better management practices environmental scanning - 20 may 2004
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Council on the Cost and Quality ofGovernment
Better Management
Practices
Environmental
Scanning
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The Better Management Practices Guidelines are produced by the Council on the Cost and Quality of
Government to assist teams undertaking Performance Reviews using the CCQG Performance Review
Methodology.
All rights reserved. Except for the quotation of short passages for the purpose of criticism and review,
no part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or
by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior
permission of the publisher.
The Better Management Practices Guidelines can be viewed on the Council’s website:
http://www.ccqg.nsw.gov.au
Better Management Practices – Environmental Scanning
ISBN 0 7313 3336 5
Copyright © Council on the Cost and Quality of Government, May 2004
Office address: Postal address:
Level 13, Bligh House c/o Mr P Connelly
4-6 Bligh Street Executive Director, Performance Measurement and ReviewSYDNEY NSW 2000 NSW Premier’s Department
Level 39, Governor Macquarie Tower
1 Farrer Place
SYDNEY NSW 2000
The Better Management Practices Guidelines was project managed by Peter Cranko and prepared by
Peter Connelly, Peter Cranko, Jane Ford, Cecily McGee, Jehangir Meher of the Performance
Measurement and Review Division. Design and layout by Sabine Mueller.
The Council welcomes comments suggestions and enquiries regarding this publication.
Contact officer: Mr Peter Connelly
Executive Director, Performance Measurement and Review
NSW Premier’s Department
Phone (02) 9228 3096 or 9228 5017
Email: Peter.Connelly@premiers.nsw.gov.au
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Better Management Practices – Environmental Scanning is the first in a series of Better Management
Practices publications prepared by the Council on the Cost and Quality of Government (CCQG).
The CCQG is the NSW Government’s in house management consultancy group. Our mission is to work
with NSW Government agencies to improve the quality and value of government services delivered to
the citizens of NSW. The Council is comprised of CEOs from the public and private sectors as well as
leading management academics.
The Council undertakes three types of activity: It measures performance and reports on the outputs and
results of NSW Government agencies in the Overview of NSW Government Services; it reviews
performance of agencies using a methodology specifically designed for public sector agencies; and itseeks to improve performance through the adoption of “Better Management Practice” within the NSW
public sector.
We are developing a series of manuals – one for each of the 12 agency ‘performance areas' defined by
CCQG’s Performance Review Methodology. This publication addresses Performance Area 1:
Environmental Scanning . It identifies key practices agencies use to monitor and analyse the
implications of trends, opportunities and threats in their external environment – a key step in delivering
appropriate, effective, efficient and prudent services.
Each Better Management Practice publication provides a practical toolbox of management techniques
comprising templates, explanatory notes and case studies. They have been developed to assist teams
undertaking our performance reviews. Feedback from agencies suggests these documents may assist a
wide range of public sector managers to better understanding their agency and develop strategies toimprove performance. Many of these tools can be used at different levels in an organisation (eg team,
branch, division) or by a number of agencies (eg clusters) for planning or analytical purposes.
In keeping with the CCQG’s aim to assist agencies improve the quality and value of government
services, this manual provides a practical resource which I hope will be of assistance to agencies seeking
to adopt ‘better management practices’ and improve their performance.
At present each tool in the manual is supported by a hypothetical case study. I encourage agencies to
submit your own worked examples of the tools. We will post your case studies on our website to assist
agencies share knowledge, ideas and better practice examples.
I encourage all agencies to give us your feedback and suggestions about the manual by completing the
attached feedback form. Council is interested in which tools you find useful and your suggestions fornew tools that could be developed.
The Council thanks the Performance Measurement and Review Division of the Premiers Department for
their assistance in preparing this publication.
Yours sincerely
Professor Percy Allan AM
Chair, Council on the Cost and Quality of Government
May 2004
Council on the Cost and Quality of GovernmentStreet address:
Level 13 & 14 Bligh House
4-6 Bligh Street, Sydney 2000
Postal address:
GPO Box 5341
SYDNEY NSW 2001
Telephone: (02) 9228 4870
Facsimile: (02) 9228 3015
Email: ccqg@premiers.nsw.gov.au
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Better Management Practices : Environmental Scanning
ContentsPage
1. Preface – Performance Reviews in the NSW Government 1
2. Introduction to the Environmental Scanning Management Tools 2
3. Environmental Scanning Tools 5
3.1 PEEST Analysis 5
3.2 Scenario Building 18
Better Management Practices
EnvironmentalScanning
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Better Management Practices : Environmental Scanning Page 1
1. Preface – Performance Reviews in the NSW GovernmentSector
This is one of a series of manuals to be produced by the Council on the Cost and Quality of Government
(CCQG). It has been prepared to assist CCQG Review Teams undertaking reviews of government
agencies.
The CCQG, with the strategic and secretariat support of the Performance Measurement and Review
Division (PMRD) of the Premier’s Department, is responsible for measuring, reviewing and improving
performance in the New South Wales public sector.
CCQG undertakes Performance Reviews of NSW Government agencies and programs at the request of
either the Budget Committee of Cabinet or an agency minister. The purpose of each review is to ensure
that an agency’s activities accord with Government policies and achieve desired outcomes, and to assess
whether programs are being provided in the most efficient, effective and prudent manner.
As part of each Performance Review an assessment is made of the quality and extent of application of
identified ‘best management practices’ in each of the 12 performance areas in the review methodology 1.
Some of these practices are mandated by legislative or central agency requirements; others reflect
acknowledged best practice or professional standards.
