treasury Board Secretariat and departments on Business Planning.

3.4 Presentations to Treasury Board

It was an innovation to have Ministers and Deputy Ministers discuss their strategic plans in person with Treasury Board Ministers. In the first presentations all parties were feeling their way. There was some scepticism on the part of some Ministers and Deputy Ministers about the likely usefulness of the discussion. However, most presentations went well.

The Treasury Board Ministers found it useful to be able to discuss the department's overall business and strategy, rather than being blinkered by a transaction-by-transaction approach. Some departmental Ministers and Deputy Ministers found it added to their credibility with the central agencies to engage the Treasury Board Ministers in a dialogue, and was useful to have a sympathetic but disinterested group of colleagues play "sounding board" to the Minister's thinking about strategy.

However, this was a new process and some aspects of the presentations need improvement in the second cycle. We recommend that the presentations should not be treated as being routine business of the Board. The effort required by departments is large, and the importance given to the presentation should reflect this. The Minister should feel that he or she has received serious attention from peers in a well-prepared discussion if the practice of discussion with the Board is to 'take root' in the long term. Careful consideration should be given to the appropriate physical setting for the dialogue among ministers, and to limiting the number of officials attending.

Recommended Practice: Presentations of Business Plans to Treasury Board Ministers should focus mainly on core business strategy of the department and major adjustments, not on minor flexibilities or operational matters.

3.5 Feedback to the Departments

The Ministers and Deputy Ministers in the most affected departments who presented their plans in person to Treasury Board Ministers received feedback through that process. However, other departments often expressed disappointment about the low level of feedback on their Plans. The types of feedback that departmental managers mentioned as being desirable included: feedback on the substance of the strategies; feedback on the implications of government-wide issues on their Plan; and feedback on the quality of the Plan itself (opportunity for comparisons with other plans was limited in the first cycle by the fact that they were Cabinet confidences). Virtually all of the executive managers with whom we discussed the Business Plans are keen to have more and better feedback on the Plans and on the related Outlooks. They are complimentary about the work of Secretariat staff during the development phase of the business plans, but are concerned that feedback was too sparse after the plans were submitted.

Recommended Practice: TBS should develop a 'feedback plan' for Cycle 2, and organize to provide a response to Business Plans within 60 days of submission.

3.6 Confidentiality of the Business Plan

In future, one might reasonably expect that Business Plan may contain at least two types of confidential information:

Flexibility or 'enabling' requests. In most cases, there may be no reason why these requests should not be public; but in a particular case confidentiality might be preferable.

Performance commitments. These might be confidential to Cabinet in some cases because they involve targets and deadlines that the Government intends to achieve but should not declare publicly beforehand because premature announcement might have adverse effects (on a divestiture or acquisition of assets, for example). Some Plans should be Cabinet confidential in full. An example would be the Plan of the Canadian Security Intelligence Service. However, many other Plans would perhaps contain little or nothing that should not be confidential.

Confidentiality is not a major problem from the point of view of the first "vision" of Business Planning that we described earlier. If the Business Plan is essentially a report to Treasury Board on implementation of adjustments, then it can be a Cabinet confidence without loss. However, if use in the departments is primary, then confidentiality becomes a significant constraint because it limits the circulation and use of the Plan.

In the latter case the best approach may be the one taken by the departments which integrated confidential material into the existing (public) business plan only when submitting it to Treasury Board, but distributed and used the existing plan widely. Restricted access may have the undesirable side effect of detracting from the image of an open and transparent process during a period when other stresses, such as 'downsizing', made openness particularly important. Two deputy ministers used the phrase "one process, one story" to describe the approach they consider ideal.

Recommended Practice: Business Planning should be open and transparent. The substantive core of the Business Plan (excluding those things that are inherently confidential to Cabinet) should be used at all levels of the department.

4. Business Planning Cycle Two

4.1 The Context

A re-design of the Expenditure Management System is underway. It began in 1994 and is not yet complete. As well, TBS is working on reform of the Estimates, which affects performance reporting to Parliament, the Outlooks and Part III of the Estimates. The Quality Service Initiative is being implemented. The first Report on Review by the President of the Treasury Board is in draft form, and there are three pilots underway for a departmental Performance Report. The appropriate future role of Business Plans depends to some extent on how these other instruments evolve.

4.2 The Objectives of Cycle Two.

As discussed earlier the two "visions" of Business Planning imply different priorities and therefore somewhat different best practices. We suggest that the order of priority for Cycle 2 be:

• Business Plans used in the departments as the key statement of strategy for the core business.

• A fruitful dialogue on direction and strategy between the Departmental Minister and Deputy Minister and Treasury Board Ministers.

• Business Plans used as a vehicle for reaching decisions on flexibilities/enabling actions that are important to the departments' implementation of strategy.

4.3 Cycle 2 Assumptions

Our assumptions regarding Cycle 2 include the following:

• Departments will continue to choose their own approaches to strategic Business Planning within a general framework provided by the Treasury Board.

• The evolution of various expenditure management instruments will proceed.

