THE TOOLKIT OF THE DECISION MAKER #3 The PESTEL Model
22-03-2021In February, The Toolkit of the decision-maker proposed an initiation to the SWOT Analysis. As a simplification of a strategic environment, SWOT’S limits became apparent: rough, incomplete, nurturing decision-makers ‘overconfidence... If SWOT is imperfect, it still has virtue, that of highlighting the organization’s strategic environment’s importance.
What is a strategic environment? Inherited from business management, the environment is organized around three strata: the market: the concurrence of a firm; the industry: the sector of activity; the macroenvironment: a nebula where political, economical, socio-cultural, and many more variables converge to reflect the ever-changing contexts of societies.
Today, PRISMA will guide you through the macroenvironment cloud’s dust and gas with the PESTEL Model.
In its second issue, The Toolkit of the decision-maker coined the definition of a good decision-maker. A good leader is one who takes a decision and sticks to it.
Yet, our societies are unstable, no variable is immobile. Leaders shouldn’t be too headstrong and refuse change, but rather adapt their decision to changing currents.
Thus, a good leader is one endowed with the gift of anticipation.
PRISMA does require you to read the future in the flights of birds like Delphi’s oracles once did. Rather, this article offers concrete tools to build up a capacity of anticipation: the PESTEL Model.
PESTEL’s origins are quite debated. Academia does agree on a first occurrence in the book of Francis J. Aguilar, Scanning the Business Environment. Initially, Pestle was entitled the ETPD model, from the initials of macroeconomic variables it considered: economy, technology, politics, and socio-cultural norms. During the 1980s, the ETPD Analysis was sharpened and changed appellation many times, from PEST to STEP, to finally, PESTEL.
PESTEL is meant to be helpful for private actors, businesses, firms. However, PRISMA believes it can be of benefit to all, especially NGOs or solitary entrepreneurs. They are not navigating in an environment free from conflicts, competitions, innovations, or opportunities, quite the contrary.
Since the multiplication of International Organizations in the 1990s, and the professionalization of NGOs during the same decade, civil society’s actors need to get better at being resilient. Resilience calls for adaptability, perspicacity: the ability to anticipate turning points. PESTEL is indeed useful to everyone.
Like the SWOT Analysis, PESTEL focuses on the strategic environment. It records macroeconomics variables that may impact a unit’s evolution. The aggregation of change factors is the basis for the creation of adaptability scenarios. Such scenarios can then guide the strategic decisions of decision-makers.
PESTEL stands for six categories of variables: Politics, Economics, Socio-cultural factors, Technology, Economy, and Legal.
- Political Variables
Public policies impact the strategic positioning of civil society’s actors. Today, they have a direct incidence on the environments of private and public sectors. For instance, an aid to employment, for the Youth, is relevant to be known and exploited by NGOs engaged in a related sector, such as Youth Engagement, Early careers, Education …
Political variables also include conflicts, corruption, the administrative capabilities of the State, as well as its relationship with the civil society. An NGO needs to consider obstacles to its activities such as the repression of certain social groups, which can create needs that the NGO must target to be relevant in a particular country. Administrative capabilities are of importance, if its process is very slow, it will impact the NGO’s activity.
The regional and international scale must not go neglected. Depending on your sector you must identity International or Regional Organizations developing public policies impacting your activity. For instance, if you are engaged in the education and culture sector, keep up with the news of UNESCO, UNICEF, or the World Food Programme. If you lead a team of young researchers of space law, be sure to stay alert for any opportunities coming from UNOOSA, national Space Agencies, or the European Space Agency.
- Economical Variables
Often ignored by civil society’s actors, the economical conjecture is crucial to anticipate the behavior of your targeted audience. Track the evolution of indicators such as the GDP. In times of economic crisis in a European country, an NGO proposing pricey cultural exchanges in Asia is anachronistic. Redirect your effort to a different activity, such as free Japanese or Chinese language classes, or move your activity to a different country, in a few words: tailor your offer.
- Socio-cultural Variables
Just like economical variables, socio-cultural norms and characteristics must be part of your strategic decision. Be sure to know your target, its needs, its behavior, the norms it follows. A demographic analysis is required before any resources are allocated to an activity. If you intervene in a country to ease the acceptance rate of your program, you must learn social norms, what is accepted, what is rejected.
- Technological Variables
You do not want to miss a revolution! The information revolution, with the Internet, changed NGOs and civil society’s strategic position irrevocably. If your NGOs organized Virtual Debate or Virtual Exchange, you must keep an eye out for any new social media app or online debate platform and jump on the bandwagon when it whistles. In the age of the internet, you must always question the pertinence of your offer. Information is now easily accessible and available. It might be redundant to write one more article on hate speech, but maybe you can invest in a workshop teaching hands-on methodologies to deconstruct hate speech and prevent the spread of false information. Tell us, if you’d want PRISMA to design a workshop on the decision-maker toolkit! This reasoning will allow your offer to have an impact.
- Ecological variables
No one can escape it, in the 21st century. Rather than a green economy, which is important, but in which your NGO may not have the opportunity to participate, climate change and ecology are an incentive to reconsider the durability of your activities. You can also implement virtuous changes at your own pace and at your own scale with in-house policies on waste, for instance. Be aware that climate change can affect your activity, with natural disasters, migrations due to rising temperatures, or that of the sea level. Climate change will create needs, urgent needs, and thus, new targets.
- Legal Variables
Especially important in a COVID-19 context, norms and regulations frame, limit your activity. Such frameworks change from one country to another, or even from smaller geographical units. If your NGOs activity is essentially face-to-face, check the evolution of the restrictions on gatherings or mobilities.
You now perfected the knowledge of the PESTEL’s variables. The next step is to identify those relevant to your activity. Do not invest energies tracking all of them. Time is money. Instead, grant just attention to key variables: pivotal variables. John Gerry defined pivotal variables as those that can affect significantly your sector - not just your organization.
Thus, they vary from one industry to another. For NGOs navigating in the education sector, a pivotal variable is Opened/Closed schools, especially during the present pandemic. Pivotal variables are characterized by uncertainty, they never stand still, they always change, they require your devoted and continuous attention.
You have identified pivotal variables, now, aggregate indicators to track them. To do so, refer to the SMART methodology. You can also refer to official reports, depending on your sector. For instance, NGOs designing solutions for SMEs in developing countries can refer to the World Bank’s Global Findex.
The last step is the writing of scenarios. They are alternatives anticipating the future of your organization. Let’s go back to the pivotal variable Opened/Closed Schools. One Scenario will be written for the Opened variable, the other for the Closed variable. Your scenarios must use operational terms, actions, they are not summaries of a situation. It is not “The school is closed, children can not get their education”, but, “Schools will close, we will invest in remote education by offering teachers formations to remote working platforms before they do”.
PESTEL is now within your reach. As perfect takes practice, start using it for small projects, before implementing its use to your organization as a whole.
Remember: do not react, anticipate.