These manuals are designed to assist review directors and teams to use the CCQG methodology in
assessing the agency’s management practices. The information may also be of use to executives,
managers and staff throughout the public sector.
Reviews are conducted by review teams which consist of a review director (a senior executive from a
third, independent agency) and review team members (a mixture of Performance Measurement and
Review staff and officers from the agency under review).
Better Management Practices deals with the 12 performance areas identified in the CCQG review
methodology. This manual addresses Performance Area One: Environmental Scanning. It describes
typical tools and processes that agencies use in undertaking Environmental Scanning. Generic templates
and worked examples of various tools are also included. These tools and templates assist reviewers to
determine whether the agency being reviewed applies such practices, where they are applied, and
whether they include the key features that are consistent with better practice.
CCQG Review Methodology – 12 Performance Areas
Strategic Dimensions Operational Dimensions
1. Environmental Scanning 7. Culture
2. Clients 8. Communications
3. Other Stakeholders 9. Organisational Structure
4. Legislation and Policy 10. Human Resources
5. Service Delivery 11. Processes and Systems
6. Strategies and Reviews 12. Controls and Metrics
1 CCQG (2003) Guidelines for Reviewing NSW Government Agencies: Performance Review Methodology. Sydney: Premier’s Department
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Page 2 © Council on the Cost and Quality of Government
2. Introduction to the Environmental Scanning ManagementTools
How do these tools help?
The tools outlined in this manual are intended to help reviewers assess how agencies build anunderstanding of the major external forces and trends that affect their work. Ensuring responsiveness to
the sector, state, national and international context is one of the key ways that agencies can ensure they
are delivering the most appropriate policies and services. Analysing the impact of the external
environment on agency activities and programs is also an important part of planning and preparing
management documents in the NSW government sector.
Why should they be used?
These tools look at how well agencies understand and respond to their broader environment and whether
systems are in place to do this. These tools assess how agencies:
• scan and review their external environment;• understand the major external trends and forces affecting their external environment; and,• ensure that strategy and actions are shaped by conditions in the external environment.
What practices should be in place?
The agency needs systems in place for regular environmental scanning to anticipate significant external
changes. Environmental scanning helps agencies to be up-to-date on broader developments relevant to
their area of activities, including an understanding of innovations nationally and internationally.
Participating in whole-of Government or cross-agency initiatives can also be a useful way for agencies
to better understand the context they operate in.
What are the key questions?
Key questions to ask when assessing an agency’s environment capacity include:
• What are the major external forces impacting on the sector?• What trends are evident?• Has the agency done any formal environmental scanning and if so, what technique was used?
How have the results been used?
• How do other governments in Australia and elsewhere approach this policy area?
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Better Management Practices : Environmental Scanning Page 3
What are the key tools?
Two tools are generally used to analyse issues in the external environment. These tools should be
customised and used selectively, depending on agency needs and circumstances.
Tool Question addressed Description
PEESTAnalysis
What are the key bigpicture trends theagency faces and whatare their implicationsfor the agency?
PEEST analysis considers the impact of externalpolitical, economic, environmental, social andtechnological factors on an agency’s activities (oftencalled ‘Environmental Scanning’ or ‘Trends Analysis’).
ScenarioBuilding
What future conditionsshould the agency beprepared to respondto?
Scenario Building develops stories that help agenciesrecognise and adapt to changing circumstances.
Scenarios provide pictures, or visions, of alternativefuture environments, enabling agencies to test theoutcomes of different decisions.
How do these tools assist in complying with reporting requirements?
Agencies are required to report on various aspects of their activities and performance to a range of
parties including their Minister, Parliament, citizens, central agencies and a range of other bodies. Some
of these are mandated by legislation while others are required by central agencies. The use of the tools
outlined in this document will assist agencies comply with a range of reporting requirements as outlined
below.
Requirement Description Source Use of Tools
AnnualReport
The Annual Report mustinclude changes in legislation,significant court cases andeconomic factors that mayimpact on activities.
AnnualReports(Depts.) Act[s11(1)(f)], AnnualReports(Depts.)Regulations[Schedule 1]
PEEST Analysis: assists byproviding an analysis of arange of impacts includingpolitical economic and socialimpacts.
Scenario Building: helps raiseawareness of legal andeconomic factors that maychange the agency’s strategicor operating environment.
Financial
Management
Agencies are required to have
sound internal control systemsto determine efficiency andeffectiveness and to reviewwhether programs/operationsare appropriate to policy goalsand objectives.
Public Finance
and Audit Act[s 11]
PEEST Analysis: assists
agencies determine the criticalfactors that impact agencyefficiency, effectiveness andappropriateness.
Results andServicesPlans (RSPs)
RSPs require agencies todemonstrate how well they areusing their current allocationand how service delivery canbe improved within existingresources.
TreasuryPolicy Paper03-05
PEEST Analysis: assistsagencies determine whethertheir goals/services and targetsare aligned with governmentpriorities.
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Better Management Practices : Environmental Scanning Page 5
3. Environmental Scanning Tools
3.1 PEEST Analysis
What is PEEST Analysis?
PEEST Analysis is a broad-brush assessment of the external environment in which the agency operates.
Elements generally scanned include PEEST i.e. political, economic, environmental, social, and
technological. The analysis aims to detect key forces and emerging trends.
The process can be qualitative and/or quantitative. Qualitative techniques use the judgement and
opinion of knowledgeable people e.g. Expert Panels, clients and front line staff. Qualitative techniques
are generally based around panels, workshops or questionnaire based processes and aim to combine and
average or draw out the opinions of experts, client or front-line staff. The Nominal Group Technique is
a popular workshop tool which ensures that every individual identifies issues and the group takes
consensus positions. The Delphi method uses questionnaires and reports to identify and consolidate the
views of expert panels where members do not meet face to face. Qualitative techniques are critical if
new and emergent issues are to be detected in the PEEST Analysis.