• Performance commitments will continue to be important in the Business Plans. Performance reporting mainly will be dealt with in a Fall departmental performance report;

• Treasury Board Secretariat will continue to provide a quality challenge service to the departments in respect to Business Plans; and

• The Standing Committees will become more active with respect to the direction and strategies of departments in light of improved reporting of departments to Parliament.

In this fluid context, we find it useful to organize our thinking around three milestones for departments in the fiscal year. (Figure 2)

• Spring Milestone: Business Plans that were developed during the period October to January are adjusted in response to the provisions of the February Budget, becoming the strategic framework within which departmental Operational Plans are developed for the new fiscal year.

• Fall Milestone: Departmental Performance Reports are developed in the period June to August, and finalized when definitive financial information on the previous fiscal year becomes available in September.

• Winter Milestone: Departmental financial estimates are prepared suing the same schedule from the previous Multi-year Operational Planning System (December/January), although computerization of the process might modify this. Estimates are submitted to Treasury Board and tabled in the House of Commons in February.

Scheduling these milestones at different times in the year rather than more or less simultaneously as was previously the case, has the advantage of more evenly spreading the work-load of the departments, the Standing Committees and Treasury Board - an important consideration now that staff and budgets are increasingly constrained.

4.4 Summary of Recommendations

Our recommendations for implementation of the second cycle of Business Planning may be summarized as follows:

1. The focus should be kept on strategy and performance commitments. Both departments and Secretariat should resist the temptation to include too much administrative detail in the Business Plans, even as appendices. Administrative details should remain part of the departmental Operating Plan, with submission requested by the Treasury Board Secretariat on an individual basis whenever appropriate, or as routine periodic submissions.

2. The substance of the Business Plan should be widely communicated and used within the department (apart from material that is confidential to Cabinet).

3. The annual call letter for Business Plans should go to departments as early as possible, tailored to specific issues or themes when individual departments are invited to make presentations to the Board. In addition, TBS should note government-wide priorities that should be reflected in departments' Business Plans in the coming planning cycle.

4. Invitations to departmental Ministers to present the department's Business Plan to the Board should be selective. Invitations should be made as early as possible, preferably in the call letter for Business Plans.

5. Business Plans should contain performance commitments (monitorable actions) by the department or agency, in each of three areas: budget targets, structural adjustments within the department, and quality of performance on key services. Each commitment should be linked to milestones against which performance and progress can be assessed.

6. Departments should (as much as possible) have a single statement of strategy which should be communicated consistently in all documents, including Business Plans and Outlooks. To the degree that different documents communicate the same strategy, there might be potential for consolidation.

7. Departments should use the "lines of business" defined in the Business Plan to organize their operational, human resource, and financial planning within a single consistent management framework.

8. The "one window" core team concept within the Treasury Board Secretariat for dealing with the Business Plans should be continued and re-inforced by training the team leaders in managing complex teams.

9. A new Business Plan should be prepared by each department or agency every year. In a time of rapid change annual attention to overall departmental strategy is appropriate. All should be provided to TBS for review and comment, although only a selected few should be presented individually to Treasury Board.

10. Treasury Board Secretariat should provide as much timely feedback as possible to the departments on the substance of the Business Plan and on the quality of their planning exercise.

11. Within the departments, the Business Plan should be separate from and guide the detailed Operational Plan.

12. In the second cycle of business planning, the Treasury Board Secretariat should restate its priorities in regard to flexibilities. Requested flexibilities should be shown to be important to the success of the proposed strategy. They should improve rather than weaken the accountability of the department, or be balanced by measures that would improve accountability; and they should not unduly complicate the management of the public service as a whole. It should also be noted that:

• Immediate decisions on flexibilities are unlikely and flexibility requests in the Business Plans should be seen as an agenda for discussions during the coming year.

• Decisions on flexibilities will be based solely on merit, and flexibilities are not to be considered a quid pro quo for producing or submitting Business Plans to the Treasury Board.

In the second cycle of Business Planning, and in the longer term, the 'flexibility' concept might evolve into a broader 'enabling role' for TBS.

"TBS, for its part, should be examining how it can help on the enabling side – partnering, clustering, new organizational models, use of other program instruments, federal/provincial cooperation, IT options and others".

Management's Response

December 1995

Introduction

The business planning process is evolutionary. This review was commissioned by the Evaluation, Audit and Review Group of TBS, pursuant to a request from the Deputy Secretary Program Branch, for the expressed purpose of ensuring that the next cycle of business plans could build upon the lessons from the first cycle.

The objectives of the review were to assess from the perspective of those involved, how the business planning process worked and whether changes were needed.

The report recognizes that the concept is still evolving and gives credence to the philosophy that one size does not fit all . The fact that business plans generally reflected one of two distinct visions, either on adjustment or on the core business of the department, reflects the outcomes of Program Review which will see some departments fundamentally re-engineered, while others simply re-focused on their core business.

Management generally concurs with the key findings. In particular:

• Many plans were excellent statements of departmental strategy - succinct and cogent. In general, the standard was high.

