We have to change our culture.

“We have to change our culture.”

It’s been muttered by every frustrated leader, in every organization, in both the public and the private sectors.

300px-enron_logo.svg_But what most of them mean is, “We have to change the way we do things around here.” At its most fundamental level, this is what the term “corporate culture” means: “the way things are done around here.”

Organizational culture is the sum of everything that makes up the modern workplace. It is the stated values of the organization. And, more importantly, it is the unstated values that have never been codified—yet which every employee fully understands.

It includes the symbols of the organization. Some are obvious, like the organization’s logo or the mission and vision statements that hang so prominently in the main lobby. Others are not so obvious to the public—parking spaces, private offices when everyone else has been moved to the new “open” floorplan, and weeklong training sessions in Palm Desert.

Culture is the conversations that take place in the boardrooms, in the hallways, in the cube farm, and in the break rooms. And it is just as much the conversations that don’t take place. The jobs-well-done, the need-to-improves, and the disciplinary actions that never happen.

It is the stories that are told, the awards that are presented, the celebrations that are canceled, the myths that are perpetuated.

The Smell of Diesel

Culture is the “smell of the place,” that feeling you get when you spend any time in an organization, no matter how large or small.

volkswagen_logoCulture defines what is OK—and what isn’t. Culture defines right and wrong, acceptable and unacceptable, meaningful and meaningless. Volkswagen has given the world a lesson in culture, because it takes a lot of people to create and install diesel engine software that cheats environmental tests. But they pulled it off for six years—and it wasn’t an internal leak that let the story out.

Culture is…
“the smell of the place.”

Culture can be strong or it can be weak, but it always exists. And it exists because people who work together must understand “the way things are done around here.”

Changing Culture

Anyone who gives culture a thought can understand these concepts. The hard part is accepting how resilient culture is.

Because culture defines a globally accepted template for action within the organization, by its nature it exists to resist change. This is the critical point every leader must clearly understand: there is no aspect of an organization that is more difficult to change than the culture. An organization that has never prioritized things like shared leadership or cross-functional teams, and wishes to move in that direction, must realize that it is embarking on a journey. It will require time, perseverance, and committed leadership. There will be resistance, much of it passive and well hidden, and there will be failure.

But organizational culture can be changed if the leaders go into the process with an awareness of the scope of the challenge and a plan for overcoming the inevitable obstacles.

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Lean Management: No Posers Allowed!

A lot of executives have heard about Lean management and would like to try it – seems like a good idea.

(Even the Prime Minister’s Advisory Committee on the Public Service thinks Lean is a good idea!)

Are you ready to Rock?

For those who have heard of Lean, they usually think of exercises like 5S or Kaizen blitz. These are tools that let people sample the Lean approach and gain some quick wins – without making a real commitment. Unit managers can dip a toe in the water while still reporting to the C-Executives that, “Yes, we’re doing Lean!”

But running a couple of workshops and re-organizing the supply closet – then declaring yourself a Lean shop – is like learning to play three chords on a guitar and declaring yourself a rock star.

Just because you can play a little doesn’t mean that you are ready to live like a rock star – Rock and Roll is a lifestyle, man! No posers allowed.

Live Below the Waterline

Peter Hines and his co-authors, in the book Staying Lean, employ the (overused and tired, yet still appropriate) Iceberg metaphor to describe what really drives successful and sustainable Lean adoption.

In this interpretation of the Iceberg you’ll find the obvious, visible aspects of Lean above the waterline:

  • Technologies, Tools & Techniques
  • Processes

But, as always, the centre of gravity – and the aspects of Lean that will ultimately determine the long term success of the initiative – lies hidden below the waterline:

  • Strategy & Alignment
  • Leadership
  • Behaviour & Engagement

Enough about Lean

“But isn’t Lean supposed to be about focusing our efforts on the customer, eliminating waste, and continually improving our processes?”

Yes.

Now, this is where we stop talking about Lean for a minute.

