McKinsey 7S Framework

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Introduction This paper discusses McKinsey's 7S Model that was created by the consulting company McKinsey and Company in the early 1980s. Since then it has been widely used by practitioners and academics alike in analysing hundreds of organisations. The paper explains each of the seven components of the model and the links between them. It also includes practical guidance and advice for the students to analyse organisations using this model. At the end, some sources for further information on the model and case studies available on this website are mentioned. The McKinsey 7S model was named after a consulting company, McKinsey and Company, which has conducted applied research in business and industry (Pascale & Athos, 1981; Peters & Waterman, 1982). All of the authors worked as consultants at McKinsey and Company; in the 1980s, they used the model to analyse over 70 large organisations. The McKinsey 7S Framework was created as a recognisable and easily remembered model in business. The seven variables, which the authors term "levers", all begin with the letter "S": These seven variables include structure, strategy, systems, skills, style, staff and shared values. Structure is defined as the skeleton of the organisation or the organisational chart. The authors describe strategy as the plan or course of action in allocating resources to achieve identified goals over time. The systems are the routine processes and procedures followed within the organisation. Staff are described in terms of personnel categories within the organisation (e.g. engineers), whereas the skills variable refers to the capabilities of the staff within the organisation as a whole. The way in which key managers behave in achieving organisational goals is considered to be the style variable; this variable is thought to encompass the cultural style of the organisation. The shared values variable, originally termed superordinate goals, refers to the significant meanings or guiding concepts that organisational members share (Peters and Waterman, 1982). The shape of the model (as shown in figure 1) was also designed to illustrate the interdependency of the variables. This is illustrated by the model also being termed as the "Managerial Molecule". While the authors thought that other variables existed within complex organisations, the variables represented in the model were considered to be of crucial importance to managers and practitioners (Peters and Waterman, 1982). The analysis of several organisations using the model revealed that American companies tend to focus on those variables which they feel they can change (e.g. structure, strategy and systems) while neglecting the other variables. These other variables (e.g. skills, style, staff and shared values) are considered to be "soft" variables. Japanese and a few excellent American companies are reportedly successful at linking their structure, strategy and systems with the soft variables. The authors have concluded that a company cannot merely change one or two variables to change the whole organisation. For long-term benefit, they feel that the variables should be changed to become more congruent as a system. The external environment is not mentioned in the McKinsey 7S Framework, although the authors do acknowledge that other variables exist and that they depict only the most crucial variables in the model. While alluded to in their discussion of the model, the notion of performance or effectiveness is not made explicit in the model. Description of 7 Ss Strategy: Strategy is the plan of action an organisation prepares in response to, or anticipation of, changes in its external environment. Strategy is differentiated by tactics or operational actions by its nature of being premeditated, well thought through and often practically rehearsed. It deals with essentially three questions (as shown in figure 2): 1) where the organisation is at this moment in time, 2) where the organisation wants to be in a particular length of time and 3) how to get there. Thus, strategy is designed to transform the firm from the present position to the new position described by objectives, subject to constraints of the capabilities or the potential (Ansoff, 1965). Structure: Business needs to be organised in a specific form of shape that is generally referred to as organisational structure. Organisations are structured in a variety of ways, dependent on their objectives and culture. The structure of the company often dictates the way it operates and performs (Waterman et al., 1980). Traditionally, the businesses have been structured in a hierarchical way with several divisions and departments, each responsible for a specific task such as human resources management, production or marketing. Many layers of management controlled the operations, with each answerable to the upper layer of management. Although this is still the most widely used organisational structure, the recent trend is increasingly towards a flat structure where the work is done in teams of specialists rather than fixed departments. The idea is to make the organisation more flexible and devolve the power by empowering the employees and eliminate the middle management layers (Boyle, 2007).