Quantitative techniques use existing data to identify the scale of the issues and quantifiable change over
time. Examples of quantitative techniques include: time series analysis, which extrapolates future
trends on the basis of past patterns; and, models that predict one variable on the basis of other (known or
unknown) variables.
Why use PEEST Analysis?
Agencies can use PEEST Analysis to identify issues and trends in the external environment and to
understand their implications. This enables them to develop appropriate responses.
In addition, agencies can integrate PEEST Analysis findings into their management processes torespond to or anticipate issues in the external environment. Related strategic management processes
include:
• scenarios about what the future may hold;• strategy and policy formulation and review; and,• planning to minimise exposure to risk.
Other publications in the Better Management Practices Tools series deal with these topics.
What does PEEST Analysis deliver?
PEEST Analysis identifies the key external issues likely to impact on the agency. In this way it delivers
an analysis of the constraints (or threats) and opportunities an agency faces in its external environment.
As such it represents the second half of the Strengths, Weaknesses, Opportunities and Threats (SWOT)
Analysis that looks at the external opportunities and threats of an organisation.
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Page 6 © Council on the Cost and Quality of Government
PEEST Analysis – Implementation Steps
PEEST Analysis comprises the following four generic steps:
The steps must be tailored to meet each agency’s specific needs. At one end of the spectrum, all foursteps of the PEEST Analysis can be undertaken in a small management team meeting (of around 2-3
hours) to produce a qualitative and anecdotal PEEST analysis. At the other end of the spectrum, the
agency might form a small project team to undertake quantitative research and analysis, interviews,
focus groups and workshops with staff and external experts over some months.
Step One
Identify issuesand trends thatare likely to havea significantimpact.
Step Two
Analyse eachkey issueidentified.
Step Three
Prioritise mostsignificant trendslikely to affectthe agency.
Step Four
Identify theimplications of,and key trendsfor the agency.
Scoping Research Identify KeyTrends Implications
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Implementation of the four steps is described below:
Step One — Scoping
What 1. Identify important political, economic, environmental,
social and technological issues and trends.
2. Identify information needs.
How Complete Template 1 – PEEST Issues.
1. Identify factors in the external environment that requirefurther examination. Select approximately 20 issues intotal. e.g. four issues for each PEEST Element.
2. Identify information needed. Target the mostaccessible and important information and data.
Notes
Can be done in a workshop, managementmeeting or via interviews. It may bevaluable to work with Expert Panels, frontline workers and clients. Commonfacilitation tool include the Nominal GroupTechnique and the Delphi Method(seeRobbins et al, pp.225-226)
Output A scoping document listing:• Twenty issues in the external environment• Information needed to better understand each issue
Step Two — Research
What Undertake a brief analysis of each of the issues identifiedin the scoping document.
How Gather and compile data and information about each ofthe identified issues (see Template 1 – PEEST Issues.)
Notes
Use qualitative and/or quantitativeinformation – limited to most useful andaccessible.
Skip this step if the complete PEEST Analysis is undertaken in a singleworkshop.
Output Compiled notes providing relevant data about eachPEEST element.
Step Three — Identify Key Trends
What Prioritise the most significant issues in the externalenvironment.
How 1. Map the 20 issues on Template 2 – Probability ImpactMatrix.
2. Identify the most significant issues i.e. high impactand high probability issues.
Output A prioritised list of the top trends or issues in theexternal environment likely to affect the agency.
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Page 8 © Council on the Cost and Quality of Government
Step Four — Implications
What Determine the implications for the agency of the topissues and trends.
How Complete Template 3 – Trends and Implications.
1. Describe each of the top trends.
2. Identify the implications and potential responsesassociated with each.
Notes
Findings should be used when preparingthe agency’s strategy documents.
Output A list of the implications and potential actions to respondto the key external issues.
Useful tips and further reading
Some useful tips for undertaking a PEEST Analysis include:
• Ensure that the analysis informs strategy, policy and services.• Limit research to the most important and accessible data. Where no data is available, use the
opinions of people inside and outside the agency.
• Get input from front-line service providers, as they will perceive new trends before they becomestatistically significant.
Helpful readings include:
• Bryson, J, Strategic Planning for Public and Non-Profit Organizations, San Francisco, JosseyBass, 1988.
• Cooper, C and Argyris, C, PEST Analysis in The Concise Blackwell Encyclopedia of Management , Malden, Mass., Blackwell, 1998.
• Robbins, S. et al. Chapter 9 Planning Tools and Techniques, in Management , Prentice Hall,Australia, 2000.
• Smith, M. Situation Audit in New Tools for Management Accountants, Melbourne, LongmanProfessional, 1994.
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Better Management Practices : Environmental Scanning Page 9
PEEST Analysis — Template 1
PEEST Issues
Element Example Issues likely tohave a
significantimpact (identifyapprox 20 issuesin total; i.e. 4 perPEEST element)
What do wealready
know?
Additionalinformation
needed (mostimportant andaccessible)
Politico-Legal
Governmentalchange
Changes in Government – Federal,NSW, other states, internationally.Election commitments,policy/structural changes
Policy andLegislative
Change
New legislation, deregulation,ministerial councils, National
Competition Policy, Native Title,immigration.Legal trends, e.g. ‘truth insentencing’, High Court decisions
InternationalAgreements
GATT, trading bloc agreements, bi-lateral trade agreements,protectionism, human rightsconventions, Kyoto protocol.