It doesn’t matter what approach to managing your business you choose, if you don’t have those items that are “below the waterline” –

Strategy & Alignment, Leadership, Behaviour & Engagement – working, it doesn’t matter what approach you use. It won’t last, and you will soon be off chasing the next ‘flavor of the month’.

And that next approach will probably offer some nice short-term gains that are, again, not sustained. Rinse. Repeat.

Back to Lean.

Given that, couldn’t you just focus on those three items and forget about Lean? Yes, absolutely. But those three bullets are so difficult for managers to get right that often an external framework is useful to guide their behaviours and actions.

Note – we are not talking about “employee” behaviours and actions.

Unfortunately, that is the mindset that many managers take when they start to explore Lean as an approach to guiding the activities in their organization. But it’s not about “them”. It’s about “you”.

With that in mind, I would like to talk about the single most important tool that a manager has to support a successful Lean rollout.

Genchi Genbutsu

Genchi genbutsu is Japanese for “go and see for yourself”, often referred to in North America as going gemba.

This is a simple concept that can be further simplified for the North American manager: “Get out of your office!”

You will never get the real story sitting at your desk. Reports will be filtered for any number of reasons – most emerging directly from CYA issues.1

This is not a “take charge” event. Your goal is to observe and ask appropriate questions; perhaps the most important – and least employed – tool that a manager has.

Stop making excuses. You are not too busy. You want to call yourself a leader? Get out of your office and go talk to your people. Every day. Nothing that you do is more important than this.

Scratching the Surface

This Lean project? It won’t be quick, and it won’t be easy.

Obviously, we are just scratching the surface of these topics, but the resources available are vast. Some are free, some not. The most important thing?

First, you have to care.


1CYA

‘Stones’ Photo Credit: Jonathan Bayer via Compfight cc
‘Office Door’ Credit: Julia Manzerova via Compfight cc

Strategic & Operating Reviews: A Checklist to Understand Your Capacity for Change

As the rate of change that our people and our organizations face continues to accelerate, many are undoubtedly in the process of preparing for some form of transformational change.

For public servants, most of you are preparing to face the fallout of the current SOR, while private sector companies wrestle with increasing intrusion from global competition or the market disintermediation of online players.  In either case, your organization is undoubtedly in the process of or preparing to undergo a “transformation”.

Against this backdrop, I felt that it would be useful for managers to have a tool that would allow them to evaluate the current state of their organization—the capacity of the organization to engage in real change right now.

Ask Everyone

The opinions of employees and other stakeholders are an important indicator of where you should focus your efforts.

Completion of a questionnaire based on these materials should take less than 20 minutes to complete, and can provide you with valuable insight. Of course, you will still need to put the answers into context;

  • what is their position/job type,
  • where are they located—central or regional,
  • do they supervise others,
  • how long have they been part of the organization, etc.

Your Vision Statement

If your organization has a strong change capability, most of your employees and colleagues will agree with these statements.  If they disagree with any of the statements, then you have pinpointed a weakness in your change capability that you will need to mitigate.

I agree/disagree that:

  1. Our vision statement represents the future vision for my organization.
  2. Achievement of this vision will require a transformational change.
  3. I have a clear role in achieving this vision.
  4. This vision is likely to be achieved by the year X.
  5. I can list the top 3 most important barriers to achieving this vision.

Elements of Strategic Change

As with any other project that an organization takes up, the planning and development of a change initiative should have a clear strategic plan, i.e., there are deliberate and coordinated actions.  Throwing some things against the wall to “see what sticks” rarely works when executing a marketing plan, and are about as likely to work with a change management initiative.

Different elements need to be in place, in varying degrees, for successful strategic change to take place. However, some requirements may be more important than others for your organization.  Are these elements present in your organization? How do you, your employees and your colleagues rank the relative importance of each element? Which is most important? Which is least important?