Systems: Every organisation has some systems or internal processes to support and implement the strategy and run day-to-day affairs. For example, a company may follow a particular process for recruitment. These processes are normally strictly followed and are designed to achieve maximum effectiveness. Traditionally the organisations have been following a bureaucratic-style process model where most decisions are taken at the higher management level and there are various and sometimes unnecessary requirements for a specific decision (e.g. procurement of daily use goods) to be taken. Increasingly, the organisations are simplifying and modernising their process by innovation and use of new technology to make the decision-making process quicker. Special emphasis is on the customers with the intention to make the processes that involve customers as user friendly as possible (Lynch, 2005). Style/Culture: All organisations have their own distinct culture and management style. It includes the dominant values, beliefs and norms which develop over time and become relatively enduring features of the organisational life. It also entails the way managers interact with the employees and the way they spend their time. The businesses have traditionally been influenced by the military style of management and culture where strict adherence to the upper management and procedures was expected from the lower-rank employees. However, there have been extensive efforts in the past couple of decades to change to culture to a more open, innovative and friendly environment with fewer hierarchies and smaller chain of command. Culture remains an important consideration in the implementation of any strategy in the organisation (Martins and Terblanche, 2003). Staff: Organisations are made up of humans and it's the people who make the real difference to the success of the organisation in the increasingly knowledge-based society. The importance of human resources has thus got the central position in the strategy of the organisation, away from the traditional model of capital and land. All leading organisations such as IBM, Microsoft, Cisco, etc put extraordinary emphasis on hiring the best staff, providing them with rigorous training and mentoring support, and pushing their staff to limits in achieving professional excellence, and this forms the basis of these organisations' strategy and competitive advantage over their competitors. It is also important for the organisation to instil confidence among the employees about their future in the organisation and future career growth as an incentive for hard work (Purcell and Boxal, 2003). Shared Values/Superordinate Goals: All members of the organisation share some common fundamental ideas or guiding concepts around which the business is built. This may be to make money or to achieve excellence in a particular field. These values and common goals keep the employees working towards a common destination as a coherent team and are important to keep the team spirit alive. The organisations with weak values and common goals often find their employees following their own personal goals that may be different or even in conflict with those of the organisation or their fellow colleagues (Martins and Terblanche, 2003). Using the 7S Model to Analyse an Organisation A detailed case study or comprehensive material on the organisation under study is required to analyse it using the 7S model. This is because the model covers almost all aspects of the business and all major parts of the organisation. It is therefore highly important to gather as much information about the organisation as possible from all available sources such as organisational reports, news and press releases although primary research, e.g. using interviews along with literature review is more suited. The researcher also needs to consider a variety of facts about the 7S model. Some of these are detailed in the paragraphs to follow. The seven components described above are normally categorised as soft and hard components. The hard components are the strategy, structure and systems which are normally feasible and easy to identify in an organisation as they are normally well documented and seen in the form of tangible objects or reports such as strategy statements, corporate plans, organisational charts and other documents. The remaining four Ss, however, are more difficult to comprehend. The capabilities, values and elements of corporate culture, for example, are continuously developing and are altered by the people at work in the organisation. It is therefore only possible to understand these aspects by studying the organisation very closely, normally through observations and/or through conducting interviews. Some linkages, however, can be made between the hard and soft components. For example, it is seen that a rigid, hierarchical organisational structure normally leads to a bureaucratic organisational culture where the power is centralised at the higher management level. It is also noted that the softer components of the model are difficult to change and are the most challenging elements of any change-management strategy. Changing the culture and overcoming the staff resistance to changes, especially the one that alters the power structure in the organisation and the inherent values of the organisation, is generally difficult to manage. However, if these factors are altered, they can have a great impact on the structure, strategies and the systems of the organisation. Over the last few years, there has been a trend to have a more open, flexible and dynamic culture in the organisation where the employees are valued and innovation encouraged. This is, however, not easy to achieve where the traditional culture is been dominant for decades and therefore many organisations are in a state of flux in

