Page 46 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

32 The Complete Guide to Executive Compensation

Threats and Opportunities
Goals may be easier or more difficult to attain based on perceived threats and opportunities
identified by an environment scan of not only what is happening, but what is likely to occur.
Let’s highlight examples of the type of information one would examine to determine the
presence of 10 kinds of threats and opportunities as shown in Table 1-14.

Threats and Opportunities

External Internal
Nature A B
Economy C D

Business E F

Law G H
Culture I J
Table 1-14. Scan for threats and opportunities

Nature. What is the impact of the change in seasons and of natural disasters (A) on the com-
pany? Internally (B), the question is, How can the company maximize the opportunities and
minimize the risks?
Economy. External economic (C) factors would include population, both customer
and workforce. The size and financial ability of the customer base is critical to the organi-
zation’s success in selling its products and services. The size, composition, and education of
the workforce has an impact on the ability of the organization to meet its internal, core-
competency staffing needs (D). Are needed skills available or in short supply? Are recruit-
ing pay premiums needed? An internal assessment of skill base of employees is a related
matter, along with the ability to retain key talent. Capital is another key external factor.
What is the availability of either borrowing or equity financing? What are short- and long-
term interest rates? Is the publicly traded stock market in a bull market (increasing stock
prices) or bear market (falling stock prices) cycle? Internally, what is the company’s cash flow
ability to meet its needs? At what rate are technological changes outdating existing products
and services?
Business. An external scan (E) would define market size for current and future products and
major competitors. Internally (F), the focus will be the ability to meet customer requirements
of quality, availability, and price.
Law. A look to the outside also examines what is present and likely to happen with legal
requirements (G) imposed on the organization. Legislation, regulation, and litigation are
more prevalent in some parts of the world than others. In addition to state and federal laws,
a number of alphabet soup organizations dramatically affect how an organization will do
business. In the United States, they include the EEOC, EPA, FASB, IRS, and SEC, to name