April 11, 2024

Why Environmental Scanning is a key input to workforce planning.

By Tanya Hammond, Wendy Morison & Tessa Spinks

When embarking on any business venture, it is vital to undertake environmental scanning to understand your internal and external environment.

Environmental scanning helps inform decision-making and helps shape ideas and insights leaders and managers need to understand to proactively identify potential impacts on an organisation and its workforce. It is a key component of the strategic planning and workforce planning projects we undertake with our clients.

What is Environmental Scanning?

Environmental scanning is the process of gathering relevant data to identify external and internal opportunities and threats that could impact an organisation and its workforce and which need to influence future decisions. 

The primary purpose of environmental scanning is to help managers understand the operating environment, which in turn helps determine the future direction of an organisation. Environmental scanning is most effective when you use a framework to guide the process. 

There are many different frameworks – even a SWOT (strengths, weaknesses, opportunities, threats) analysis can be effective – but we find the process to be relatively straight forward if you follow the STEEP (and legal/regulatory) method which analyses social, technological, environmental, economic, political and legal impacts on your business. To obtain a more holistic view of the context your organisation operates within, we consider it is essential to analyse the trends, competition, customers and external labour supply.

You may be asking yourself, why is environmental scanning necessary?

Environmental scanning plays a vital role in many of the processes within your organisation. There are many advantages of performing an environmental analysis that helps the organisation stay safe from business loss, stay ahead of the competition and allocate resources to enhance the business. 

Environmental scanning is an essential component of strategic planning as it provides information on factors that will affect the organisation in the future. The information gathered will allow leadership to respond to the external environment proactively. Undertaking environmental scanning will also help your organisation remain sustainable and obtain a competitive advantage when closely monitoring several information sources simultaneously. It will help the overall organisation retain a higher understanding of its employees, customers, and competitors. From a workforce planning perspective, understanding your organisation’s internal and external operating environments is critical, as the information gathered during this phase provides the foundation on which your workforce plan will be built.

How do you undertake an Environmental Scan?

Research. Read. Ask questions of multiple stakeholders to your organisation. Consider the data you compile and organise into ‘chunks’ or themes, such as STEEP(+L). This is incredibly useful. The following is an outline of each STEEP element:

Social

Demographic changes, lifestyle developments (e.g., the movement toward “wellness” and healthy living), differing wants and needs of generations in the workplace and outside of it, education and expectations of higher education, changing social norms and expectations.

Technological

Product technologies (e.g., smartphones, virtual reality, robotics), communication technologies (e.g., the internet, Skype, FaceTime, email, text messages, social media), operational technologies (e.g., global distribution systems, global supply chains, mass customisation) and advances in technology which enables increased automation (machine learning, artificial intelligence etc.)

Economic

Interest rates, currency exchange rates, the state of economies, prices, inflation, the distribution of wealth in a society, the effects of globalisation, vertical and horizontal integration in one’s industry, industry trends and changes.

Environmental

Climate change, global sustainability concerning the use of natural resources (including air, water, and land), mining, hydraulic fracturing, fossil fuels, clean energy, alternative energy sources.

Political

Regulatory developments, government policies related to issues that affect your industry, taxation schemes, government grants and fiscal incentives, political stability, strikes, the role of governments in different countries, war, and

Legal/Regulatory

Both statutory as well as developments in case law of (e.g., immigration, health care, water, cyber law, privacy, product liability, patent law, intellectual property, civil rights) or regulatory environment.

There are many directions and components that a manager could add to their environmental scan, and they will always be driven by the context of your organisation.

Example elements that should be considered are: 

    • What changes are currently happening within society?

    • What is different within generations? How will these social changes impact my workforce and my organisation in the future?

    • Do I have a workforce which is inclusive, psychosocially safe and representative of the population in which my organisation operates?

    • What developments in technology may impact my organisation in the future?

    • Developments might impact your organisation itself, or potentially your customers, or suppliers.

    • Are there new technologies that can make my organisation more efficient and productive?

    • How do I best leverage technological advancements to automate tasks which my employees are currently performing?

    • Which job roles and occupations within my organisation will be most impacted by advances in technology and automation? 

    • How could we leverage technology to improve an employees’ remote and flexible working experience?

