Better Management Practices Environmental Scanning - 20 May 2004

8/20/2019 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: [email protected]


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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: [email protected]


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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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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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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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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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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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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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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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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.


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


ImpactLow High

Key trends

SecondaryTrends

MarginalTrends

SecondaryTrends

High


ImpactLow High

Key trends

SecondaryTrends

MarginalTrends

SecondaryTrends


ImpactLow High

Key trends

SecondaryTrends

MarginalTrends

SecondaryTrends


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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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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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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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PEEST Analysis — Template 2 — Probability Impact Matrix


Low


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


Impact

High

LowHigh



Regional NGA

resourceconstraint



Growing pressure


Budgetconstraints


claims



immigration





IT Security


EnergyManagement

PlanInsurance levy



Impact

High

LowHigh



Regional NGA

resourceconstraint



Growing pressure


Budgetconstraints


claims



immigration





IT Security


EnergyManagement

PlanInsurance levy



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PEEST Analysis — Template 3 — Trends and Implications


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



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.

Better Management Practices Environmental Scanning - 20 May 2004

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