Yes/No – strategic change requires:

  1. Flexible Management Policiesthat permit employees to decide how best to carry them out, depending on the circumstances.
  2. Commitment of senior managers and leaders.
  3. Planning and prioritizing– along with ongoing operations, as an integral part of the regular business planning process.
  4. Progress to be measured and monitored.
  5. Calculated risk-taking– a certain amount of it.
  6. Audit and evaluation functionthat play a role in encouraging improvement.
  7. Accountability mechanismsthat encourage all employees to take ownership of results as appropriate to their roles.
  8. Some positive incentivesfor employees to participate.
  9. Important messages be shared and understood by all stakeholders.
  10. Information sharing – a positive attitude toward it.
  11. Innovation to compensate for the absence of sufficient financial resources to achieve business objectives.
  12. Talent, skills and dedication of employees– be recognized as the most valuable resource available to an organization.
  13. Communication and accountabilitythat cuts horizontally across the vertical chain of command.Small fishbowl-270x327
  14. Ability (best practices supported by technology) to successfully transfer critical knowledge from person to person or role to role.

Some of the following statements reflect commonly held stereotypes. Based on your own knowledge and experience, do you agree or disagree with them? Do your employees and colleagues agree or disagree with them? What do your answers reveal about weaknesses in your organization in the areas of working climate, employee engagement and organizational alignment?

I agree/disagree that in my organization:

  1. Management policies are written in such a way that they restrict the freedom to carry them out as effectively and efficiently as possible.
  2. Leadership appears to be committed to a single, clearly articulated transformational agenda for the organization.
  3. Strategic change priorities are clearly articulated through the regular cyclical business planning process.
  4. Managers have the performance information they need to make decisions that will keep them on track towards achieving the vision.
  5. Taking calculated risks can be damaging to one’s career in the event of failure.
  6. Audit and evaluation are primarily regarded as punitive exercises that frequently result in the assignment of blame for poor performance.
  7. Strategic change is supported by the establishment of clear accountabilities for results.
  8. Employees are rewarded and/or recognized for their contributions to continuous improvement.
  9. Many important messages, whether accurate or not, are first communicated through the rumour mill.
  10. It is difficult to get people to share information if they perceive that it might cause them to lose an advantage.
  11. Limitation of financial resources tends to be regarded as a valid barrier to the achievement of strategic change.
  12. Employees feel as though their well-being receives the care and attention that it deserves.
  13. Horizontal channels of communication and accountability are well developed and utilized in support of operational and organizational development objectives.
  14. Despite frequent employee turnover, little support is available (either in sharing best practices or supportive knowledge capture technologies) for ensuring that critical knowledge is successfully transferred from person to person or role to role.

The Sticking Points

An organization’s ability to successfully undergo a strategic change is dependent upon management policies and practices, human resources management, knowledge management, organizational culture, and communication.

Here is a quick checklist of some common things organizations often overlook or downplay as they embark on a strategic change project:

  • The vision for the future is effectively communicated below the managerial levels.
  • People tend not to change their way of doing things unless they have a compelling reason to do so.
  • There are mechanisms to ensure that a consistent transformational plan would survive a change in leadership.
  • There are mechanisms to ensure that the highest priorities are identified and resourced.
  • Vertical ‘stovepipes’ effectively inhibit the necessary horizontal initiatives.
  • The organizational culture promotes continuous improvement through the encouragement of critical thinking.
  • Employees generally perceive change as a threat.
  • In general, adequate expertise and support methodologies are available within organizations to facilitate improvement initiatives.
  • There is insufficient time available to launch improvement initiatives within organizations because of heavy workloads associated with normal day-to-day activities.
  • There should be an active leadership role responsible for standardizing and supporting business management tools designed to support continuous improvement efforts within organizations.
  • Regulatory roadblocks are not impediments to change and improvement within organizations.
  • Organizations should adopt a common approach to promote continuous improvement across operating units.

As with any checklist or tool—this is not intended to be an exhaustive and complete list.  Rather, it should provide a starting point as you begin to ask the difficult questions of yourself and your people.  All input is valid, all data is useful.  But it’s up to you—as the “subject matter expert” on your organization—to evaluate the feedback that you receive in the proper context.

