- stakeholder analysis
- SWOT analysis
- value chain analysis
- benchmarking
- scenario analysis.
Each of these tools can be used in a variety of ways; there is no ‘right’ way. Nor, unfortunately, will these tools ‘produce’ a strategy on their own. The best way to think of these tools is that:
- they provide the basis for a discussion about a particular aspect of the business that might impact strategy
- they can be used and revisited at various times and thus allow you to consider if and how things have changed
- they can be used to justify the allocation of resources to support strategic priorities.
Each tool is described below:
Stakeholder analysis
The purpose of a stakeholder analysis is to map out the various groups and individuals who are affected by or have an impact on the area of strategy or strategic direction under consideration. This can be carried out at a generic level but is often most useful if applied when considering the impact of a particular decision. This allows a more fine-grained analysis of the impact.
Various means can be used of mapping a stakeholder analysis:
- Network analysis maps the strength and direction of the ties between stakeholders and the HRD group (you will return to networks in Unit 5).
- Stakeholder lists rank the level of perceived support for different aspects of HRD strategy according to an understanding of their interests and priorities.
- Stakeholder matrices group stakeholders according to their interests, areas of opposition or perceived importance.
Whatever the particular form of analysis, these basic steps are required:
- Identify the key stakeholders – this might include internal and external, formal and informal stakeholders).
- Identify if there are any key influencers – e.g. those who are a member of more than one stakeholder group or those who have benefited from a past HRD initiative or are known to be supportive.
- Review your understanding of their position in relation to the issue under debate – you might simply classify stakeholders as supporting or opposing but the more detail you have at this stage the more specific your planning to address this can be.
- Decide which stakeholder positions need to be addressed to improve buy-in or other specified objective.
- Plan how to obtain, retain or manage a lack of buy-in.
- Review the risks and benefits of this plan and agree timescale to review outcomes.
It is important to remember not to set unrealistic targets or to devote excessive energy to trying to get stakeholders onside by over-promising. It is also important to use any discussions as a means of getting input into, or feedback on, your ideas. After all, opposition may be well founded.
If you are interested in reading more about the use of stakeholder analysis in HRD please see Garavan (1995) in Suggested additional resources.
SWOT analysis
SWOT stands for:
- strengths
- weaknesses
- opportunities
- threats.
These four elements are usually plotted as a two-by-two matrix, as shown in Figure 3.8:
At first sight this appears to be a very simple tool since the objective is to map these elements and understand the relative balance between those factors enabling and those constraining achievement of a particular strategic objective. For example, in examining strengths you would aim to identify areas or drivers of competitive advantage and aspects of positioning that would enable the organisation to achieve its strategic goals. Usually in a SWOT analysis, strengths and weaknesses are considered internal to the organisation while opportunities and threats are from competitors or other aspects of the external environment. Using this analysis alongside your review of the internal and external context can therefore be a useful approach.
The simplicity of the tool hides its real usefulness in strategic discussions. Providing a matrix can force discussion about the allocation of a particular statement or issue to a particular box, rather than simply suggesting an issue is important. Some issues might be easily allocated and commonly agreed. Other issues might be discovered to be poorly understood and therefore require more data collection and analysis. Further areas might be subject to disagreement between different individuals and groups and therefore require further consideration. The SWOT analysis can therefore act as a means of sorting strategic issues into those that are understood and agreed (these can be assigned to a particular area of the matrix) and those that are not well understood or not agreed. In a strategic planning approach, these issues then need their own strategies for resolution.
If you are interested in reading more about the use of SWOT in HRD please see Chermack and Kasshanna (2007) in Suggested additional resources. It is also useful to note that by entering the search term ‘swot analysis’ into the Library search facility you can access many summary SWOT analyses for major companies.