    • What changes are happening within the environment that could impact the future of your organisation?

    • What are potential impacts of catastrophic climate events on your workforce and how prepared is your organisation to strategically respond, with the right capacity and capability while ensuring the safety of your workforce?

    • What are current environmental trends, and what is their impact?

    • What is happening in the economy that could affect your future business operations?

    • How will your organisation respond to changes in interest rates or currency exchange rates, price increases or inflation?

    • Are there opportunities for more effective vertical and horizontal integration in your industry?

    • How is your industry changing (growing, contracting or remaining static) and how is your organisation responding to these changes?

    • Are there opportunities for more effective vertical and horizontal integration in your industry?

    • Is your organisation’s industry seasonal or cyclical?

    • What is the average life cycle in your organisation’s industry?

    • What impact will a change in government have on your organisation?

    • What impact will political instability have on your organisation?

    • Is there impending legislation or changes to legislation (e.g. tax laws) that will affect your operations?

    • Are there any regulatory changes likely to be implemented which will impact on your operations?

Secondary:

    • What impact will a change in government have on your organisation?

    • What are the workforce and workplace trends that are occurring internal and external to your organisation?

    • What is the current employee experience?

    • What is your competition doing that provides them with an advantage?

    • Where can you exploit the weaknesses of your competition?

    • How is your customer base changing?

    • What is impacting your ability to provide top-notch customer service?

    • How are your customer expectations changing?

    • What is the labour market like in the geographies where you operate?

    • How can you ensure ready access to high-demand workers?

    • What are the labour market trends?

Each organisation must spend time considering and identifying what factors are likely to have the most impact, to ensure the environmental scan is comprehensive and therefore a helpful tool; some organisations will encounter different issues to others; therefore, it is vital to make the scan relevant to your organisation.

When conducting an environmental scan, you should use various methods to collect data, including reviewing publications, facilitating focus groups, interviewing leaders inside and outside the organisation, and administering surveys. 

The STEEP(+L) process will identify predominantly external factors and some internal factors, so to ensure your environmental scan is comprehensive, it is important that you also conduct a more specific internal scan of your organisation. Consider your organisation’s purpose, vision, strategic plan, risk plan, financial plan, organisation outputs and business goals – as well as current and planned projects. 

Most of the factors you will have considered so far are business issues because you are trying to get a clear picture of the business operating environment. Importantly, for workforce planning purposes it is also important to consider internal data such as your organisation’s workforce profiles including employee demographics, employee tenure, career development opportunities, trends in retirements, employee turnover, employee engagement and any financial constraints. 

Examine and analyse this data to determine your organisation’s strengths, weaknesses, opportunities and threats. Consider where your organisation is now and where it plans to be in three, five to 10 years. The knowledge and insights of managers, business owners, senior leaders and other key stakeholders is critical to ensure you understand and uncover internal factors within your organisation that the data may miss, so it is important that you use a collaborative approach in conducting your environmental scan.

What do you do with the data you’ve compiled through your environmental scanning efforts?

Once an organisation has gathered information about the external environment and potential impacts of identified trends, such as its competitors and understanding the internal factors, it should help inform strategic management processes. 

You want the environmental scan to be useful and to inform your strategic planning, organisational change, or workforce planning efforts. A tip that we give all managers and workforce planners embarking on an environmental scan is to showcase their findings in a digestible way. This will increase the likelihood of the environmental scan document really adding value to your process and helping your organisation prepare for and adapt to change.

To deepen the user’s understanding, below is an example template for your environmental scan outputs. We call it a ‘billboard*’:

We organise billboards so that information can be grouped into easily digestible segments or ‘chunks’ of trends. We often print out an initial billboard in a large poster size and invite staff and stakeholders to review and contribute to areas which are missing from the initial environmental scan outputs.  

The final outputs of the environmental scan are distributed to key stakeholders who are involved in developing their organisation strategies and plans, including workforce plans. In a workforce planning project, we continue to invite managers to consider and discuss trends which they foresee will have the greatest impact on their workforce. This information is then utilised in informing the development of scenarios which outline plausible organisation futures.  

We invite organisations to maintain their environmental scan billboard over time, to assist them in remaining current and abreast of external trends and potential impacts.

Useful links / articles.