The McKinsey 7S Framework is a management model developed by business consultants Robert Waterman Jr. and Tom Peters in the 1980s. The 7 S’s are Structure, Strategy, Structures, Skills, Style, Staff and Shared values.
Most commonly, the model is used as an organizational analysis tool to analyze and track changes in an organization’s internal situation. The model is based on the premise that these seven components need to be balanced and mutually reinforcing for an organization to function well.
The model can also be used to assess what needs to be realigned in order to boost performance or preserve alignment (and performance) during other forms of transition.
- Introduction
- 7s Factors
- What is McKinsey 7s Model used for
- When to use McKinsey 7s Model
- Using the Tool
- Example of McKinsey 7s Model
- McKinsey 7s Model tips
- Benefits and Limitations of McKinsey 7s Model
Introduction
The McKinsey 7s model was developed with the aid of Richard Pascale and Anthony G. Athos by McKinsey consultants Tom Peters, Robert Waterman and Julien Philips in the 1980s.
The model has been widely used by practitioners and scholars since its introduction and remains one of the most influential strategic planning methods. It sought to present a focus on human resources (Soft S), as a key to higher organizational efficiency, rather than the conventional mass production tangibles of money, facilities and equipment.
The purpose of the model was to illustrate how the company’s seven elements: structure, strategy, skills, staff, style, systems, and shared values can be aligned together to achieve productivity in a company.
The key point of the model is that all seven areas are interconnected, and for the rest of an organization to work efficiently, a change in one area needs change.
7s Factors
The seven areas of organization are divided into the ‘soft and hard’ areas in McKinsey’s model. Strategy, structure and systems are hard elements that as opposed to soft elements, are much easier to identify and manage.
On the other hand, while more difficult to handle, soft areas are the backbone of the enterprise and are more likely to achieve a sustainable competitive advantage.
| Hard Elements | Soft Elements |
| Strategy | Shared Values |
| Structure | Skills |
| Systems | Style |
| Staff |
What each element means:
- Style
Often referred to as culture, this describes the way things are done and the way the leadership team conducts itself in the company, in particular. The style of leadership will impact how the majority of the staff handle themselves.
Therefore if the leadership visibly supports, champions and exhibits cost transformation and control, then it will usually pursue individuals throughout the company.
- Skills
It refers to the skills necessary to deliver the strategy of cost transformation and management. It is important to have the right skills to execute the plan and skill gaps may pose a risk to the achievement of cost competitiveness goals.
- Systems
These are the activities, procedures and processes in which people participate in order to perform the task. Software systems, which are gradually automating operations, processes and procedures, are also included.
- Structure
The hierarchy of control is exercised by delegated accountability. To help people understand who is responsible for particular outcomes, the process should be as clear as possible.
- Staff
This involves the innate abilities of the people of the company, the number of employees and the diversity required to maximize organizational capability and resources in each sector.
- Strategy
In dynamic, unpredictable, nuanced and ambiguous environments, organizations need to compete. So, with agility, strategy needs to adapt to this. To thrive, organizations must continually adapt to tactics.
- Shared values
These encapsulate the mission of the company or its social mandate. The function of the organization continues to remain a central constant over time and this purpose forms the principles of the organization.
What is McKinsey 7s Model used for
Most commonly, the model is used as an organizational analysis tool to analyze and track changes in an organization’s internal situation.
The model is based on the premise that these seven components need to be aligned and mutually reinforcing for an organization to function well. The model can also be used to help determine what needs to be realigned during other types of change to boost performance, or to preserve alignment (and performance).
The model can be used to explain how the organizational components are interrelated, regardless of the form of transition-restructuring, new processes, organizational merger, new systems, change of leadership, and so on-and to ensure that the broader effect of changes made in one field is taken into account.
When to use McKinsey 7s Model
In a wide range of circumstances where it’s helpful to analyze how the different parts of the company work together, you can use the 7-S model.
It can help you, for example, to improve your organization’s performance, or to determine the best way to implement a proposed strategy.
