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The McKinsey 7S Model is a framework for systematically analyzing the environment of a business to develop either new operational strategies or change existing ones. The model looks at the organization’s existing strategy, capabilities, structure, skills, staff systems, shared values and culture. It’s used as a framework to identify new opportunities that can be pursued by an organization or as a way of refocusing its strategy. It examines both internal and external factors.
The McKinsey 7S Framework was developed by McKinsey & Company, a leading global management consulting firm. The concept was introduced in the late 1970s, in the book In Search of Excellence, written by Thomas J. Peters and Robert H. Waterman. It’s a framework for analyzing and structuring a business. The 7S strategy was based on the experiences of McKinsey consultants working with clients around the world.
The McKinsey model is essentially a strategic planning tool that uses a structured process. It’s been used extensively to help business leaders and managers achieve their organizational goals. The model is based on the premise that every organization has a unique set of values and capabilities that can be leveraged to transform it into a successful business. Hence, it’s essential that managers develop a holistic understanding of the organization’s environment to identify opportunities for change and growth.
The model comprises seven elements, or Ss, each of which can be mapped.
McKinsey 7S Model: A Closer Look
The McKinsey 7S Framework is based on the assumption that before any action can be taken toward achieving its goals, an organization must assess the external environment and existing resources. This helps them understand whether they’re sound enough to face the competitive market, which helps them develop strategies to move forward. Let’s take a closer look at the 7Ss that make up the framework:
1. Structure
This focuses on how the organization is structured. Knowing this allows organizations to make changes when needed. This includes things like the management structure, the total number of employees, the various divisions and locations. The aim of this analysis is to ensure that a business’ structure sets it up for success.
2. Strategy
The second S of the framework is about the organization’s strategic alignment. It involves analyzing its external environment and developing new strategic plans and approaches which are aligned with its values and long-term goals. These strategies should be flexible enough to address changing conditions in the market or consumer needs.
3. Systems
The next S stands for systems in the 7S strategy. Systems analysis helps understand what systems are in place to manage output, performance or projects. This determines whether an organization’s existing systems and processes are working efficiently or causing problems. A business may identify new systems to be introduced to improve its performance.
4. Style
Style here refers to the management style. This has an influence over everything from organizational culture (which is addressed separately in the framework as well) to employee performance. This aspect of the framework considers both the management style and all it impacts.
5. Staff
Staff is one of the key Ss in the framework. In analyzing current staff levels, organizations have to delve deep into their knowhow and skills sets. Is the workforce the correct size? Is it motivated? Is it showing progress?
6. Skills
This deals with how an organization’s employees perform their jobs and how they might be trained to do their tasks better. In other words, this looks at the skill of employees and the training they receive and require. This helps an organization identify gaps between existing and required skills and find ways to train its workforce to meet those requirements.
7. Shared Values
The final S in McKinsey’s strategy frameworks refers to the culture of the business. This goes beyond management style to encompass all aspects of the work environment. From organizational HR policies to on-the-job training opportunities to guidelines that impact decisions large and small.
That sums up the McKinsey Model. These are further divided into hard and soft elements. The hard elements are the building blocks of the model. They refer to:
- Structure
- Strategy
- Systems
The soft elements are more intangible. They deal with culture and workforce. These elements are about the way people think about themselves and their organization. As a result, they tend to be more difficult to verify or measure objectively. They are:
- Style
- Staff
- Shared Values
- Skills
Whether soft or hard, each of the Ss is a pillar of equal importance in McKinsey’s strategy frameworks.
McKinsey 7S Framework In Practice
As we have seen, the McKinsey 7S framework is a tool used to conduct a self-assessment of an organization’s capabilities. Highly successful organizations, including those that have experienced sustained growth over multiple decades, generally possess similar characteristics and capabilities. Identifying what they do well offers managers in most firms useful insights into how their own organizations can become more successful.
Strategic management is one of the most important functions of an organization. The ability to change, adapt and develop a strategy is an enterprise’s greatest asset. For the firm to be successful, its strategy must be realized in a timely and efficient manner. The 7S Model helps them keep each pillar in mind when analyzing performance, to avoid any organizational blind spots from skewing results.
How decisions are made is one of the most important considerations in a modern organization. Its decisions then need to be implemented in an effective way that’ll drive results such as financial performance, competitive advantage, customer satisfaction, loyalty of employees and shareholders.
Using a framework like the McKinsey 7S framework is beneficial, as it provides a way for a firm to evaluate its current strategy and define its future strategy. To be successful, organizations must have vision, purpose, expectations of others and systems that are effective.
This is true for both startups and larger organizations alike. Even small firms can use the McKinsey 7S Model. Today, thanks to technology transforming access to products and markets, small organizations can compete with larger ones on the global stage. To push toward greater success, it’s important for small businesses to adapt to the needs of the changing world and improve their strategic plan. The McKinsey 7S model is a useful tool for small businesses to improve their strategic planning as well as their decision-making capabilities. In fact, being smaller and more agile, they may have an advantage in being able to change track more quickly.
Benefits of The McKinsey Model
The McKinsey 7S framework allows organizations to analyze their strengths and weaknesses. With this analysis, they can identify areas which need improvement. It also helps measure their strengths and weaknesses compared to those of their competitors. This helps them develop strategies to move forward and identify new opportunities.
The framework allows them to identify areas that need to be upgraded. It’ll highlight the operational strategies that need re-engineering. It’ll help take stock of the skills of employees that need to be enhanced. In this way, the organization will learn if it’s in a position to compete in its environment or if it needs a revamp.
But that doesn’t mean that the McKinsey 7S Model is suitable for all situations. It too has limitations. Here are a few of them:
- Comparing an organization’s current strategy to the strategy of an organization that is doing much better or is much larger can be misleading. This is because it doesn’t consider factors such as risk management, chance and rewards. These do not appear in the model when using a comparison approach.
- It can cause more harm than good if used without proper consideration of the environment, culture and other factors in the organization. Without proper knowledge of the competitive conditions of a market, there’s no way of predicting whether the changes planned will be profitable or not. It can be difficult for the management to take into account the correct factors while using the model. This presents a challenge while justifying their conclusions or taking corrective action.
- The McKinsey 7S framework requires deep knowledge of the business and corporate environment to implement properly. If this knowledge is absent, the exercise will fail. Sometimes the organization might not choose the right areas to change or upgrade. This can be an expensive mistake to fix.
Like any tool meant for strategic planning, the framework is only as good as the information used to complete it. Analysis can be the hardest part when conducting an evaluation or a long-term planning exercise.
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