• The best plans were presented by departments actively engaged in strategic planning during the previous Fall and Winter.

• The process improved many departments' commitments to results. The best business plans made commitments to fiscal targets, re-structuring and improvements in services; and stated how and when performance on these will be assessed.

• Presentations by departmental Ministers and Deputy Ministers were a successful innovation.

• The single window approach was effective.

• Including flexibility requests in the business plans was worthwhile - there was a mis-match of expectations.

• The expressed concerns about feedback being too sparse after Plans were submitted should be considered.

Management's response

The response to the report is embodied in the next steps strategy for second cycle of the business plans, which has been considered by the Treasury Board. This strategy, which builds on the lessons learned in the first cycle is summarized below.

All departments and agencies will be requested to submit a plan to the Treasury Board. The focus will be on key departmental strategies and performance commitments (incorporating Quality Service). The submission should continue to be a "high level" document of relevance to the ministerial and department executive level.

The TBS Business Plan Team approach will be continued, and the focus will be on engaging departments in discussions as they develop their Business Plans. In addition, the Secretariat in association with CCMD, will be running seminars which will communicate lessons learned, our approach to round two and, as well, will provide a forum for departments to share best practices and provide ongoing feedback.

The approach to the review of the submissions will be two tiered as follows:

• Selected departments (no more than 10 to 12), will be requested to present their plans directly to Ministers of the Treasury Board according to the following guidelines:

• All other plans will be submitted to the Treasury Board by April 30, 1996.

• Plans may consist of "Updates" that can range from "nil" reports to complete plans - the exact nature to be a subject of discussion between the Secretariat Business Plan Team and the department giving consideration to any issues identified by the Treasury Board;

• Feedback will be given to departments at the senior officials level within six weeks;

• Departments will report to the Treasury Board on issues and matters requiring further action.

It is anticipated that the focus will shift away from adjustment and move more towards core business strategies.

Horizontal flexibilities should not be a key focus in the upcoming cycle. The Secretariat may determine that a certain flexibility is required in order for a department to meet the performance targets set out in the business plan and correspondingly recommend it to the Treasury Board.

Notwithstanding concerns that being Treasury Board Submissions the business plans become Cabinet Confidences, the requirement for transparency/frankness between departments and the Treasury Board is an over-riding consideration which necessitates continuing the current practice. It should be noted that departments have the option of separating confidential information and repackaging the document submitted to the Treasury Board as required.

Appendix - Individuals Interviewed

Citizenship and Immigration

B. DiBartelo, D.G., Financial Management

Canadian Centre for Management Development

J. Smith

Environment Canada

M. Cappe, Deputy Minister

L. Talbot-Allan, A.D.M., Corporate Services

S. Wex, D.G., Corporate Management & Review Directorate

Fisheries and Oceans

M. Hynna, A.D.M., Corporate Services

D. Dixon, D.G., Finance & Administration

G. Viscount, Senior Advisor, Business Planning

Health Canada

A. Juneau, A.D.M., Policy & Coordination Branch.

C. Boivin-Cole, Executive Dir., Strategic Planning Division.

Indian Affairs & Northern Development

W. Austin, D.G., Finance Branch.

P. Traversy, Mgr, Pol. Res. & Adv. Services, Finance Branch.

Natural Resources Canada

J. McCloskey, Deputy Minister

D. Bickerton, D.G., Financial Management

P. McClure, Asst. Dir., Man. Prac. & Accountability Reporting

G. Seguin, Dir., Financial Planning & Analysis

P. Tissot, Analyst, Executive Coordination Branch

Privy Council Office

P. Barlow, Legislative, House Planning/Council Section

Public Works and Government Services Canada

J. Catterson, D.G. Departmental Products Sector

Revenue Canada

P. Gravelle, Deputy Minister

W. Crandell, A.D.M. Finance and Administration

Transport Canada

N. Mulder, Deputy Minister

P. Gauvin, A.D.M. Finance and Administration

R. Legault, Chief, Expenditure Analysis

Veterans Affairs

J. Nicholson, Deputy Minister

L. Blackwell, A.D.M., Corporate Services

R. Bray, D.G., Finance Division

K. Hillier, D.G., Corporate Planning

J. Mulligan, Planning Advisor

Treasury Board Secretariat

EXCOM

R. Giroux, R. Paton, J.-C. Bouchard, G. Finn for M. Ouellon, R. Little, N. Moyer

Program Branch, Assistant Secretaries

P. Thibault, E. Sarkar, S. Gershberg, D. Miller

TBS B.P. Team Leaders

M. Joyce, C. Caron, C. Swan, F. Cameron, J. Harlick

TBS B.P. Team Members

P. Carter, C. Davis, J. Ewanovich, P. Green, W. Hingston, F. Lamarche, J. Martin, D. Rogers, A. Starcher, T. Uno

Other TBS Staff.

C. Freebury, R. Hilton, T. Hopwood, W. Maidens, J. Quinn, A. Robert

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