Security Terrorism, war, protest.
Interest groups Issues raised by lobby groups,media, political parties. E.g.consumer protection, regional
interests.
Institutional Government restructuring,outsourcing, reducing red tape,transparency, whole of governmentcoordination, performancemeasurement.
Economic
EconomicIndicators
GDP, CPI, savings, debt, buildingapprovals, property market.
Fiscal Policy Government spending, tax (e.g.income tax, GST), Commonwealthand state budgets, income support.
Income Policy Wage levels, minimum wages,enterprise bargaining agreements,labour flexibility.
Monetary andTrade Policy
Balance of payments, exchangerates, interest rates
RegulatoryPolicy
IPART, ACCC, Australian PrudentialRegulatory Authority, AustralianQuarantine Service, ombudsmanand complaints bodies, ASIC.
Industry Issues Industry competitiveness, industrytrends, market deregulation, offshorecompany structures, stock market
trends, industry incentives, researchfunding, NCP legislative reviews
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Better Management Practices : Environmental Scanning Page 11
Element Example Issues likelyto have asignificantimpact (identifyapprox 20 issuesin total; i.e. 4 perPEEST element)
What do wealreadyknow?
Additionalinformationneeded (mostimportant andaccessible)
Socio-Cultural
Demography,Families andCommunities
Population trends, ageing, familyimpacts, geographical distribution,poverty, homelessness.Community groups, volunteering.Regional issues – viability, drift to cities,loss of local services. Family support,early intervention and prevention,childcare. Same sex marriages & legalentitlements.
EqualOpportunity &Discrimination
Disabled access, equity groups, Aboriginal community development.
Lifestyle Leisure activities, sports, gambling,alcohol, arts & entertainment, film industry,censorship. Tourism, major events.
Health andEducation
Hospitals, GP services, heath insurance,pharmaceutical benefits scheme, daysurgery, home care, rehabilitation,immunisation, SARs, mental illnessservices, carer support. Plastic surgery,lifestyle related illnesses, obesity.HECS, higher education fees, educationstandards, literacy/numeracypublic/private schooling. Secular andreligious education.
Employmentand Income
Work patterns, unemployment, skillshortages (e.g. teachers & nurses)household income, OH&S trends,superannuation policies. Flexible, familyfriendly working conditions, tele-working,working from home. Training.
Crime Computer fraud, intellectual propertytheft, domestic violence, gun control,gang warfare. Security industry, gatedcommunities. Road safety laws andpenalties. Sentencing policies, re-offending, custodial sentencing,mediation, victim support.
Technological
Information &Communication Technology
Internet, e-business, e-education, SMS,digital conferencing, tele-health. Internetshopping, gambling, musicdownloading/copyright.
NewIndustries
Nano-technology, bio-technology, newmaterials, alternative energy sources.
ProductionTechnologies
Automation, call centres, enterpriseresource planning, client relationshipmanagement systems, business processreengineering, knowledge management,data warehousing.
Tech PolicyIssues
Privacy, intellectual property rights,information security, hacking, viruses,Internet censorship (minors).
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Page 12 © Council on the Cost and Quality of Government
PEEST Analysis — Template 2
Probability Impact Matrix
Definitions
• Probability : the likelihood of an event occurring in the short, medium or long term.• Impact : the magnitude of the opportunity or threat in terms of its benefits or costs to the
organisation.
PEEST Analysis — Template 3
Trends and Implications
Key Trend Opportunity or Threat Possible Response
High
P r o b a b i l i t y
ImpactLow High
Key trends
SecondaryTrends
MarginalTrends
SecondaryTrends
High
P r o b a b i l i t y
ImpactLow High
Key trends
SecondaryTrends
MarginalTrends
SecondaryTrends
High
P r o b a b i l i t y
ImpactLow High
Key trends
SecondaryTrends
MarginalTrends
SecondaryTrends
P r o b a b i l i t y
ImpactLow High
Key trends
SecondaryTrends
MarginalTrends
SecondaryTrends
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Better Management Practices : Environmental Scanning Page 13
PEEST Analysis Case Study — Professional Services Agency
The brief
Below is a worked example of a PEEST analysis for a hypothetical public sector, state-based
professional services unit or agency. Examples of this type of service are: legal services, architectural
design, heritage or urban planning, economic/statistical analysis, project management or valuation
services, health professionals, etc. The primary role of the hypothetical organisation below is to provide
‘peak body’ advisory services to legal professionals, with a lesser role of advice direct to the public (e.g.
Law Society, Legal Aid). The PEEST analysis outlines likely future challenges and opportunities from
five perspectives: Political, Economic, Environmental, Social and Technical. The PEEST should
provide valuable contextual material for strategy documents. The results may suggest the need for
changes to policy and legislation, or require different methods of service delivery.
The process
Discussion and/or research on each PEEST element will produce a list of key issues. Each issue is
briefly reviewed, taking care to focus on the most important and accessible information. Issues are then
prioritised using a ‘Probability: Impact Chart’. Priority issues are described and their implications forthe organisation and possible actions are assessed.
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Page 14 © Council on the Cost and Quality of Government
PEEST Analysis — Template 1 — PEEST Issues
Case Study — Professional Services Agency
Element Issues likely to have asignificant impact (identify
approx 20 issues in total; i.e. 4per PEEST element)
What do we already know? Additional informationneeded (most important and
accessible)
Politico-Legal
Governmentalchange
N/A
Policy andLegislativeChange
National Competition Policy:client agencies will have tocompete in marketplace andsubmit tenders.
