McKinsey 7S Framework Improves the performance of a company

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:

• 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.

Tip:
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	Soft Elements
Strategy Structure Systems	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:

• 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.

Note:
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

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 will be needed to explore to help us understand our situation in terms of the 7S framework.
Use them to analyze current (Point A) situation first, and then repeat the exercise for proposed situation (Point B).

Strategy:

• 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:

• 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:

• 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:

• 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:

• 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:

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

Skills:

• 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 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:

• 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.