Value chain analysis
At its simplest, a value chain can be considered as an activity path through an organisation. In other words, it shows what an organisation does in order to create value either by manufacturing a product or by delivering a service, and the order in which it does it. Porter’s (1985) value chain in Figure 3.9 is that of a manufacturing firm. Its primary activities revolve around making something – the chain begins with inbound logistics (e.g. component parts, inventory control, ordering and management, plus transportation planning), follows through a transformation process (operations, where the product is built), and is then shipped to customers, marketed and supported with after-sales backup. These primary activities are supported by a variety of activities designed to ensure that they are delivered as effectively and efficiently as possible.
What is the benefit of the idea of a value chain for HRD strategy? As with a SWOT analysis, benefit can be gained from the process of discussing and identifying the different elements of the value chain. Indeed the final diagram may or may not be of use at all. Particularly with respect to HRD strategy, a key aspect here is identifying the focus of effort and priority of different areas of the organisation with respect to learning and development investment.
Benchmarking
Benchmarking involves a process of comparison. There are two key questions that need to be answered:
- What do you want to assess?
- Against what benchmark will you assess this?
The process of benchmarking is most straightforward where there is a well-established measure that can be compared and where the values of this measure are easy to obtain. For example, it is relatively easy to benchmark a graduate starting salary to understand where an organisation sits within the graduate recruitment market. This is because the notion of a ‘graduate’ is relatively common and information on their starting salaries is relatively easy to obtain (not least from advertisements). Traditional measures of benchmarking HRD often rely on notions of training expenditure, which may or may not provide relevant information about the HRD strategy more broadly. Other aspects of HR and of HRD are less straightforward to benchmark, although there is an increasing use of common tools (such as engagement questionnaires) that can provide some basis for comparative investigation. There is suggestion that the range and scope of HR data analytics will change dramatically with the advent of so-called ‘big data’ (Barton and Court, 2012) but as yet these seem more aspirational than practical inputs to HRD strategy development.
Analytic approaches to benchmarking are often supplemented by processes which benchmark on the basis of best practice. Here, information is often gained from competitors’ annual reports, industry surveys and press coverage. Within the sphere of HR practice, CIPD reports on a variety of topics often pull together surveys of HR practitioners’ reported practice and case studies that describe exemplar strategies. However, these provide notional rather than analytic benchmarks, as it is often not possible to obtain enough detail to make specific comparisons. Nevertheless, even the process of discussing the targets that an organisation could benchmark against can prove useful fuel for a debate about HRD strategic priorities.
The aim of benchmarking is not only to perform a comparative analysis but also to identify what changes would be needed within the organisation to achieve the performance of the target. This can provide useful information to guide the process of HRD strategy development.
Scenario planning
Essentially, a scenario provides an outline of a potential future context (internal, external or both) that will impact the organisation’s direction or success.
There are two critical aspects to using this approach: the design of the scenarios, and the design of the process for using the scenarios to develop strategy. Used well, scenarios can prompt creativity and lateral thinking but a risk is that they divert attention from real issues facing the business or cause confusion by introducing too many variables.
There are many different dimensions that can be considered when developing a scenario. The first decision is then to decide which dimensions will be modelled and varied in the scenarios you wish to use. Some suggest selecting a ‘likely scenario’ is most effective while others suggest an extreme scenario provokes the most debate and discussion. The well-known strategy consultancy firm McKinsey & Company (Roxburgh, 2009) suggests that effective scenario planning:
- uses at least four alternative scenarios (using two scenarios provides too little choice, three allows for selection of a middle option while more than four becomes too complex)
- is based on a central case around which the scenarios vary
- uses more than one variable as the basis for the different scenarios
- involves a dry run during which scenarios are tested and refined
- provides flexibility for exploring ‘what if’ and extreme cases.
As with other tools described in this section, the key is to ensure that a process exists for capturing the debate and utilising this in the development of strategy.
If you are interested in further reading about the use of scenario planning in HRD please see Thursfield (2014) in Suggested additional resources.
Strategy tools in practice
Strategic planning can be assisted by the use of all these tools, as well as those discussed earlier in the unit (mapping internal and external context, and STEEPLE analysis). In the next activity you will try using one of these tools.
Activity 3.7: Challenges of using strategic tools (60 minutes)