managing this change. What compounds their problems is their focus on only the hard components and neglecting the softer issues identified in the model which is without doubt a recipe for failure. Similarly, when analysing an organisation using the 7S model, it is important for the researcher to give more time and effort to understanding the real dynamics of the organisation's soft aspects as these underlying values in reality drive the organisations by affecting the decisionmaking at all levels. It is too easy to fall into the trap of only concentrating on the hard factors as they are readily available from organisations' reports etc. However, to achieve higher marks, students must analyse in depth the cultural dimension of the structure, processes and decision made in an organisation. For even advanced analysis, the student should not just write about these components individually but also highlight how they interact and affect each other. Or in other words, how one component is affected by changes in the other. Especially the "cause and effect" analyses of soft and hard components often yield a very interesting analysis and provides readers with an in-depth understanding of what caused the change. Sources for Data on McKinsey's 7S Model The main source of academic work on the 7S model has to be the writings of Waterman et al. (1980; 1982), and Pascale and Athos (1981) who came up with the idea and applied it to analyse over 70 large organisations. Since then, it has been used by hundreds of organisations and academics for analytical purposes. Many such case studies can be obtained from the academic journals and the books written on the topic. A few case studies, for example the analyses of Coca-Cola and energy giant Centrica (Owner of British Gas), are also available at this website. References Ansoff, I. (1965) Corporate Strategy, McGraw-Hill, London Boyle, S. (2007) "Impact of Changes in Organisational Structure on Selected Key Performance Indicators for Cultural Organisations", International Journal of Cultural Policy, Vol. 13 (3), pp.319334. Lynch, R. (2005) "Corporate Strategy" (4th edition), Prentice Hall, UK. Martins, E. and Terblanche, F. (2003) "Building Organisational Culture that Stimulates Creativity and Innovation", European Journal of Innovation Management, Vol. 6 (1), pp.6474. Pascale, R. and Athos, A. (1981) "The Art of Japanese Management", London: Penguin Books. Peters, T. and Waterman, R. (1982) "In Search of Excellence", New York, London: Harper & Row. Price, A. and Chahal, K. (2006) "A Strategic Framework for Change Management", Construction Management and Economics, Vol. 24 (3), pp.237251. Purcell, J. and Boxal, P. (2003) "Strategy and Human Resource Management (Management, Work and Organisations)", Palgrave Macmillan, UK. Waterman, R. Jr., Peters, T. and Phillips, J.R. (1980) "Structure Is Not Organisation" in Business Horizons, Vol. 23(3), pp.1426. Copyright 2002-2007 Papers4You.Com All Rights Reserved

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The McKinsey 7S Framework

Ensuring that all parts of your organization work in harmony
How do you go about analyzing how well your organization is positioned to achieve its intended objective? This is a question that has been asked for many years, and there are many different answers. Some approaches look at internal factors, others look at external ones, some combine these perspectives, and others look for congruence between various aspects of the organization being studied. Ultimately, the issue comes down to which factors to study. While some models of organizational effectiveness go in and out of fashion, one that has persisted is the McKinsey 7S framework. Developed in the early 1980s by Tom Peters and Robert Waterman, two consultants working at the McKinsey & Company consulting firm, the basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successful. The 7S model can be used in a wide variety of situations where an alignment perspective is useful, for example to help you:
y y y y

Improve the performance of a company. Examine the likely effects of future changes within a company. Align departments and processes during a merger or acquisition. Determine how best to implement a proposed strategy.

The McKinsey 7S model can be applied to elements of a team or a project as well. The alignment issues apply, regardless of how you decide to define the scope of the areas you study.

The Seven Elements

The McKinsey 7S model involves seven interdependent factors which are categorized as either "hard" or "soft" elements: Hard Elements Strategy Structure Systems Soft Elements Shared Values Skills Style Staff

"Hard" elements are easier to define or identify and management can directly influence them: These are strategy statements; organization charts and reporting lines; and formal processes and IT systems. "Soft" elements, on the other hand, can be more difficult to describe, and are less tangible and more influenced by culture. However, these soft elements are as important as the hard elements if the organization is going to be successful. The way the model is presented in Figure 1 below depicts the interdependency of the elements and indicates how a change in one affects all the others.