The framework may be used during a merger or acquisition to analyze the possible consequences of potential changes in the company, or to coordinate departments and processes. The McKinsey 7-S model can also be applied to elements of a team or a project.
During Mergers or Acquisitions:
Much of the time companies combine with other businesses, or other businesses to purchase them, to support themselves from an emerging loss. This acquisition or combining act is innately hazardous. There are some examples of fruitful mergers (Disney and Pixar), although there are those that just led them to their demise (AOL and Time Warner).
Researched and well-developed plan, common shared principles, structure, leadership style (one of the important reasons why the Sprint and Nextel merger failed), etc., are the key to a successful merge. The McKinsey 7s model enables companies to identify the key, as it can serve as an instrument of research, policy and management.
For any change or development in the organization:
Change is as unpredictable as a merger in a company. Change is nice, however, especially in this fast-paced world. Netflix is one of the leading examples of a business that has handled the transformation and adapted to its environment.
However, in some cases, changes are not yet necessary. Therefore, it is critical for organizations to self-assess, come up with the right game plan, and know the working method. To evaluate these variables, organizations can still use the McKinsey model.
For recognizing potential changes:
It is important for organizations to always keep a watchful eye for potential modifications after implementing the update. Organizations can find the model useful even in this case.
Using the Tool
As we pointed out earlier, when organizational design and performance are at question, the McKinsey 7s framework is always used. Because of a common misconception of what a well-aligned feature should be like, it is easy to understand the model, but much harder to adapt it to your organization.
We provide the following steps that will assist you in implementing this tool:
Step 1. Identify the areas that are not effectively aligned
The first step is to look at the 7S elements during the first step and identify whether they are compatible with each other efficiently. Normally, you should already know how 7 elements are aligned in your company.
You should look for the gaps, contradictions and limitations between the relationships of the elements after you have answered the questions outlined there. For instance, you built a strategy that relies on the rapid launch of the product, but the matrix structure with competing relationships hinders that there is a conflict that needs a change of strategy or structure.
Step 2. Determine the optimal organization design
Your second step, with the assistance of top management, is to figure out what successful organizational design you want to accomplish. You can set the targets and make the action plans much clearer by recognizing the desired alignment. For a few factors, this move is not as simple as specifying how seven areas in your organization are currently aligned.
First you need to find the best optimal alignment that is currently not known to you, so more than answering the questions or collecting data is needed.
Second, you will not use models or predetermined organizational designs and you would have to do a lot of analysis or benchmarking to find out how other similar organizations have coped with organizational change or what organizational designs they use.
Step 3. Decide where and what changes should be made
This is simply your plan of action, which will outline the areas you want to realign and how you want to do it. If you find that the structure and management style of the business is not consistent with the principles of the company, you should determine how to reorganize the reporting relationships and the top executives can let go of the company or how to persuade them to adjust their management style so that the company can function more efficiently.
Step 4. Make the necessary changes
In any process, improvement or analysis, the implementation is the most significant stage and only the well-implemented changes have positive effects. You should either identify the people in your company or hire consultants who are ideally qualified to execute the changes.
Step 5. Continuously review the 7s
The seven elements are dynamic and change constantly: strategy, structure, systems, skills, staff, style and values. A change in one element often affects the other elements and allows a new organizational design to be introduced. Continuous review of each area is therefore very crucial.
Example of McKinsey 7s Model
McKinsey 7s Framework of Samsung Group
Brief:
The Samsung Group is a multinational corporation in South Korea with headquarters in Samsung City, Seoul. It includes various associated firms, most of them unified under the Samsung name, and is the largest chaebol in South Korea (business conglomerate).
Samsung Electronics (the world’s largest information technology firm, consumer electronics manufacturer and chipmaker measured by 2017 sales), Samsung Heavy Industries (the world’s 2nd largest shipbuilder measured by 2010 sales), and Samsung Engineering and Samsung C&T (respectively the 13th and 36th largest construction companies in the world) are notable Samsung industrial affiliates.
Hard Elements
#1 Strategy
The business strategy of Samsung is mainly based on market readership, i.e. the replication of market leaders’ developments in the launch of new products and/or the addition of revolutionary features to new products.