Kotter’s 8 Steps to Change: More Relevant Than Ever

Failure is not fatal, but failure to change might be.
– John Wooden

In 1996, John Kotter published Leading Change, which quickly became the seminal work in the change management space.

15 years later—an eon in the Internet time-space to which we have become accustomed—and Leading Change is still the work that most change management professionals will point to when asked “how to do it.” There have been some other blips on the radar in the change management discussion, most notably the high-intensity spotlight wielded by the Heath Bros, Chip and Dan, in Switch: How to Change Things When Change is Hard.

Yet everyone keeps coming back to Mr. Kotter. (welcome back!)

leading-change-kotterWhy? Because effecting change—real change—transformative change—is hard. Really hard.

And The Eight-Stage Process of Creating Major Change that Kotter spelled out in Leading Change has been proven to work better than most anything else when appropriately implemented. The Eight Steps give organizational leader/managers a clear map to follow when most are wandering in the dark as they face the challenges of non-linear acceleration of change as we move into the 21st century.

But this post is not intended to re-hash every aspect of the Eight Steps. Rather, I wanted to remind everyone how unique it is in this “management” space to have a book that has held up so well over time. So many flavour-of-the-week approaches to managing an organization have come and gone in the last fifteen years that we could, and have, fill a library with them.

The other, really unusual aspect of Leading Change as a cornerstone work, is that its relevance has only increased since publication. Business-as-usual did not pass this book by; it is virtually required reading for anyone who leads an organization today.

The Eight Step Process

For those who are not familiar with Kotter’s work, here is a list of his Eight Steps, with some recent comments that he has made on those issues that he finds to be critical for success (I’ll include a link to these comments when/if it becomes publicly available):

1. Establish a Sense of Urgency

  • This is the absolute starting point.
  • You must appeal to both the intellectual AND the emotional.
  • Repeatedly screaming at people “Your platform is burning, you are going to die!” does not work.
    • Threats lose their value.
    • It results in a demoralized workforce.
    • Talent leaves as soon as there is a good out.

2. Create a Guiding Coalition

  • If you want transformational change, you must create transformational leadership.
  • If you want transformational leadership, hierarchical-command/control structures will not work.
    • Good managers, utilizing good policies and practices, can create great results—but they cannot create transformational change.
  • Note the use of the term Coalition: if you want transformational leadership, this must represent a broad cross-section of people from all levels of the organization.
    • people who have their hearts in it
    • people who will provide leadership
    • people who will attack barriers
    • people who will get others on board
  • If you don’t do this right, it will effect everything else that follows.

3. Develop a Vision and Strategy

4. Communicate the Change Vision

  • It’s not likely that you will under-communicate a little bit; you will probably under-communicate 10x to 100x too much. And your initiative, no matter how well planned, will fail.

5. Empower Broad-Based Action

  • Give away authority. The hierarchy must give way to the network.

6. Generate Short-Term Wins

  • Make the wins real and they will be powerful.
  • If people don’t see results, cynicism will quickly follow.

7. Consolidate Gains and Produce More Change

  • Never let up!
    • You must maintain the urgency.
    • If you hand your initiative off to a change management “department” or “committee” — you will fail.
    • Don’t get discouraged, it might require cycling back and trying new things.
    • Don’t let your “command and control” genes take over.
  • It’s like tending a fire, you can’t start it and walk away.

8. Anchor New Approaches in the Culture

  • You don’t “change your culture” to create transformation.
  • It’s the reverse, if you want to create a culture change then go through the other seven steps — then, after success has been created, the outcome will be a change in the culture!

Management v. Leadership

I think it’s safe to say that we are all exhausted with the manager or leader debate. I’ll not waste too much time on that. However, a couple of quotes from Kotter that make it very clear; change management is a task for leaders.

Managers can define projects, develop measures, and monitor systems—they cannot create change.

“Leadership defines what the future should look like, aligns people with that vision, and inspires them to make it happen despite the obstacles.”

“…linking the discussion back to the engine that drives change—leadership—and in showing how a purely managerial mindset inevitably fails, regardless of the quality of people involved.”