Let's look at each of the elements specifically:

y y y y y y y

Strategy: the plan devised to maintain and build competitive advantage over the competition. Structure: the way the organization is structured and who reports to whom. Systems: the daily activities and procedures that staff members engage in to get the job done. Shared Values: called "superordinate goals" when the model was first developed, these are the core values of the company that are evidenced in the corporate culture and the general work ethic. Style: the style of leadership adopted. Staff: the employees and their general capabilities. Skills: the actual skills and competencies of the employees working for the company.

Placing Shared Values in the middle of the model emphasizes that these values are central to the development of all the other critical elements. The company's structure, strategy, systems, style, staff and skills all stem from why the organization was originally created, and what it stands for. The original vision of the company was formed from the values of the creators. As the values change, so do all the other elements.

How to Use the Model

Now you know what the model covers, how can you use it? The model is based on the theory that, for an organization to perform well, these seven elements need to be aligned and mutually reinforcing. So, the model can be used to help identify what needs to be realigned to improve performance, or to maintain alignment (and performance) during other types of change. Whatever the type of change - restructuring, new processes, organizational merger, new systems, change of leadership, and so on - the model can be used to understand how the organizational elements are interrelated, and so ensure that the wider impact of changes made in one area is taken into consideration. You can use the 7S model to help analyze the current situation (Point A), a proposed future situation (Point B) and to identify gaps and inconsistencies between them. It's then a question of adjusting and tuning the elements of the 7S model to ensure that your organization works effectively and well once you reach the desired endpoint. Sounds simple? Well, of course not: Changing your organization probably will not be simple at all! Whole books and methodologies are dedicated to analyzing organizational strategy, improving performance and managing change. The 7S model is a good framework to help you ask the right questions - but it won't give you all the answers. For that you'll need to bring together the right knowledge, skills and experience. When it comes to asking the right questions, we've developed a Mind Tools checklist and a matrix to keep track of how the seven elements align with each other. Supplement these with your own questions, based on your organization's specific circumstances and accumulated wisdom. 7S Checklist Questions Here are some of the questions that you'll need to explore to help you understand your situation in terms of the 7S framework. Use them to analyze your current (Point A) situation first, and then repeat the exercise for your proposed situation (Point B). Strategy:
y y y y y

What is our strategy? How do we intend to achieve our objectives? How do we deal with competitive pressure? How are changes in customer demands dealt with? How is strategy adjusted for environmental issues?

Structure:
y y y y y y

How is the company/team divided? What is the hierarchy? How do the various departments coordinate activities? How do the team members organize and align themselves? Is decision making and controlling centralized or decentralized? Is this as it should be, given what we're doing? Where are the lines of communication? Explicit and implicit?

Systems:

y y y

What are the main systems that run the organization? Consider financial and HR systems as well as communications and document storage. Where are the controls and how are they monitored and evaluated? What internal rules and processes does the team use to keep on track?

Shared Values:
y y y y

What are the core values? What is the corporate/team culture? How strong are the values? What are the fundamental values that the company/team was built on?

Style:
y y y y

How participative is the management/leadership style? How effective is that leadership? Do employees/team members tend to be competitive or cooperative? Are there real teams functioning within the organization or are they just nominal groups?

Staff:
y y y

What positions or specializations are represented within the team? What positions need to be filled? Are there gaps in required competencies?

Skills:
y y y y y

What are the strongest skills represented within the company/team? Are there any skills gaps? What is the company/team known for doing well? Do the current employees/team members have the ability to do the job? How are skills monitored and assessed?