COAG requirement formarket testing and legislativereviews has been met.Reports published.
Need to know how many clientagencies are dependent on oneclient for over 50% of theirbusiness.
InternationalAgreements
Security IT security [see below‘Technological’]
Interest groups Media campaign about needfor plain English legaldocuments.
Some topics e.g. land andproperty contracts not clear.
Examples of client agencydocuments to assess clarity.
Institutional Federal Govt to do spotchecks on corporategovernance & accountability.
Some client agencies havegood auditing practices.
Identify significant clients wherecorporate governance may beinadequate.
Economic
EconomicIndicators
Fiscal Policy Budget constraints due to
closure of government grantprogram.
Required to self-fund via
user chargers; no Budgetfunding or enhancements.Grant program closed down.
Identify possible savings, cross
subsidies, scope to increasecharges.
Income Policy Research/library staff seekingnew Enterprise Bargaining
Agreement (EBA).
Have draft EBA from staffreps.
How many staff and at whatlevel covered by this EBA.
Monetary andTrade Policy
RegulatoryPolicy
IPART has issued new pricingguidelines.
Guidelines suggest need fordetailed costing of allservices.
Need to identify and break downcost components.
Industry Issues
Privacy of client records to beimproved.
Also see ‘Technology’
Firewall contractor engagedrecently.
Monitor issues. Possible newservice area.
CorporateGovernance
Govt. review may recommendinsurance top up levy forservice providers.
Review is consideringproposal – not likely to beendorsed.
Impact of cost on servceproviders
GovernmentFinancialManagement
[See Regulatory Policy abovere IPART pricing policy]
Transport &communicationsinfrastructure
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Better Management Practices : Environmental Scanning Page 15
Environment
Air Increase in demand for legalservices re workplace injurydue to pollution, asbestos,etc.
Have some expertwitnesses, but need moreexpertise re asbestos.
Identify sources and cost ofexpert medical advisers.
Water
Waste
Land and Landuse
Biodiversity
Energy Need energy managementplan for officeaccommodation.
Know that lighting system istoo expensive and wasteful.
Obtain quotations for energymanagement plan & strategies.
NaturalDisasters
Socio-cultural
Demography,
Families andCommunities
Regional NGOs providing
legal advice are facingresource & accommodationconstraints.
Some local councils are
introducing charges forpreviously free facilities
Find out which services are at
risk of closure, and obtain localgovernment association views.
EqualOpportunity andDiscrimination
Increased immigration meansthat proportion of clients fromnon-English speakingbackgrounds is increasing.
Already know the mainlanguage groups that areincreasing.
Not sure of staff language skills.Need to identify and sub-contract a panel of translationagencies.
Lifestyle
Health andEducation
Growing pressure forcommunity education.
Fly by night adult educationschemes. One company hascrashed, affecting 400consumers.
Whether any of our agencieshave clients affected by thiscrash or similar schemes.
Employmentand Income
Crime IT security [see below]
Technological
Web-based services now thenorm.
There is a national‘Communications 2005’strategy for legal advisorbodies.
Find out if member agencies canmeet strategy targets. Identifytraining needs for members.
Information &CommunicationTechnology(ICT)
IT security and client privacy. ‘Firewall’ for computerrecords recently approved.
Need to develop website formsand ‘disclaimers’.
New Industries
ProductionTechnologies
Telephone answeringtechnology: Automatedqueuing and responsesystems available.
Opportunity to improvecapacity to handle callvolumes. Switchboard onlyavailable 9-5, Mon-Fri.
Assess scope for adoption ofnew telephone answeringtechnology, also costs andtimeframes.
Tech PolicyIssues
See ‘privacy’ under ‘ICT’above.
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Page 16 © Council on the Cost and Quality of Government
PEEST Analysis — Template 2 — Probability Impact Matrix
Case Study — Professional Services Agency
Low
P r o b a b i l i t y
Impact
High
LowHigh
Increasedcompetitiondue to NCP
Federalgovernmentspot checks
Regional NGA
resourceconstraint
IPART pricingguidelines
Telephone answeringtechnology
Growing pressure
for consumereducation
Budgetconstraints
Increased clientdemand due toworkplace injury
claims
Plain Englishmedia campaign
Greater clientdemand due to
immigration
Govt. push fore-businessinitiatives
KEY TRENDS SECONDARY TRENDS
SECONDARY TRENDS MARGINAL TRENDS
Privacy ofclient records
IT Security
IndustrialRelations (EBA)
EnergyManagement
PlanInsurance levy
for serviceproviders
P r o b a b i l i t y
Impact
High
LowHigh
Increasedcompetitiondue to NCP
Federalgovernmentspot checks
Regional NGA
resourceconstraint
IPART pricingguidelines
Telephone answeringtechnology
Growing pressure
for consumereducation
Budgetconstraints
Increased clientdemand due toworkplace injury
claims
Plain Englishmedia campaign
Greater clientdemand due to
immigration
Govt. push fore-businessinitiatives
KEY TRENDS SECONDARY TRENDS
SECONDARY TRENDS MARGINAL TRENDS
Privacy ofclient records
IT Security
IndustrialRelations (EBA)
EnergyManagement
PlanInsurance levy
for serviceproviders
P r o b a b i l i t y
Impact
High
LowHigh
Increasedcompetitiondue to NCP
Federalgovernmentspot checks
Regional NGA
resourceconstraint
IPART pricingguidelines
Telephone answeringtechnology
Growing pressure
for consumereducation
Budgetconstraints
Increased clientdemand due toworkplace injury
claims
Plain Englishmedia campaign
Greater clientdemand due to
immigration
Govt. push fore-businessinitiatives
KEY TRENDS SECONDARY TRENDS
SECONDARY TRENDS MARGINAL TRENDS
Privacy ofclient records
IT Security
IndustrialRelations (EBA)
EnergyManagement
PlanInsurance levy
for serviceproviders
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PEEST Analysis — Template 3 — Trends and Implications
Case Study — Professional Services Agency
Element Key Trend Opportunities (O) & Threats (T) Possible Responses
Political/
Legal
National
CompetitionPolicy –increasedcompetition
• Application of competitive
conduct rules to all governmentbusiness activities.(T)
• Competitive neutrality meansthat government businessactivities must not enjoy unfairmarket advantages. (T)
• Market testing and legislativereviews required under NCP.Laws restricting competitionreviewed and amended. (T)
• Scope to expand service areasand develop value-added andstrategic services. (O)
• Benchmark costs with interstate bodies and
similar private sector organisations.Develop a pricing policy and test market toinform tender decisions. Reduce costs anddeliver services more efficiently. Developcommunication plan to understand clientneeds and build loyalty.