Change Leadership

So, the question that spins out of all of this focus on leadership:

Is it time to change the term “change management”?

Would the process be more accurately conveyed if we started referring to it as “change leadership”?

Read the Book

Again, if you haven’t read Leading Change, and you have any interest in creating lasting change in an organizational environment, you really should pick up a copy.

Not only do you stand to gain some critical knowledge, I think you will be shocked at the prescience of this 15 year-old book.

updated 11 October 2011 – added a link to the recent Kotter webinar


note: this post originally appeared on the Delta Blog, 5 October 2011

Sewage Pumps and Leadership

If you don’t read Jim Taggart’s Changing Winds leadership blog, you really should add it to your list – he does a great job!  Yesterday I read his latest entry Work Hard, Play Hard: Leadership Lessons to Redefine Your Thinking about Michael Abrashoff, retired U.S. Naval Captain and co-founder of GLS Worldwide.  Jim’s post is a review of Michael’s book, It’s Your Ship: Management Techniques from the Best Damn Ship in the Navy.

As I read this post it reminded me of the time I heard Michael speak in Toronto a few years ago.  He told one story in particular that always stuck with me – and it’s about time that I shared it with someone else…

The USS Benfold

When Captain Abrashoff took command of the USS Benfold in 1997,

the ship had one of the poorest service records in the U.S. Navy.  One year later the crew of the USS Benfold achieved the highest performance ratings in the fleet – and went on to win multiple awards and achievements.

The details of this remarkable turnaround are well worth the time it takes to read the book – I highly recommend that you check it out.

Sewage

Here is the story (as I remember it)…

its_your_ship-196x300

During the first 30 days of his new command Captain Abrashoff spent most of his time exploring the ship,
and one of the lessons he learned was that he had a sewage problem.

In the lowest part of the ship, in the dark of the bilge, there are pumps that move the ship’s sewage. It seems like such a meaningless thing – sewage pumps.  This is a fighting ship of the sea, outfitted with the latest technology that the U.S. defense industry can attach to a floating vessel with the purpose of blowing other things up.

But the sewage pumps were junk.  And they were junk in all of the ships of this class.  So there was a shortage of parts to keep them running.  And – as these things always go – there was a shortage of engineers who knew how to keep them running.

Big deal – these are just sewage pumps.  They have no impact at all on the ship’s capacity to launch missiles.

However, if these pumps are not functioning, the ship is not combat ready.  No sewage pumps, no operations.

Every Day

So, Captain Abrashoff, recognizing the importance of these pumps, but more importantly, recognizing the importance of the sailors who kept them functioning properly, would make the difficult climb down into the depths of the ship to check on his staff – every day.  Let’s repeat that — every day.

industrial_pump-280x187He could have just as easily picked up the phone and checked in, or had one of the ship’s officers do it for him.  But he recognized the critical failure point that these pumps represented in his efforts to change the performance and culture of his command.

So he took the time to personally visit these sailors so that they would clearly understand how important their work was to the success of the organization.

Where Are Your Pumps?

You might lead a small group or a large organization — either way, there are some great questions in this story:

  • Do you know where your sewage pumps are?  Can you describe — right now — which functions (processes) will stop your organization in its tracks.  Which ones seem vital, but under scrutiny maybe aren’t so critical as you thought?
  • How much time do you devote to those items deemed “important” by your managers and leaders that don’t add any value to actual accomplishment?  Do you have the guts to ignore these for the good of your organization?
  • Do you hide behind paperwork and reports or do you climb down into the “bilge water”?  How often do you get out of your office and talk to the people who make your organization actually work?  Not the “junior officers” and other middle-managers, but the “coal face” workers who make real things happen?
  • How important is prestige in your organization? Does the value of the paycheque dictate the value of the individual? Does your culture acknowledge the importance of those who “do” being just as (more?) important as those who “discuss”?

