Friday, May 6, 2011

Classical decision making techniques: PEST

quote



“Complexity is the decadence of society; simplicity is the path of reality and salvation.”



Egyptian Proverb





This technique helps to identify the effects and consequences of external factors on a decision. It looks at the following influences:




  • Political


  • Economic


  • Social


  • Technological






Political:



These are factors related to how much the government intervenes in the economy. Examples include taxation, employment law, international trade etc. You need to also consider political stability and the effects of a change of government in this influence.




Economic:



hese are factors related to the economy including interest rates, inflation, employment levels etc.



Social:



Includes factors such as population growth, the age distribution of the population and socially acceptable and unacceptable behaviours.



Technological:


Includes technological trends, computerisation, automation etc.




using the technique



The simplest way to use this is to draw four boxes on a piece of paper and label them and then populate the boxes with as many effects and consequences of the decision that you can think of. The resulting lists will help with deciding whether the decision is a good one or not.



extending the model (pestel)



The model is commonly extended to include another two factors:




Environmental:



These are factors such as climate, climate change, weather etc.



Legal:



Factors related to legislation in a specific country of operation such as the law relating to discrimination, health and safely, employment etc.





extending the model further





The model can be extended further to include Education and Demographics (the steepled model) or in fact in any other way that you might find useful. In most cases though a relatively simple four or six factor model is all that is needed. Adding further factors tends to cause some overlap between influences and can cause some confusion about which box to put an individual factor in.



making your decision



This technique can be used as a decision making technique in its own right. The usual way is to look at the output of the technique and decide on the individual factors that most affect your decision. Considering these will usually make the correct decision more obvious.

This technique can also be used in conjunction with a swot analysis, helping to populate the 'opportunities' and 'threats' boxes.

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