The PEST analysis is an approach for considering the external business environment. PEST stands for Political, Economic, Social and Technological analysis and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. This analysis can be expanded to include the L and E which describe Legal and Environmental factors respectively. These factors are considered in the course of developing and evaluating business strategies. HRM is key component of strategic management and so should consider how changes in the components PESTEL affects its functions and what it needs to do in response. For our example we shall use Safaricom Plc, Kenya’s biggest mobile service provider.
These elements relate to how the decisions of the current government can have an impact on the economy or a particular industry. With regards to Safaricom’s HRM political impact would include issues such as minimum wage rates, changes in Pay As You Earn taxes and leave policies.
These elements demonstrate how a country’s economic performance can influence the performance of a company in the short and long term. Factors such as the inflation rate and interest rates would need to be considered. Inflation affects the purchasing power of the population which impacts on Safaricom’s financial performance and specific HRM matters such as ability to recruit (both quantity and quality), annual salary increments or even bonuses.
These elements that affect the industry, the company and the community socially. With regards to Safaricom’s HRM, they need to be careful about how they manage diversity for the betterment of the company and for protection of the rights of the individuals. Diversity in this context would mean age, sexual orientation and ethnicity. Rules and regulations in the regards need to be developed and enforced and should form part of the company’s corporate culture.
These elements refer to advances in technology development that would have an impact on the company either positively or negatively. Being a telco company at the forefront of developing new technologies, Safaricom HRM should embrace technology in its operations. These include using technology in areas of recruitment (social media), time and attendance and flexi-time management.
These elements refer to the physical environment in which the company operates. Safaricom prides itself as a socially responsible citizen in and this strategy needs the support of its employees. For example, Safaricom is the key sponsor of The Lewa Marathon aimed at raising funds for wildlife conservation. To make it a success, Safaricom relies on its employees to participate fully and to publicise the event to their families and friends.
These elements refer to the legal environment in which Safaricom operates. These relate closely to the political aspects mentioned above. As a telco company, the laws governing data protection are of great importance. Safaricom’s HRM policies should aim to sensitise employees about taking great care of its customers data and use it within the confines of the law. Disciplinary action should be taken against employees who contravene this rule.