PESTLE Analysis: A Strategic Framework for Informed Decision-Making

The environmental scanning process is systematized by searching for environmental forces organized under specific categories. This process is commonly referred to as a PESTLE analysis for political, economic, social, technological, legal, and environmental categories.

A PESTLE analysis can be conducted on different levels: for the entire enterprise, for individual units or functions, or for specific activities. Performing this type of analysis requires HR professionals to adopt a broader and more long-range perspective than they may ordinarily use. At the same time, analysts must restrict their horizons and the directions they scan, or the organization will drown in data whose analysis may absorb too much time or whose complexity may paralyze decision making.

The general process is similar to some of the steps used in the risk management process. PESTLE analysts:

• Assemble a list of possible events or trends that exist now or could materialize within a defined time frame. This could be done through brainstorming meetings, interviews or focus groups with experts in certain areas, or literature reviews.
• Identify the potential impacts on the organization. These should include positive and negative or immediate and long-range effects. Analysts should also look for possible ripple effects on apparently unconnected processes or parts of the organization.
• Research the impacts more thoroughly to understand possible causes, their dimensions, and connections with other events or trends. For example, trending information may be obtained from government agencies or industry associations
• Assess the importance of the possible impacts based on the strength of the date.

Exhibit traces the way in which events or trends that have been identified through PESTLE analysis might affect an enterprise and HR. Note that each of these categories can include unique ethical considerations. For example, political analysis may include examining levels of corruption.

PESTLE Analysis

Category	Possible Enterprise		Possible HR Impact
Political (influences of government policies, laws, and regulations)
·        Regulation environment and actions ·        Taxation policies ·        Treaties and tariff structures ·        Immigration policies ·        Governance legislation ·        Government stability ·        Levels of corruption		An organization's leaders are debating expanding the business into a country because corruption and bribery make it difficult to do business there.	The company decides to go ahead, and HR considers what guidance to provide to those who will be working in this country and those who will be assessing these employees' performance.
Economics
·        Business forecasts ·        Labor availability and cost ·        Price for services and materials (inflation/deflation rates) ·        Household income ·        Consumer confidence ·        Availability and cost of capital ·        Income disparities		Expansion plans could be curtailed by signs of increased costs of financing or difficulty in obtaining investment.	A business case analyzing the purchase of a new HR information system could emphasize the savings in interest by making the purchase now.
Social
·        Demographic shifts in age, ethnic background ·        Education and skills profiles ·        Housing patterns ·        Patterns of discrimination ·        Family structure ·        Values ·        Lifestyles and purchasing habits ·        Media use ·        Effect of globalization on local culture		The organization channels an increasingly large portion of its marketing budget into social media aimed at a growing youth demographic.	HR must assess its policies and implement monitoring to make sure that social media are used in an equitable manner for recruiting and that employees know what social media activity conforms to company policy.
Technological
New centers of technological training and expertise • Innovative technology and applications of technology • Unequal access to technology • New or changing technical standards • Technological vulnerability		The organization may have to invest more heavily in data security measures.	HR has to review its recruiting program to identify and attract new sources of highly skilled workers in this area.

 

 

PESTLE Analysis (Continued)

Category	Possible Enterprise		Possible HR Impact
Legal
·        Trends in patent law and intellectual property protection ·        Increased civil litigation in workplaces ·        Increased shareholder legal actions ·        Unequal access to legal representation ·        Trends in evidence requirements and penalties ·        Increased cost for defense ·        Trends in findings for corporate negligence		Senior management increases its budget for legal services and its risk contingency reserves earmarked for legal issues.	HR strengthens risk management against legal vulnerabilities (for example, compliance checklists and audits, use of alternative dispute resolution).
Environmental
·        Decreasing carbon consumption limits ·        Increased use of alternative-fuel vehicles ·        Need for innovative technology and practices to decrease use of resources or environmental impact ·        Unequal effect of environmental damage or policies ·        Vulnerability of reliable and potable water supplies ·        Increased interest in environmental impact		The organization may have a corporate social responsibility strategy that includes environmental goals.	HR can use the corporate social responsibility strategy in the organization's employment brand to attract workers.