Determination of external and internal issues – The PESTEL Method (Part 2)


In this post, the second part of this title, I am going to describe a method, called PESTEL, which can be very useful for organizations to identify, analyze, prioritize and determine the relevant external issues, in accordance with Sub-clause 4.1 of the different management system standards.

In the first part I commented on the need for the management system standards, in Sub-clause 4.1, should consider that both external and internal issues should be relevant to both the purpose of the organization and its strategic direction, something that establishes ISO 9001:20015 standard, but not the other standards of that type.

As I mentioned before, the vast majority of organizations have not correctly identified and determined the external issues, nor the relevant internal issues. In general, their identification is inappropriate or incomplete and their inclusion in the corresponding management system is confusing, and their relevance, either in the purpose of the organization or in its strategic direction, is generally not clarified.

If you have read any previous posts on this topic, you can already imagine the consequences of an organization not correctly identifying and, therefore, not being able to track and review the information corresponding to the issues that are relevant, to that allow the strategic management to establish, implement or review the objectives of the organization's management system, or the owners (shareholders), and where appropriate the senior management, to update, rethink or reorient the organizational purpose (mission and vision).

Unfortunately, in general, this situation is not detected when monitoring, internal audits or management review are carried out internally, nor externally when organizations face audits or evaluations of their management system, since either by their clients, or to obtain their certification.

Actually, there are very few auditors, no matter how many qualifications or credentials some may show, who have the capacity, or competence, to detect these inconsistencies and non-compliances, or non-conformities, with these requirements of the corresponding standard. In my opinion, this happens because most auditors are more concerned with training in the audit process and taking care of the proper development of the process, in accordance with the corresponding management system standard, than paying due attention to fully understanding the requirements of the standard, to formulate the precise questions or make the appropriate information requirements to detect this type of non-compliance.

With this method called PESTEL, the organization will be able to analyze the different factors that are beyond its control (external issues), which are political, economic, social, technological, environmental and legal that affect the organization`s objetctives. By joining the initials of all these factors (PESTEL), the name of this method is formed. In the particular case of the ISO 22000: 2018 standard, on food safety management systems, it should include, as far as external issues are concerned, cyber security (which in my opinion should be analyzed in all standardized management systems), food fraud and the so-called “Food Defense”.

The application of this method of analysis can help a work group, selected by the organization, to better understand both the markets and the competitive position of the organization itself, to plan strategically and carry out market studies, both in new markets and in existing ones. In relation to Sub-clause 4.1 of management system standards, what is intended to be achieved with the application of this method is that the group identifies, prioritizes and selects the external issues that are relevant to the organization and are considered in the establishment of the objectives of its management system.

I usually suggest that different meetings be used to apply the PESTEL method and the “7S” method, since in general the participants in both methods would be different people or functions, unless they were very small organizations.

If you want to apply a useful PESTEL analysis, it is important to take the following considerations:

  • ü It is important to select the participants in the task force group carefully, so that they can provide expert knowledge, but it is also important to have new perspectives.
  • ü If you identify people who can contribute that knowledge in remote places, use technological tools to engage them so you don't miss out on their participation.
  • ü Promote individual thinking to generate ideas, then share and analyze them as a group and then combine the identified problems to obtain a general image.
  • ü Participants should be asked to be specific in their ideas.
  • ü Where possible, encourage the use of quantitative data to focus on the heart of the problem.
  • ü Provide adequate time in the session to rank and prioritize ideas.
  • ü Document the results.
  • ü Communicate results to stakeholders
  • ü Periodically update the progress of the actions.