What other questions or observations can we draw from this story?  I would love to know if this story resonates with others as it did for me.


note: this post originally appeared on the Delta Blog, 31 August 2011

Managers, it’s Time for an Easter Egg Hunt

I have two kids.

They love kid things – colouring, bikes, skating, dolls, birthday parties, video games, dancing, hockey, braids. All the usual stuff. And they really love holiday celebrations, with the Easter egg hunt coming in very near the top of the list.

It has always been fun for my wife and I to set up the hunt. We’re plastic egg people. I know, it’s not traditional – yes, we have a fake Christmas tree too – but it’s convenient and let’s us mix things up with the treats.

But here’s the deal. As the kids get older, setting up the hunt gets more and more challenging. Parents, you know what I’m talking about.

When they were 3 years old, we would just walk around the yard and put plastic eggs down wherever we felt like it. Everything was out in the open and easy to spot. Yet they still would not see all of the brightly coloured eggs. Why? They would just walk around, head down, staring at the ground in front of wherever their body ended up pointing. Egg was a foot off the ground sitting on a swing? Couldn’t see it – it wasn’t where their attention was focussed.

But with time and the hard-won experience of multiple Easter adventures, they learned to take in more of their environment. Perhaps the eggs were above the ground, maybe even above their heads – higher than they could reach without climbing. They realized that Mom & Dad even put eggs in places that they couldn’t find without making an effort to get to places where they had never been before.

Now we have to work to find places that are challenging for our little bloodhounds to find. Why bother? It’s not as fun when it’s easy.

The Peter Principle – not Peter Cottontail

As a manager, time and experience have the same effect on you.

As so often happens, The Peter Principle placed me in a manager’s position before I had acquired the emotional maturity and life experience needed to be really effective at leading a group of humans toward a common goal.

I was so inexperienced that I just couldn’t see some serious problems that were right there in front of me – out in the open. They may as well have been trapped in a big pink egg and sitting on a swing seat. I was focussed on the ground in front of me.

But I didn’t get fired, and time and hard-won experience led to some inevitable growth. I learned to sit back, relax, and scan the environment with a practiced eye. And, eventually, I could pick out those bits of colour where there shouldn’t be any.

Still, I didn’t grow into a real and effective leader for my team and manager for my department until I got off of my seat, out of my office, and started looking in the places where I had never been before. It wasn’t easy. Sometimes it was scary to go into those places. But eventually – like everything that is worthwhile – I struggled through and I learned.

It’s Time for Your Easter Egg Hunt

Here’s my challenge to you as we head into the egg hunting season – get off of your seat, out of your office, and go looking in those uncomfortable places where the real challenges and problems for your team will be found.

  • We have been trained to provide consistent and clear feedback to our direct reports. When is the last time that you asked for their feedback on your performance? Do you think that they will feel confident and secure enough to provide you with honest feedback? There’s a nice, cozy dark place to start in. Nothing like a little dose of self-awareness to rattle our assumptions.
  • Do you know the short and long term goals of each of your staff? Have you ever asked this question and given sufficient time, space, and – most important – attention to allow the individual to develop a comprehensive answer? Do they have learning and development plans in place to support these goals?
  • Do you understand the preferred working and communication style of each of your team members? Are your team members clear on your preferred working and communication styles? Are you aware of the importance of generational differences in these preferences?
  • Do your employees believe that you “have their back”? When trouble appears do they feel like they are on their own, or are they part of team that pulls together and has a leader that will work for the greater good of the team – not for his/her own personal benefit?
  • Does your team trust you? How can you be sure?

There are many more challenges that could be added to this list. The point is, you’ll never know if you don’t search.

The answers won’t be in plastic eggs sitting out in the open – they’ll be difficult to find. But that’s ok, it’s not as fun when it’s easy.


note: this post originally appeared on the Delta Blog, 21 April 2011

Tools for Managers: The PESTLE Analysis

In a previous post, we discussed the use of SWOT Analysis and it’s usefulness as a framework for discussing the internal and external environment that an organization faces.  I would like to extend that discussion here to introduce the PESTLE Analysis – another framework used to guide your thinking as you participate in strategic evaluations.