• Prepare contingency plan for possible lossof major contracts. Consider deliveringvalue-added or strategic services ratherthan high volume low price products.
• Evaluate capacity to expand service areas;conduct market analysis.
Economic Budgetaryconstraints
• Required to self-fund via userchargers; no Budget funding orenhancements. Grant programclosed down. (T)
• Need to be self-reliant and cut excessivecosts. This might prompt client complaintsdue to change in service quality. Riskmanagement necessary to protect essentialrole. May need to reduce functions.
• Audit costs and identify wasteful practices,unnecessary perks, seek cheaper location.
Assess whether technology can be used tosimplify time-consuming processes.
• Research potential new income e.g. newclients, value-added services and examinescale economies and diseconomies.
Environ-ment Increasedclientdemand dueto workplacehazards/injury claims
•
Increasing demand forprofessional and communityadvice on workers’ claims dueto exposure to pollution in theworkplace, e.g. dust, noise,asbestos, etc. (O)
•
New role reduces time for routine servicesand client queries. Environmental tasksrequire costly expert submissions.
• Seek a collaborative arrangement toprovide these advisory services orcompetitively contract out this service.Nominate a project manager to developenvironmental health knowledge andmanage contracted service.
Socio-cultural
Increasedclientdemand duetoimmigration.
• Recent client survey of allmembers’ clients found thatpeople from non-Englishspeaking backgrounds nowmake up one-third of
community demand for legalservices, an increase from 20%five years ago. (O)
• Extra demands on staff with relevantlanguage skills. More time needed toascertain client requirements. Delayscaused by need to engage translators.
• Appoint para-legals to screen clients and
deal with simple issues.• Identify most common requirement or
problem for NESB clients. Develop ‘info-packs’ in main language groups and runinfo sessions on common solutions. Addweb links to relevant services in communitylanguages.
Techno-logical
Governmentpush for newe-businessinitiatives
• A ‘Communications 2005’strategy has been developed topromote web-based services,trial new systems, use ‘virtual’conferencing, and contribute toknowledge of case law andlegal research. (O)
• Survey members and auditIT/communications capabilities todetermine areas of greatest need. Developtraining plan. Prepare business case tofund equipment upgrade
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3.2. Scenario Building
What is Scenario Building?
Scenario Building is a way of thinking about and preparing for alternative future environments.
Scenarios provide pictures, or visions, of what the future could hold. The analysis should include an
assessment of the likelihood and potential impact of the various scenarios and draw out implications and
potential actions for the agency.
Like the PEEST Analysis, the process can be qualitative and/or quantitative. Qualitative techniques use
the judgement and opinion of knowledgeable people e.g. Expert Panels, clients and front-line staff.
Focus groups or surveys are commonly used to identify key issues. The Nominal Group Technique is a
popular workshop tool which ensures that every individual identifies issues and the group takes
consensus positions. The Delphi method uses questionnaires and reports to identify and consolidate the
views of expert panels where members do not meet face to face.
Quantitative techniques use statistical forecasting (a quantitative approach predicting future outcomes
on the basis of past data).
It is important not to rely solely on past data as this is limited to known trends whilst scenarios should
take care to address both existing and newly emerging issues.
Simulations are also a common analytical technique for scenario building. A simulation is based on a
logical flow chart which describes the interrelationships between issues, sometimes underpinned by a
mathematical model. It imitates an aspect of a real world environment and extrapolates how issues may
impact. Two popular simulation methods are Systems Thinking and the Monte Carlo Approach, so
called because early applications used roulette wheels to simulate the chance events inherent in this
approach.
The Scenario Building process starts of by identifying the key issues and trends in the externalenvironment. These key issues and trends are used to identify the major factors that may drive possible
alterative scenarios. These change drivers are used to underpin the construction of various scenarios.
Finally, the consequences of each scenario for the organisation and possible actions are identified.
Why use Scenario Building?
Scenario Building is designed to help managers prepare for an uncertain future by informing thinking
about how the future could unfold. Such an understanding helps to ensure that rapid change in the
external environment is factored into strategy and planning.
Scenarios are also useful for agencies that want to think about how their own actions affect the
environment as well as how the external environment affects them.
The process of building scenarios fosters a shared understanding of the environment and a common
approach to action plans within the agency. This is particularly effective where diverse viewpoints need
to be managed. Scenarios can be used to provide a context for strategy and policy formulation/review.
