Business Acumen

PESTLE is a strategic framework used for analyzing the external macro-environment that affects organizations. The correct acronym stands for:

P - Political
E - Economic
S - Social
T - Technological
L - Legal
E - Environmental

This framework is widely recognized in strategic management and HR planning as a tool to scan the external environment and identify factors that may impact organizational strategy and operations.

Political factors include government policies, political stability, and regulations.
Economic factors cover economic growth, interest rates, inflation, and employment levels.
Social factors encompass demographics, cultural trends, and workforce expectations.
Technological factors include innovation, automation, and digital transformation.
Legal factors involve employment laws, health and safety regulations, and compliance requirements.
Environmental factors address sustainability, climate change, and corporate social responsibility.

The other options contain incorrect elements:

One option incorrectly includes 'Strategic' and 'Legislative' (which is redundant with Legal) and 'Ethical' instead of the standard components.

Another option starts with 'Personnel' and includes 'Enterprise' and 'Efficiency', which are not part of the standard PESTLE framework.

The final incorrect option replaces 'Social' and 'Environmental' with 'Efficiency' and duplicates 'Economic', which doesn't align with the established framework.

For SHRM-SCP professionals, understanding PESTLE analysis is crucial for strategic workforce planning and ensuring HR strategies align with external environmental factors.

The correct answer is to revise the incentive plan to credit stores for total sales activity regardless of the origination channel.

This is the most effective solution because it directly addresses the root cause of the behavior: the misalignment between the organization's strategic goal (omnichannel integration) and the managers' financial incentives. Currently, managers are penalized for designating labor to online fulfillment because their bonuses rely on high-margin in-store sales. By altering the compensation metric to recognize total sales (both digital and physical) attributed to the store, the organization aligns the reward system with the new business model. This ensures that store managers view online fulfillment as a contributor to their success rather than a distractor.

Establishing distinct inventory specialist roles is a staffing or organizational design solution, not a modification to the total rewards strategy. While it mitigates the labor diversion issue, it increases headcount costs and fails to motivate the store leadership to embrace the strategic shift.

Deploying a change management program focuses on communication and buy-in. While helpful, communication alone rarely changes behavior if financial incentives actively encourage the opposite behavior (the agency problem).

Increasing base salary levels addresses the complexity of the role but fails to drive specific performance outcomes. It acts as an entitlement rather than a motivator. If the variable pay structure remains tied only to in-store sales, managers will continue to prioritize in-store customers over online orders to maximize their total compensation.

The correct answer is the opportunity cost associated with resource diversion.

In this scenario, the CFO is applying the economic concept of opportunity cost to evaluate the true cost of the internal build. Opportunity cost implies that for every choice made, there is a next-best alternative that is forgone. While the engineers' salaries are fixed expenses (sunk costs in the short term), their time is a scarce resource.

By taking the engineering team away from their primary function—developing the core product that generates revenue—the company loses the value created by that work. If the revenue lost by delaying product features exceeds the $50,000 license fee, the internal build is actually more expensive than the external vendor, despite the internal labor costs being 'fixed.'

• The capitalization of internal development labor refers to the accounting practice of recording development costs as an asset on the balance sheet rather than an expense, which does not address the revenue loss argument.
• Standard rate variance relates to cost accounting differences between budgeted and actual costs, not the strategic trade-off of resource allocation.
• The valuation of intangible assets concerns estimating the worth of non-physical assets, not the cost of diverting labor from revenue-generating activities.