McKinsey 7s Model
McKinsey 7s Model
McKinsey 7s Model
Definition
McKinsey 7s model is a tool that analyzes firms organizational design by
looking at 7 key internal elements: strategy, structure, systems, shared values,
style, staff and skills, in order to identify if they are effectively aligned and allow
organization to achieve its objectives.
Understanding the tool
McKinsey 7s model was developed in 1980s by McKinsey consultants Tom
Peters, Robert Waterman and Julien Philips with a help from Richard Pascale
and Anthony G. Athos. Since the introduction, the model has been widely
used by academics and practitioners and remains one of the most popular
strategic planning tools. It sought to present an emphasis on human resources
(Soft S), rather than the traditional mass production tangibles of capital,
infrastructure and equipment, as a key to higher organizational performance.
The goal of the model was to show how 7 elements of the company: Structure,
Strategy, Skills, Staff, Style, Systems, and Shared values, can be aligned
together to achieve effectiveness in a company. The key point of the model is
that all the seven areas are interconnected and a change in one area requires
change in the rest of a firm for it to function effectively.
Below you can find the McKinsey model, which represents the connections
between seven areas and divides them into Soft Ss and Hard Ss. The shape
of the model emphasizes interconnectedness of the elements.
The model can be applied to many situations and is a valuable tool when
organizational design is at question. The most common uses of the framework
are:
7s factors
In McKinsey model, the seven areas of organization are divided into the soft
and hard areas. Strategy, structure and systems are hard elements that are
much easier to identify and manage when compared to soft elements. On the
other hand, soft areas, although harder to manage, are the foundation of the
organization and are more likely to create the sustained competitive
advantage.
Hard S
Soft S
Strategy
Style
Structure
Staff
Systems
Skills
Shared Values
such strategy is well-aligned with other elements when analyzed alone. So the
key in 7s model is not to look at your company to find the great strategy,
structure, systems and etc. but to look if its aligned with other elements. For
example, short-term strategy is usually a poor choice for a company but if its
aligned with other 6 elements, then it may provide strong results.
Structure represents the way business divisions and units are organized and
includes the information of who is accountable to whom. In other words,
structure is the organizational chart of the firm. It is also one of the most visible
and easy to change elements of the framework.
Systems are the processes and procedures of the company, which reveal
business daily activities and how decisions are made. Systems are the area of
the firm that determines how business is done and it should be the main focus
for managers during organizational change.
Skills are the abilities that firms employees perform very well. They also
include capabilities and competences. During organizational change, the
question often arises of what skills the company will really need to reinforce its
new strategy or new structure.
Staf element is concerned with what type and how many employees an
organization will need and how they will be recruited, trained, motivated and
rewarded.
between the relationships of the elements. For example, you designed the
strategy that relies on quick product introduction but the matrix structure with
conflicting relationships hinders that so theres a conflict that requires the
change in strategy or structure.
Step 2. Determine the optimal organization design
With the help from top management, your second step is to find out what
effective organizational design you want to achieve. By knowing the desired
alignment you can set your goals and make the action plans much easier. This
step is not as straightforward as identifying how seven areas are currently
aligned in your organization for a few reasons. First, you need to find the best
optimal alignment, which is not known to you at the moment, so it requires
more than answering the questions or collecting data. Second, there are no
templates or predetermined organizational designs that you could use and
youll have to do a lot of research or benchmarking to find out how other
similar organizations coped with organizational change or what organizational
designs they are using.
Step 3. Decide where and what changes should be made
This is basically your action plan, which will detail the areas you want to
realign and how would you like to do that. If you find that your firms structure
and management style are not aligned with companys values, you should
decide how to reorganize the reporting relationships and which top managers
should the company let go or how to influence them to change their
management style so the company could work more effectively.
The strategic position of the company and alernatives of the strategic behavior
are following:
Aggressive position - an attractive and relatively stable industry, the company
has a competitive advantage and it can protect it, a critical factor is the
possible entry of new competitors into the industry, it may be considered new
acquisitions, increasing market share and focusing on competitive products
Competitive position - attractive and relatively unstable environment, the
company has some competitive advantage, a critical factor is the companys
financial strength - the company should look for ways of their attachment, the
solution is the possibility of joining another company, increasing production
efficiency and strengthening cash flow
Conservative position - a stable industry with low growth rate and financially
stable company, a critical factor is in the product competitiveness, company
should protect its succesfull products and develop new ones and think about
the possibilities of the penetration into the industry more attractive and reduce
costs.
Defensive position - an unattractive industry, the company lacks competitive
products and financial resources, a critical factor is the competitiveness, the
company should reduce costs, reduce investment and consider leaving the
industry.