SWOT Analysis



SWOT Analysis

A successful business is founded on a series of sound decisions, so the way you analyze situations and choose to react is essential. When trying to assess the lay of the land, few tools are more useful than the SWOT analysis. It stands for strengths, weaknesses, opportunities, and threats; the SWOT analysis is a planning process that allows your company to overcome challenges and determine what new leads to pursue.

The elements of a SWOT analysis

A SWOT analysis focuses on the four elements comprising the acronym, allowing companies to identify the forces influencing a strategy, action or initiative. Knowing these positive and negative elements can help companies more effectively communicate what parts of a plan need to be recognized.

When drafting a SWOT analysis, individuals typically create a table split into four columns to list each impacting element side-by-side for comparison. Strengths and weaknesses won’t typically match listed opportunities and threats, though they should correlate somewhat since they’re tied together in some way. Billy Bauer, managing director of Royce Leather, noted that pairing external threats with internal weaknesses can highlight the most serious issues faced by a company.

Internal factors

The first two letters in the acronym, S (strengths) and W (weaknesses), refer to internal factors, which means the resources and experience readily available to you. Examples of areas typically considered include:  

• Financial resources (funding, sources of income, investment opportunities)
• Physical resources (location, facilities, equipment)
• Human resources (employees, volunteers, target audiences)
• Access to natural resources, trademarks, patents and copyrights
• Current processes (employee programs, department hierarchies, software systems)

External factors

External forces influence and affect every company, organization and individual. Whether these factors are connected directly or indirectly to an opportunity or threat, it is important to take note of and document each one. External factors typically reference things you or your company do not control, such as:

• Market trends (new products and technology, shifts in audience needs)
• Economic trends (local, national and international financial trends)
• Funding (donations, legislature and other sources)
• Demographics
• Relationships with suppliers and partners
• Political, environmental and economic regulations

Once you fill out your SWOT analysis, you will need to come up with some recommendations and strategies based on the results. Linda Pophal, owner and CEO of Strategic Communications consulting firm, said these strategies should be focused on leveraging strengths and opportunities to overcome weaknesses and threats.

Performance standard and appraisal

Performance appraisal is a process by which organizations evaluate employee performance based on preset standards. The main purpose of appraisals is to help managers effectively staff companies and use human resources, and, ultimately, to improve productivity. When conducted properly, appraisals serve that purpose by:

• showing employees how to improve their performance,
• setting goals for employees, and
• helping managers to assess subordinates’ effectiveness and take actions related to hiring, promotions, demotions, training, compensation, job design, transfers, and terminations.

In the early part of this century performance appraisals were used in larger organizations mostly for administrative purposes, such as making promotions and determining salaries and bonuses. Since the 1960s, however, companies and researchers have increasingly stressed the use of employee evaluations for motivational and organizational planning purposes. Indeed, for many companies performance appraisal has become an important tool for maximizing the effectiveness of all aspects of the organization, from staffing and development to production and customer service.  

That shift of focus was accompanied during the 1970s, 1980s, and 1990s by a number of changes in the design and use of appraisals. Those changes reflected new research and attitudes about organizational behavior and theory. In general, employee evaluation systems have recognized the importance of individual needs and cultural influences in achieving organizational objectives. For example, traditional appraisal systems were often closed, meaning that individuals were not allowed to see their own reports. Since the mid-1900s, most companies have rejected closed evaluations in favor of open appraisals that allow workers to benefit from criticism and praise  

Another change in appraisal techniques since the mid-1900s has been a move toward greater employee participation. This includes self-analysis, employee input into evaluations, feedback, and goal setting by workers. Appraisal systems have also become more results-oriented, which means that appraisals are more focused on a process of establishing benchmarks, setting individual objectives, measuring performance, and then judging success based on the goals, standards, and accomplishments. Likewise, appraisals have become more multifaceted, incorporating a wide range of different criteria and approaches to ensure an effective assessment process and to help determine the reasons behind employees’ performance.  

Performance appraisals and standards have also reflected a move toward decentralization. In other words, the responsibility for managing the entire appraisal process has moved closer to the employees who are being evaluated; whereas past performance reviews were often developed and administered by centralized human resources departments or upper-level managers, appraisals in the 1990s were much more likely to be conducted by line managers directly above the appraisee. Because of the movement toward more decentralized approaches, performance appraisals also began to involve not only lower-level managers, but also coworkers and even customers. Known as multirater feedback or 360 degree feedback, this form of performance appraisal uses confidential assessments from customers, managers, coworkers, and the individual employees themselves. Furthermore, the appraisal process has become increasingly integrated into complementary organizational initiatives, such as training and mentoring.  

In addition to reflecting new ideas about personal needs and cultural influences, performance appraisal systems evolved during the late 1900s to meet strict new federal regulations and to conform to labor union demands. A flurry of legislation during the 1970s and 1980s, for example, prohibited the use of performance appraisals to discriminate against members of selected minority groups. Other laws established restrictions related to privacy and freedom of information. The end result of new laws and labor demands was that companies were forced to painstakingly design and document their appraisal programs to avoid costly disputes and litigation.  

Finally, with the booming economy in the late 1990s, many managers throughout the country began to move away from performance appraisals, according to Marilyn Moats Kennedy in Across the Board. Because of high employee turnover during this period, managers felt that conducting performance appraisals was not worth the effort since appraisals have the potential to irritate and drive off badly needed employees and since employees’ time at a company might be short-lived. Moats argued, however, that managers should continue to conduct appraisals to assess and retain competent employees, because appraisals inform employees of how they can improve their skills, how they can advance within a company, and how their skills have improved (or failed to improve) over time.