We can identify the following activities to develop in the application of this method:

I will start by mentioning the preliminary actions that an organization should carry out, in preparation for the application of the PESTEL method:

a) The first thing is to identify all the objectives that the organization has established in relation to the management system with which the analysis will be carried out. In the event that the system is just being established, it would be good for the strategic management to propose the objectives to be established, so that the task force group can have a basis for analysis, remembering that each objective must meet three conditions: that is relevant, is desirable and is achievable.

b) The second preliminary action is to select the personnel to be included in the task force group that will analyze these issues. I recommend that organizations form a team that includes the appropriate management program leader, or direction representative, as well as some senior management, to discuss strategic direction, and if possible the CEO and some of the owners, shareholders, or members of the Board of Directors to analyze what corresponds to the purpose of the organization. If you have identified people who can contribute this knowledge in remote places, you should consider their remote participation. It is important that all participants know and understand the mission and vision of the organization. It would be very useful for a person to join the team who could act as a coach or facilitator, in order to lead the application of the tool called "brainstorming" and prepare, prior to the meeting, a series of questions to present to the task force group.

c) The day of the meeting for this analysis, its agenda, logistics and the way of working should be carefully planned. I also suggest that this analysis be carried out in a single session rather than spread over several ones, since it is easier, on the one hand, for senior managers to leave their daily activities on a given day than to be doing them at intervals. Additionally, it is easier to maintain the concentration of the participants in a single event than to work by chapters at different times.

d) The members of the task force group should be invited well in advance so that they can schedule their daily activities to free that day from other commitments, and those invited, either all of them or some selected ones, should be asked to investigate, obtain and bring to that meeting, all the data, information, magazines or other publications that include analysis of the relevant factors, whether at the local, national or international level, that may affect, positively or negatively, the performance of the organization in relation to the corresponding discipline of the management system, so that they arrive prepared for the meeting.

e) The support documents should be prepared to carry out this analysis, such as an attendance list, if applicable, agenda, ways to collect the information that arises from the meeting, lists of questions required to identify the pertinent issues, among others.

f) There should be assured that all the material or equipment required to carry out the necessary analysis is available: blackboard and chalk, computer equipment, projector, work table, among other possibilities.

Now, I present to you the actions during the task force group meeting. Having completed the initial formalities, the team should focus on the first activity of applying this method, with a competent coach or facilitator to act as leader. It is important that this person knows how to create conditions of trust so that people can participate actively, applying their knowledge, intelligence and experience.

Bearing this in mind, all participants must have in view both the relevant results of the organization's performance in terms of its management system(s) under analysis, as well as the related proposed or established objectives.

a) The first task is the description of the method to be used, by the facilitator, so that all team members understand it.

b) The second task will be to brainstorm all the factors that could have an impact, either positive or negative, on the organization`s performance in the light of the presented objectives, whether established and/or proposed, and that could be considered as external issues relevant either to the purpose or to the strategic direction and therefore affect its ability to achieve the expected results (objectives) of its corresponding management system.

As mentioned, in this task individual thinking should be promoted to generate ideas. From this exercise, two simple lists should be elaborated with all the reasonable elements that would have been mentioned in that exercise. There could be a large number of items in this list, some could be included in both lists, and not all of them may be relevant.

As a simple, non-exhaustive example, the following factors can be identified to be evaluated:

Source: Internet, from various web pages

To carry out this activity in a valuable way, it is important that the facilitator of the task force group presents to them a series of questions, previously elaborated, in which they should consider the relevance of these external issues in the analyzed management system.

The questions presented by the coach should be formulated in such a way that the answers given are the different relevant external issues, either for the purpose as for the strategic direction of the organization.

As examples of these questions, in relation to the organization`s purpose, I present some:

Regarding political factors:

1) Are there currently any public policies or political trends that are impacting or will impact the purpose of our organization? Locally? At the national level? At regional level? On an international level?

2) What political groups or activists can affect the organization, in terms of its purpose? Locally? At the national level? At regional level? On an international level?

3) Is there a stable political environment for the organization? Locally? At the national level? At regional level? On an international level?

Regarding economic factors:

1) How might current economic performance affect the organization's purpose? Locally? At the national level? At regional level? On an international level?

2) What are the economic aspects that affect the purpose of the organization? Locally? At the national level? At regional level? On an international level?


3) What are the factors that affect our costs? Locally? At the national level? At regional level? On an international level?

4) What are the factors that affect our prices? Locally? At the national level? At regional level? On an international level?

These are just a few examples, but it is important that the questions cover all external factors and aspects that could affect the expected results of the organization, within the management system to be analyzed.