You might recall that the ‘O’ and ‘T’ of the SWOT Analysis (Opportunities and Threats) focussed on the external issues impacting the firm.  The PESTLE Analysis is similar to SWOT in that it provides a framework to guide your discussions.  However, where the PESTLE differs is in its focus on the external environment.

And, it’s clearly an acronym – so what does it represent?

PESTLE

Political

Economic

Social

Technological

Legal

Environmental

Here we have a list of factors that are external to the competencies and capabilities of the organization and can help you move logically through an evaluation of the external world in which you operate.  This framework was originally referred to as the PEST Analysis, but was expanded to PESTLE over the past ten years as Legal and Environmental factors gained increasing importance.  In fact, there are some in the strategy and analysis business who are encouraging people to move to STEEPLED in reaction to the current environment for greater emphasis on ‘Ethical’ concerns and ‘Demographics’.

Political

What is happening politically in the environment in which you operate – these issues can take on a community, regional, national, or international perspective? A few months ago we might have shrugged our shoulders and thought, “Meh – nothing ever really changes.”  But I think the events of the past couple of months in Tunisia, Egypt, Libya, etc., will have changed the minds of a great many people on that front.

Some issues to guide your discussion:

  • political stability
  • government structure
  • trade policy
  • tax policy
  • lobby impacts
  • local perceptions and attitudes
  • regional conflict

Economic

What is happening within the macroeconomy in which you operate – locally, regionally, nationally, globally?  Is it in decline, growth, recession, bubble status?

Our slow emergence from the global economic meltdown has provided a wakeup call for many who had come to expect that the good times would continue unchecked.  The level of expertise in currency management techniques within Canadian management circles has matured radically over the past two years.

Other aspects for economic awareness:

  • economic growth
  • interest rates
  • inflation
  • currency valuations
  • credit availability
  • employment rates

Social

What is happening socially in the arena in which you operate – locally, regionally, nationally, globally?  Are cultural norms changing?  The coming change in the make-up of our workforce and the potential for an Intergenerational Divide is an example of a sociological challenge that our leaders will soon be facing.

Other examples of social factors:

  • demographics
  • skilled labour
  • education
  • health care
  • attitudes toward work
  • quality of life

Technological

What is happening within the technology sphere that can have a significant impact upon your operations?  If asked in 2005, would you have agreed that there would be an online social network that had 500 million members in 2010?

Some issues surrounding technology:

  • new research
  • rate of change
  • IT implementation in your area
  • product life cycles
  • government research funding
  • changes in Internet  use – service disintermediation, video and voice delivery, social networks
  • mobile telephony penetration and development – mobile applications, geolocation, near field communications
  • automation

Legal

An added facet to the original PEST model, this is in response to the increasing importance of the regulation and legislation on operations.  Maturity and appropriate enforcement of financial regulations will often form the baseline analysis for foreign direct investment.

  • tax law
  • trade
  • employment
  • security
  • resource acquisition

Environmental

The second addition to the PEST model, this item also reflects the importance of environmental issues on nearly the operations of nearly any organization.  Some firms are adopting environmental impact as a key differentiator in their strategic development.

  • local regulation
  • international treaties
  • public perception
  • local climate concerns
  • client values

Implementation

Again, like the SWOT, the PESTLE framework provides a tool to help you in guiding your discussion of the important external factors that can impact your organization.  However, some of the same weaknesses persist:

  • It is a “snapshot” analysis – findings will change over time, sometimes from day-to-day.
  • It will be as variable as the number of people involved in the discussion.
  • Be careful not to make sweeping judgments of future states on small data sets.

However, this can be a valuable tool in directing the analysis when used appropriately.  In fact, the SWOT – fuelled by the PESTLE – can be very effective in driving Scenario Planning activities.

If you would like to dig deeper into this tool, the RapidBI website has an excellent discussion and template for using the PESTLE Analysis.


note: this post originally appeared on the Delta Blog, 15 March 2011