Penfold Associates

Keeping track of what is going on in a rapidly changing world is important if housing associations are going to survive and meet the needs of the people they serve. In recent years there have been fundamental changes in housing markets and in customers’ (and potential customers’) aspirations. With regard to the economy, we have been through a major recession and we have seen the rise of India and China as economic powers. Demographically, we have an ageing population but have also seen changing migration patterns. We are going through a period of political flux which has its roots in the recession and Brexit but which reflects deep divisions in our society.

In addition to all this there is climate change to be considered along with a whole range of technological issues.

Housing associations work in an extremely political environment. They have political partners at the local level and are influenced by sub-regional, regional and national policies. The sector is also highly-regulated.

All these factors make environmental scanning vital to all housing associations in their planning for the future. However, to be useful and effective this scanning must be done in an organised and systematic way. It is not enough just to read the papers, watch for government announcements and just hope that the important things will stick out. An ‘ad hoc’ approach runs the danger that things will be missed and also leaves out the vital step of reflecting on the implications of what is going on. Scanning needs to be regular, preferably linked to the housing association’s planning cycle, and continuous with updates keeping track of changes between formal plan reviews.

A simple definition of environmental scanning is: “Careful monitoring of a firm’s internal and external environments for detecting early signs of opportunities and threats that may influence its current and future plans. In comparison ‘surveillance’ is confined to a specific objective or narrow sector.” www.businessdictionary.com

More insight into how to go about scanning is given by Maree Conway: “Environmental Scanning in a strategic sense is about building a global context for your work, your organization, your competitive environment, and your industry. It is about recognising that the future is unlikely to be anything like the past, and that we therefore need to spend some time understanding the trends and likely influencers on the future of our organizations. High quality scanning is the core of effective futures work.” (“Environmental scanning – what it is and how to do it…”,Thinking Futures, 2009).

The environmental scanning process has four basic elements:-

• input – information gathering to identify scanning events or “hits”
• analysis – working out what the data means
• interpretation – focusing on how it affects you and your organisation
• prospection – working out what might happen, perhaps developing scenarios.

There are well-known simple techniques for gathering and organising the data, the most common being PEST – politics, economy, social and technology. One variation – STEEP – identifies environmental issues as a separate category and PESTLE also separates out legal factors. This first stage in the process works best as a group exercise with representatives from different levels and all functions in the organisation. This stage should identify trends where there is an evident pattern of change and should also aim to pick up the drivers for change which are broader in scope and tend to be longer term.

Output from the PEST exercise (or STEEP/PESTLE variation) can feed into the planning process using the simple and well-known SWOT technique. Internal scanning hits tend to relate to Strengths and Weaknesses while external hits tend to relate to Opportunities and Threats. To make a meaningful contribution to planning, the environmental scan must take at least a 5 – 10 year view and participants in the group PEST exercise should not be afraid to go further into the future. Having said this, it must be recognized that housing associations are peculiarly prone to short term political influences which tend to skew things towards a shorter time horizon. Policy and priorities in public bodies can change very rapidly. While this fact of life has to be accepted, it must not prevent taking a longer term view.

Another danger is that scanners can be overly influenced by their own world view. It is important to be aware of your world view so that you can make the effort to be objective and avoid the danger of missing something vitally important just because it conflicts with your pre-conceptions.

A simple scoring system can be used to assess the relevance of trends and drivers for change on your organization. Marks can be given for the time-frame for a trend or driver to come into effect, the scope or breadth of its effects, the depth of impact, the likelihood that it will happen, and the urgency to do something about it. For all factors the point is how it affects your organization. This will help in determining how to respond – to act now as a matter of urgency, to manage the issue, or just to monitor it. I t is important though to watch out for counter-trends and also to give careful attention to “wild cards” – low probability hits that would have high impact if they actually materialised.

There are four things that you should aim to get out of environmental scanning:-

the ability to identify the information relevant to you and your organization – but while picking out trends is relatively easy because most will be known about, it is harder to pick up the weak signals on the horizon and more effort will be needed to spot these
the luxury of avoiding (most) surprises – this does not mean you need to be risk averse but does mean you can be risk aware and this puts you in a position to manage risk
a written report on the outcomes – this may seem a bit of a luxury but is vitally important for two reasons: a) in draft form it gives you the opportunity for a reality check and a chance for reflection on your original thoughts, and b) the final report leaves you with an audit trail that will help you remember why key planning decisions were made
the important business advantage of being able to respond to your environment in a thinking and prepared way rather than just reacting to things as they happen.

Summing this up, environmental scanning is essential for housing associations. It is important though that this is a systematic process and that it is both regular and continuous. It is important too that the results of environmental scanning feed into the planning process. Scanning techniques are simple so there are really no excuses for not using them. However, it is important to apply judgement and think through the implications of the results.

With uncertainties around Brexit and changes in the Regulator’s expectations it can be argued that environmental scanning is an even more vital part of housing associations’ and related bodies’ activities than normal. Press coverage is often hostile. There is continuing economic and political uncertainty. The Housing White Paper signalled some change in Government attitude and policy but it is still unclear how this will be put into effect. It is all the more important that everyone in the sector – and Boards in particular – should keep aware of trends and prepare to react appropriately. Environmental scanning an essential part of an association’s approach to risk management, especially in a time of such great uncertainty.

Kim Penfold
September 2017