Within this activity, all the possible relevant external factors that the team members have mentioned, in relation to the questions formulated by the facilitator, must be listed in simple lists, for which a template such as the following could be used:

Source: Palomares Hilton, Ernesto

It is important to emphasize that this tool can be used by the organization to establish different strategies, either at a general level or by segments of interest. In this case, as it is aimed to meet the requirement of one or more management system standards, you should restrict these tasks to matters relevant to that or those systems.

Once the exhaustive list(s) of the relevant factors identified individually by the task force group members during the “brainstorming” had been elaborated, the next task would be carried out for this team.

c) This third activity will be the analysis of all those previously listed factors, carried out as a team and in an orderly manner. For this, each element of the lists must be analyzed, to define if each one of them is really relevant for the organization, identify in what type of factors it is classified, and is relevant for the purpose, for the strategic direction or for both.

This would lead to generating another list of previously identified elements, which would have already been selected and classified by factors and by area of influence.

As an example, I present the following table, using a template that I consider appropriate for that second list:

Source: Palomares Hilton, Ernesto

d) The fourth task is to carry out a formal analysis, with the participation of the entire task force group, to identify those external issues already listed in the previous tasks, which are really relevant, generating a list of six columns to place those issues that are external, and that are pertinent to the purpose or the strategic direction of the organization, indicating whether its effect is positive or negative, and if so, the range in which the factor can be considered pertinent issue.

A template similar to the following should be used for this table:

Source: Palomares Hilton, Ernesto

As I mentioned before, there may be cases where the identified issues are the same for the purpose as for the strategic direction. If so, we should incorporate them in both columns. This list must remain as documentation required by the corresponding management system standard and kept as evidence. It must be taken into account that the ISO 9001: 2015 standard, in Note 1 on this Sub-Clause 4.1, tells us that the issues can include positive and negative factors or conditions for their consideration. This means that task force team members can define, for example, that less than 6% in annual inflation is a relevant positive issue, and greater than 12% is a relevant negative issue, and if it falls between those ranges, it is irrelevant.

With these tasks you would have already identified the external issues relevant to both the organization`s purpose and strategic direction and that affect its ability to achieve the expected results of the corresponding management system, in compliance with these requirements of Sub-Clause 4.1 of the management system standard referred.

e) The next activity, no less important, is the prioritization of relevant external issues. In those cases in which a large number of relevant external issues have been listed, it will be important for the task force team to analyze and select a maximum number of relevant issues, which I suggest two, that are the most important within each one of the factors and defined levels. In this way, the organization will be able to focus its attention on priority relevant external issues, so that they can be followed up and revised. These can be listed in a template like the following:

Source: Palomares Hilton, Ernesto

As you can see from the header of this table, this listing would be to establish the external issues relevant to the organization's purpose. An equivalent table should be used for external issues relevant to its strategic direction.

f) And in the last activity of this meeting, all data and documentation used as support in the determination of all external issues must be listed, identified and retained.

Already in the activities after the meeting, it will be up to the strategic management, or where appropriate, the top management, to use the information of these external issues to adjust or confirm the objectives of the management system.

For the remaining requirements of this Sub-Clause 4.1, it is up to senior management to determine which area or function within the organization must monitor the information on these relevant external issues, and with which other areas or functions it may be supported for this activity, how often they will do it, what results you might expect and how they would document them and to whom they would be distributed.

The result that should be expected from montoring would be whether the information originally used to identify each of these external issues is still valid, or which of that information is no longer valid.

Likewise, it is important to document the way in which the revision of these external issues will be carried out: which area or function will carry it out, when, what the expected results would be, how they would be documented and to whom they would be distributed.

In relation to this revision activity, the expected result should be whether, based on the outcome of the information of monitoring, changes are made to the external issues identified as relevant to the organization´s purpose and strategic direction and affecting its ability to achieve the planned results, or they remain as they have been previously identified, or also if, due to changes in the relevant external issues, some change is required in one or more of the objectives of the management system.

It should not be forgotten that all considerations about changes in external and internal issues that are relevant to the management system will be input elements for the management review requirement.


Ernesto Palomares Hilton