Samsung as a company Samsung mainly replicates from, Apple can be specified as a major rival. In addition, Samsung’s corporate strategy is focused on the routine scanning and utilization of market opportunities and new product growth.
#2 Structure
The structure of Samsung is divisional and the corporation is divided on the basis of products into three divisions: IT & Mobile Communications (IM), Consumer Electronics (CE) and Computer Solutions (CE) (DS). Each division is individually handled according to its products’ specific aspects and characteristics. As the outcome of the analysis of the optimal organizational structure was completed in April 2017, the senior management agreed not to move to the organizational structure pattern.
However, in the medium term, Samsung’s organizational structure could change. This is due to a number of controversies that the company recently had to contend with, including the imprisonment for his role in bribery and embezzlement of Jay Y. Lee, a former Samsung executive and founding family member.
#3 Systems
The long-term growth prospects for Samsung rely on the smooth operation of a broad range of systems. This include the recruiting and selection system for workers, the creation and orientation of teams, the processing processes for transactions, the management system for customer relations, the business intelligence system, the information management system and others. In order to find and use opportunities for changes with beneficial impact on the bottom line, Samsung performs frequent review of its processes and systems.
Soft Elements
#1 Skills
The range of skills and competencies needed for Samsung to be successful is extensive, including interpersonal skills, teamwork, pressure-based ability to work, customer orientation, creativity and analytical thinking. In addition, applicants must have technical skills to be employed by Samsung; they need to be results-oriented and versatile.
#2 Staff
In 80 countries, Samsung employs 325,677 employees, including 1,921 designers. The global electronics company maintains the “Next Generation Leaders” initiative for training and advancement of workers and the Global Mobility Program to provide global employees with on-the-job training. In 2019, Samsung allocated 15.1% of the company’s economic value to workers on pay forms and multiple benefits.
#3 Style
Traditionally, the leadership style of Samsung has been patternistic and autocratic, representing related characteristics of the national cultures of its home country, South Korea. Such a style of leadership may have perceived benefits, such as a high degree of employee obedience and quicker decision-making.
At the same time, negative elements related to such a style of leadership include a lack of motivation to communicate their initiatives and ideas to employees. This may have negative repercussions for the overall competitiveness of the organization.
#4 Shared values
Samsung’s strategic level management attempts at all levels to foster the ideals of commitment to work, innovation and hard work in the workforce. The shared values of Samsung are well matched with its corporate mission “to inspire the world with innovative technologies, products and designs that enrich the lives of people and lead to a socially responsible, appropriate future.”
McKinsey 7s Model tips
To perform a McKinsey 7s analysis, some valuable tips are:
- Collaborate-there would be a better result for a study with multiple viewpoints.
- Using the skills and resources inside the organization that are already available.
- To track changes in the market climate, integrate the study into an ongoing process.
- Try not to get bogged down by gathering large quantities of quantitative information without adequately evaluating and interpreting the data.
- Don’t leap to the past or present-based conclusions about the future.
Benefits and Limitations of McKinsey 7s Model
Benefits:
There are many benefits of the McKinsey 7s Model, including:
It Can Be Applied Widely: One of its greatest strengths is the flexibility of the McKinsey 7S framework promotes. If you’re going through transition or to help find gaps and possibilities in your company, it can be implemented.
It Takes a Holistic View: McKinsey 7s Framework is unique in that it focuses within the company on harmony and equilibrium. It allows businesses to recognize places that they might not see as linked and when it comes to change, see them holistically.
People & Processes are Included: Some models of change management rely heavily on individuals, and others concentrate more on procedures. Both are used in the McKinsey change management model, ensuring that both the human and technological aspects of change management are kept in mind.
Limitations:
Some limitations of the McKinsey 7s Model include the following:
- There are more elements to be careful about when planning a plan and implementing it, apart from the other six elements mentioned.
- To substantiate this model, there is no proper proof.
- Emphasized only in the internal elements, lacking a range of external factors such as money, equipment and infrastructure.
