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Why is Environmental Scanning the Key Input to Strategic Workforce Planning?

Not unlike checking the peak times for grocery shopping to avoid crowds, it’s vital to undertake environmental scanning when embarking on any business venture. Unlike preparing for grocery shopping, environmental scanning helps you understand your internal and external environment and how that will impact your organisation. 

It’s crucial for informed decision-making and shaping the ideas and insights your managers need to understand environmental trends. These could impact an organisation and its workforce. It’s also a key component of your strategic and workforce planning projects—meaning there’s no time like the present if you haven’t already done it. 

In this guide, we’ll take you through everything you need to know about environmental scanning, how to do it and how to get the most out of it.

Contents

What is environmental scanning?

The primary purpose of environmental scanning is to help managers understand the operating environment. That in turn helps determine the future direction of an organisation. Environmental scanning is essential to analysing the trends, competition, customers and external labour supply in order to obtain a more holistic view of the context your organisation functions within.

The importance of environmental scanning

In its purest form, environmental scanning is the process of gathering relevant data to identify external and internal opportunities and threats. These opportunities and threats are so important to identify because they: 

As with most business activities, it’s most effective when you use a framework to guide the process. There are many different frameworks (even a SWOT—or strengths, weaknesses, opportunities and threats—analysis can be effective) but we find the process to be relatively straight forward if you follow the STEEP (plus legal) method. The STEEP method analyses social, technological, environmental, economic, political and legal impacts on your business.

Environmental scanning plays a vital role in many of the processes within your organisation. Consider how advantageous it is to:

Environmental scanning is a necessary component of strategic planning as it provides information on factors that will affect your organisation in the future. Before you say, “we can’t plan for the future, we don’t know what will happen”, consider that this information allows leadership to proactively respond to external changes, rather than hastily reacting. And, if your hasty reaction is misinformed and ill-timed, it can do more harm than good.

Undertaking environmental scanning will also help your organisation remain sustainable and obtain a competitive advantage. It’ll further help the organisation at large to retain a better understanding of employees, customers, and competitors.

Why you need to know this

From a workforce planning perspective, understanding your organisation’s internal and external operating environments is critical. The information gathered during this phase provides the foundation on which your workforce plan will be built.

How do you undertake an environmental scan? You look to the external environment 

In short? Research. Read. Ask questions of multiple stakeholders to your organisation. Consider the data you compile and organise them into “chunks” or themes, such as STEEP (+L, aka plus legal).  

The long version? We’ll need to dive deeper into the STEEP(+L) approach for that. It’s incredibly useful, so we recommend getting yourself a cup of tea and a snack and settling in to read about it. 

Social 

The first aspect of this method charts: 

Technological

As the name may imply, this part maps: 

Economic 

The first E in STEEP looks at 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, and industry trends and changes. 

Environmental 

The second E puts the literal environmental into environmental scan, surveying climate change, global sustainability concerning the use of natural resources (including air, water, and land), mining, hydraulic fracturing, fossil fuels, clean energy, and alternative energy sources. 

Political 

Last but not least, the political scan looks at: 

Legal/Regulatory 

This additional section covers both legal and regulatory factors as well as developments in case law (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:

Infographic showing the STEEP framework for environmental scanning example

Outside of the STEEP framework, there some secondary areas of impact to consider.

Infographic example environmental scan  secondary areas of impact to consider during a STEEP analysis

All organisations 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 and personal to your organisation. 

Environmental scanning example

When it comes time to undertake environmental scanning, 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 some internal factors but predominantly external. To ensure your environmental scan is comprehensive, you should 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. Also consider current and planned projects. 

Most of the factors you will have considered so far are business issues because you’re 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, and 10 years. Don’t sleep on the knowledge and insights of your managers, senior leaders and other key stakeholders. Using a collaborative approach will ensure you understand and uncover internal factors that the data may miss.

Utilising your environmental data 

Once you’ve gathered information about the external environment and potential impacts of identified trends (such as competitors and understanding internal factors), you’ll find your strategic management processes are better informed.  

For this reason, you want the environmental scan to be useful and to inform your strategic planning, organisational change, or workforce planning efforts. Hot tip: Showcase 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 users’ understanding, below is an example template for your environmental scan outputs. We call it a billboard:

Table template for environmental scan outputs

Billboards should be organised so that information can be grouped into easily digestible segments or “chunks” of trends. Keeping a copy of this billboard, perhaps in large, editable poster format and in a heavily-trafficked part of the workplace, will 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 then distributed to key stakeholders who are involved in developing their organisation strategies and plans, including workforce plans. In a workforce planning project, it’s important to continue inviting managers to discuss trends that they foresee will have the greatest impact on their workforce. You can then utilise this more nuanced information when developing plausible future scenarios.  

Don’t neglect to maintain your environmental scan billboard over time, to ensure you remain current and abreast of external trends and potential impacts. 

The takeaway: the importance of scanning environmental information

Strategic workforce planning means you can make more informed decisions relating to the future (and future success) of your organisation. But in order to get to this sweet spot, you need to undergo an environmental scan. Understanding your internal and external threats and opportunities, and any trends amongst those, means you’re better prepared in case of emergency, better informed when making business decisions, and in a better position to grow, pivot or change as needed. Oh, and did we mention that you’ll already have the plans in place to navigate these events, all thanks to environmental scanning? Ensure you get all key stakeholders involved in the process so you cover all bases, nooks and crannies, and you’ll be future fortified before you know it.

Book a call today with the team at Panorama and let’s discuss how to drive efficiencies in your workforce planning through digital transformation of WFP processes.