Agencies can use scenarios in conjunction with PEEST Analysis to pre-empt possible changes in their
external environments. They can also use scenarios to help plan for contingencies to minimise exposure
to risk.
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What does Scenario Building deliver?
Scenario Building is intended to deliver 3-4 written scenarios predicting optimistic and pessimistic
future outcomes. Each scenario describes a possible future environment in which the agency might
operate. The scenarios are based on possible impacts of key change drivers. Each scenario includes an
assessment of the likelihood and potential impact, and draws out the implications for the agency, as well
as possible responses.
Implementation Steps
Scenario Building has four steps (outlined below) which can be undertaken via a single workshop or a
longer process of analysis and research.
Scenario Building can be based on qualitative and quantitative analysis and can be tailored to an
agency’s needs. The first step, ‘Preparing Background’ begins with a PEEST Analysis which identifies
key issues in the external environment likely to affect the agency and assesses their implications for the
agency.
Step One
Identify keyforces in theexternalenvironment andtheir implications
for the agency.
Step Two
Develop a basicconcept for 3-4scenarios. Eachscenario shouldinclude a name that
characterises it aswell as clearlystated underlyingdrivers.
Step Three
Write up thescenarios bydeveloping 3-4snapshots orstories about what
the future couldhold.
Step Four
Identify theimplications ofthe scenarios forthe agency andpotential
responses.
PreparingBackground
OutliningScenarios
DevelopingScenarios
AnalyseImplications
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The implementation process is described in the following table.
Step One — Prepare Background
What Compile key background information to inform the scenariobuilding process.
How Complete PEEST Analysis (see previous tool in thismanual).
Output A list of key external issues impacting on the agency,including an overview of their implications for the agency.
Step Two — Outline Scenarios
What Outline 3-4 rough scenarios.
How 1. Discuss possible ways the key issues identified in thePEEST may develop and impact the externalenvironment. Probe each of the priority issues with‘what if? …. questions.
2. Select 2 or 3 key underlying drivers of change thatcould drive future scenarios.
3. Map the change drivers on a matrix, Template 1 –Change Drivers Matrix. Identify different possibleoutcomes for each change driver and differentcombinations of outcomes.
4. Using the different combinations of outcomes in thematrix, outline 3-4 rough pictures of the externalenvironment in the future. Give each picture a namethat characterises the scenario.
Notes
Scenarios should include optimistic and pessimistic, likely and unlikely. They couldalso focus on the possible impact ofspecific changes.
It will probably be necessary to repeatTemplate 1, a number of times as thisstep will need to explore various changedrivers and combinations of possibleoutcomes.
Output Three or four broad-brush scenarios (i.e. high-levelconcepts). Each scenario will include a name thatcharacterises that particular picture or vision of the future.
Step Three — Develop Scenarios
What Prepare a clear description of each scenario.
How 1. Analyse the change drivers and assumptions of eachscenario in workshops and desk based analysis.Developed Scenarios should be based on:• Quantitative analysis – prepare future projections
of historical trends.• Qualitative analysis – examine, trends, and new
and emergent issues and their possible impacts.
Notes
Steps Three and Four can be reversed ifthe Scenario Building process iscompressed into a single workshop.
It may be valuable to work with ExpertPanels, front line workers and clients.
For an overview of quantitative and qualitativeforecasting techniques see Robbins et al, p.316.
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Step Three — Develop Scenarios (cont’d)
How 2. Write up each scenario. NotesTools to facilitate qualitative analysis
processes include the Nominal GroupTechnique and the Delphi Method (see
Robbins et al, pp.225-226).
Simulations such as the Monte Carlo Approach (see Armstrong pp.643-648)and Systems Thinking (see Holman andDevane chap 9) can be used to developscenarios.
Output 3-4 analyses or stories of what the future could hold.
Step Four — Analyse Implications
What Identify the implications and potential actions for the agencyrelating to each scenario.
How 1. Review and revise the scenarios.2. Discuss implications and potential actions for the agency.3. Ensure the trends of the key forces driving each scenario
are tracked by the agency.
Notes
Findings should be applied to theagency’s strategy documents.
Output Scenarios refined. Implications and potential actions outlined.
Useful tips and further reading
The following tips are useful in implementing Scenario Building:
• Limit research to the most important and accessible data.• Expert panels are particularly helpful when thinking through possible impacts.• Sometimes a scenario can represent a vision for the future and can be used as a strategic
planning tool to help the agency think about getting from where it is to where it wants to be.
• Consider the time horizon — between 1-2 years might be too short, but 10-20 years might be farto general. 5-10 year time horizons are recommended
• Agencies should track the key forces identified in each scenario as they move forward.
Helpful readings include:
• Armstrong, M., Handbook of Management Techniques, Kogan Page, London 2001• Channon, Scenario Planning in Cooper, C and Argyris, C, ‘Environmental Scanning’ in The
Concise Blackwell Encyclopedia of Management, Malden, Mass., Blackwell, 1998
• Holman and Devane, The Change Handbook - Group Methods for Shaping the Future, BerretKoehler, San Francisco, 1999
• Longley and Warner, Future Health Scenarios in Bryson, J, Strategic Management in Publicand Voluntary Services, St Louis, USA, Pergammon, 1999
• Robbins, S. et al, Chapter 9, Planning Tools and Techniques in Management, Prentice Hall,2000
• Schwartz, P., The Art of the Long View, USA, John Wiley, 1996
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Scenario Building — Template 1
Change Drivers Matrix
Note:• Each axis represents a different change driver. Two possible outcomes must be identified for each change driver. The
various combinations in the 4 boxes depict the key elements of possible scenarios.• It may be necessary to complete this chart a number of times whilst completing step 2.• See the worked example below for further guidance.
