Adapting PESTEL analysis to best suit the HR Department

Human Resources formerly commonly known as Personnel is a function which each and every organisation has and desperately need to keep up-to-date mainly because the future of the organisation is determined and affected by the professionals / individuals recruited and retained. Initially it was presented as the Political, Economic, Social and Technological factors however just over a decade ago some addendum was presented as some sort of reform which included Legislation and Environmental Factors.  PESTEL stands for - Political, Economic, Sociological, Technological, Environmental, Legislation. The term PESTEL has been used regularly in the last 12 years and its true history is difficult to establish. Various other similar acronyms have been used including ETPS, STEP, PEST, and STEEPLE. The term PESTEL is particularly popular on HR and introductory marketing courses in the UK.

PESTEL analysis is in effect an audit of an organisation's environmental influences with the purpose of using this information to guide strategic decision-making. The assumption is that if the organisation is able to audit its current environment and assess potential changes, it will be better placed than its competitors to respond to changes.

To help make decisions and to plan for future events, organisations need to understand the wider ‘meso-economic’ and ‘macro-economic’ environments in which they operate. (The meso-economic environment is the one in which we operate and have limited influence or impact, the macro-environment includes all factors that influence an organisation but are out of its direct control). An organisation on its own cannot affect these factors, nor can these factors directly affect the profitability of an organisation. But by understanding these environments, it is possible to take the advantage to maximise the opportunities and minimise the threats to the organisation. Conducting a strategic analysis entails scanning these economic environments to detect and understand the broad, long term trends.

A PESTEL analysis is a useful tool for understanding the ‘big picture’ of the environment in which an organisation is operating. Specifically a PESTEL analysis is a useful tool for understanding risks associated with market (the need for a product or service) growth or decline, and as such the position, potential and direction for an individual business or organisation.

A PESTEL analysis is often used as a generic 'orientation' tool, finding out where an organisation or product is in the context of what is happening outside that will at some point affect what is happening inside an organisation. The six elements form a framework for reviewing a situation, and can also be used to review a strategy or position, direction of a company, a marketing proposition, or idea.

                                            

Although these two theories are totally independent entities they normally work together effectively because of what they stand for and measure in terms of employee work focus mainly future projections. However as the organisation grows and expands the organisation will be forced to have specialist or actuaries who can better focus on the needs future of the organisation. These employees will be hired specifically for these posts of business forecast whilst using their skills and intelligence to implement these theories in detail.

• Strengths
• Weaknesses
• Opportunities
• Threats

A traditional SWOT analysis would take the context of the PESTEL and analyse how these factors may emerge/impact.

A SWOT analysis should be a useful tool for planning and marketing strategy. Identify your strengths and weaknesses first because they may suggest some of the opportunities and threats later. There is a tendency for people to play the ‘opposites game’ whereby an opportunity might be identified and then a converse threat that ‘it might not be taken up’. This is not a threat, threats have to exist now in the present – this is a RISK associated with taking that opportunity and this should be recorded in the risk register.

A better way to map this output more directly into a project plan and/or strategy is to use a 3×3 grid, arranging your strengths, weaknesses, opportunities and threats in the labelled boxes. Then come up with some ‘mini strategies’ in the four boxes in the bottom right corner of the matrix, addressing the questions outlined. Having done this you can use the top left box to either translate the strategies into a task list for a project plan or come up with a strategy or mission statement for whatever topic was the subject of the SWOT analysis.