7S matrix questions Using the information you have gathered, now examine where there are gaps and inconsistencies between elements. Remember you can use this to look at either your current or your desired organization. Click here to download our McKinsey 7S Worksheet, which contains a matrix that you can use to check off alignment between each of the elements as you go through the following steps:
y

Start with your Shared Values: Are they consistent with your structure, strategy, and systems? If not, what needs to change? Then look at the hard elements. How well does each one support the others? Identify where changes need to be made. Next look at the other soft elements. Do they support the desired hard elements? Do they support one another? If not, what needs to change? As you adjust and align the elements, you'll need to use an iterative (and often time consuming) process of making adjustments, and then re-analyzing how that impacts other elements and their alignment. The end result of better performance will be worth it.

Key Points
The McKinsey 7Ss model is one that can be applied to almost any organizational or team effectiveness issue. If something within your organization or team isn't working, chances are there is inconsistency between some of the elements identified by this classic model. Once these inconsistencies are revealed, you can work to align the internal elements to make sure they are all contributing to the shared goals and values. The process of analyzing where you are right now in terms of these elements is worthwhile in and of itself. But by taking this analysis to the next level and determining the ultimate state for each of the factors, you can really move your organization or team forward.

DaveChaffey.com : Your Guide to Digital Business http://www.davechaffey.com/E-business/Ch10-Change/mckinsey-7s-strategy-model/

McKinsey 7S strategy model reference

The McKinsey 7S model or strategy framework summarised by Waterman et al. (1980) was developed by McKinsey consultants in the 1980s and it is often referenced when referring to managing change and strategy development in a business. A recent (2008) update on the Mckinsey 7S model is a short podcast on the creation of Mckinsey 7S model by Lowell Bryan, a director in McKinsey's New York office, involved in creating and applying the 7-S framework. He describes how it was introduced in the late 1970s to address the critical role of coordination, rather than structure, in organizational effectiveness. We reference the McKinsey 7S model in the E-consultancy Managing an E-commerce team report as a method of reviewing the internal capabilities of an organisation to manage digital channels. Some of the key issues that require management are shown in the table below. The original refererence is: Waterman, R.H., Peters, T.J. and Phillips, J.R. (1980) Structure is not organization. McKinsey Quarterly inhouse journal. McKinsey & Co., New York. Element of 7S model Strategy Application to digital marketing team The significance of digital marketing in influencing and supporting organisations' strategy Key issues from practice and literature Gaining appropriate budgets and demonstrating / delivering value and ROI from budgets. Annual planning approach. Techniques for using digital marketing to impact organisation strategy Techniques for aligning digital strategy with organisational and marketing strategy The modification of organizational Integration of team with other management, structure to support digital marketing. marketing (corporate communications, brand marketing, direct marketing) and IT staff

Structure

Use of cross-functional teams and steering groups Insourcing vs. outsourcing The development of specific processes, Campaign planning approach-integration procedures or information systems to support digital marketing Managing/sharing customer information Managing content quality Unified reporting of digital marketing effectiveness In-house vs. external best-of-breed vs. external integrated technology solutions Insourcing vs. outsourcing Achieving senior management buy-in/involvement with digital marketing Staff recruitment and retention. Virtual working Staff development and training Relates to role of digital marketing team in influencing strategy

Systems

Staff

The breakdown of staff in terms of their background and characteristics such as IT vs. Marketing, use of contractors/consultants, age and sex.

Style

it is it dynamic and influential or conservative and looking for a voice Skills Distinctive capabilities of key staff, but Staff skills in specific areas: supplier selection, can be interpreted as specific skill-sets project management, Content management, specific of team members. e-marketing approaches (SEO,PPC, affiliate marketing, e-mail marketing, online advertising) Superordinate goals The guiding concepts of the digital Improving the perception of the importance and marketing organisation which are also effectiveness of the digital marketing team amongst part of shared values and culture. The senior managers and staff it works with (marketing internal and external perception of generalists and IT) these goals may vary

Includes both the way in which key managers behave in achieving the organizations' goals and the cultural style of the organization as a whole.