Scenario Building — Template 2
Overview of Scenarios
ScenarioName
ChangeDrivers
Key underlyingassumptions
Description Implications forAgency/
Government
PotentialActions by
Agency
Scenario 1:
………………
Scenario 2:
………………
Scenario 3:
………………
Scenario 4:
………………
Outcome Outcome
O u t c o m e
O u t c o m e
C C oommbbi i nnaat t i i oonn 44
C C oommbbi i nnaat t i i oonn 2 2
C C oommbbi i nnaat t i i oonn 11
C C oommbbi i nnaat t i i oonn 33
Change Driver 1
C h a n g e D r i v e r 2
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Scenario Building Case Study — Drug Rehabilitation
The brief
A planning exercise was undertaken to explore potential workforce planning issues in a drug
rehabilitation agency. Scenario planning provided an opportunity for some free thinking about possible
futures and their implications for the agency’s policies and systems. By looking ahead in a way that was
informed by some research, the agency was more able to effectively respond to an uncertain
environment. In this case study, scenario planning addressed drivers of change in society, drivers of
change for the agency, key uncertainties in the agency’s future, possible models for future operation and
staffing issues.
The process
Key drivers of all scenarios were
highlighted as follows:
• Social policy expenditure• Public policy and values about
rehabilitation and punishment
• Anti-crime push• Drugs policy• Skills and education levels in the
community
• Education and sophistication ofclients
• Budget pressures.
A brainstorming session identified two
areas of uncertainty for the agency with
the potential to produce quite differentfutures: policy direction (due to changing
community attitudes) and funding. The
scenarios emerged from a process of
describing preferred and non-preferred worlds. The agency decided that some thought should be given
to workforce planning, training and research. This was represented on a matrix, juxtaposing two key
drivers. ‘Social policy’ is the horizontal axis and ‘funding’ is the vertical axis.
Field ofDreams
Increased $
Oily Rag R e h a b i l i t a t i v e
CaliforniaDownUnder
BladeRunner
Decreased $
P u n i t i v e
CaliforniaDownUnder
BladeRunner
Decreased $
P u n i t i v e
Scenario Building – Template 1 – Change Drivers Matrix
Case Study – Drug Rehabilitation
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Scenario Building — Template 2 — Overview of Scenarios
Case Study — Drug Rehabilitation
ScenarioName
Changedrivers/
underlyingassumptions
Description Implications for the agency
Potential actions by theagency/ government
Field ofDreams
Rehabilitativesocial policyand increasedfunding.
With a liberal drugs policyand decriminalisation,there is a push to focus onprevention and individualtreatment.
New technologies andstrategies replace oldtreatment methods.Focus on long run benefitsrather than short termoutcomes.
Requires 120 new positionsfor highly educated staff, withhigher remuneration.Need for greater flexibility.Lower proportion of lowskilled caring positions – 80potential redundancies.
Existing treatment facilitiesneed redesigning at anestimated cost of $1.7 m.More career options for staff.
Staff will be mobile.Many existing staff will needretraining or will beredundant.
Develop recruitment andtraining strategies that focuson increasing staff skilllevels. Provisions for flexiblework and treatmentpractices.
Redesigned treatmentfacilities. Seek opportunitiesto collaborate with otherorganisations.
Negotiations with unionsabout changing positiondescriptions andredundancies.Redundancies and trainingpackages.
CaliforniaDownUnder
Punitive socialpolicydirection andincreasedfunding.
Community attitudes haveled to a tougher stanceagainst drugs and apunitive approach totreatment.More resources aredeployed towards
containing the problem.Emphasis on containmentprograms rather thantreatment programs.
Higher in-patient numbers.Greater conflict in theworkforce, need to restrainpatients.
Greater proportion of low-skilled positions. Requires
130 new FTE at lower payrates. Fewer careeropportunities for staff.Higher staff attrition rate.
Seek to recruit young, fit jobseekers. Offer incentives –subsidies for vocationaltraining etc.Mediation/security trainingfor staff.
New facilities required toaccommodate patients.Increased securitymeasures required.
Oily Rag Rehabilitativesocial policyanddecreasedfunding.
A liberal drugs policyleads to a trend inalternative treatments anda focus on rehabilitation.
State budget squeeze dueto drought and risingunemployment meansfewer resources allocatedto drug treatment.
Reliance on voluntary staffand privatisation.
Require a greater proportionof highly trained staff. Noadditional positions – newmix of existing positions.Potential redundancies of 80FTEs. More career optionsfor staff.
High staff turnover due toincreased workloads and
stress – inadequate facilitiesto accommodate new policyrequirements.
Negotiations with unionsabout changing positionsdescriptions andredundancies.
Incentives at university –status for pre-existingdegrees etc. Promotionamong school leavers.
Explore options for resourcesharing, innovative servicedelivery to reduce pressureon existing facilities.
BladeRunner
Punitive socialpolicy anddecreasedfunding.
Tough drug stance isaccompanied by a toughbudgetary environment.
There is pressure tocontain the problem butfew resources fortreatment.
Facilities are inadequate innumber, size and repair.FTEs are frozen at 580.
Difficult to recruit appropriatestaff due to poor jobsatisfaction.
Operates on low cost andhigh reliance on user-pays.
Reduced need for training.Recruitment focus onyoung, fit staff due toincreased personal securityrisks.
Low skill positions.Increased focus onoutsourcing functions/privatisation. Contract
management focus.
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