McKinsey’s 7S Framework – What, How and Why?

An organization as a whole can be re-imagined as a living being, with its departments acting as the organs. Likewise, when applying Darwin’s ‘Survival of the fittest’ principle, it is evident how companies strive to be the best, or else they will soon meet bankruptcy (extinction). One notable example which suits this comparison is how Apple overpowered the then big company, Nextel. Hence, it is every company’s inherent chase to stay on top and remain relevant.

Similarly, McKinsey’s 7s framework talks about the organs that need to be given importance for the smooth managing, and the enhanced performance of an organization, especially when subject to change. Do keep in mind that as a living being cannot survive without the blood circulation, in the same way; a company cannot endure without funds.

What is the McKinsey’s 7s Framework

Making its earliest appearance in the book titled ‘In Search of Excellence’, McKinsey’s 7s framework is a management and administration aid model designed by Tom Peters and Robert Waterman in the late 1970s.

Like most management models, McKinsey’s 7s framework also developed based on helping organizations manage and execute an excellent strategy. However, it stood out because of its disregard for conventional determinants like infrastructure, assets, and machinery. It also shed light on the human resource factor, which back then wasn’t considered crucial.

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What are the Seven Elements of McKinsey’s 7s Framework

The seven ‘S’ of the model are systems, strategy, structure, shared values, staff, skills, and style. They are classified into soft and hard elements. The ones that fall under the hard elements include strategy, structure, and systems. While the elements that are cataloged for being soft are shared values, skills, style, and staff.

We can also understand this categorization as external and internal organs. Like the former, the hard elements are visible and concrete. In the same manner, soft elements like internal organs are not noticeable, yet they play an equally significant role.

Only after the neurons transmit the signal to the brain can the hand execute the action of lifting the cup. However, it would be futile for the signals to travel, if the person has no arms. From this example, we see how both the hard and soft elements complement each other. Without the other, only one functioning is vain. Hence, emphasizing more on the fact that they are interdependent. As the model suggests, an organization can only achieve its goal, when the elements stay connected.

As we dive deep into this topic, let’s take an elaborate route to understand each element.

Strategy

A strategy is an approach developed for maintaining a company’s perpetual victory or standing point. It involves taking risks and coming out of the comfort zone. However, it is vital to keep the other six elements in mind while designing the strategy. A long term goal strategy is the ideal plan for any organization. But, if it is not in sync with the rest organs, then the execution won’t be able to produce the desired outcome.

The employee onboarding strategy must be given time and importance, as it can determine the shared value, skill, and staff factor. After recruiting the employees, it is essential that they also know the strategy of the then on-going project. If they are not aware of the plan, then it is similar to planning in the head, but not sending the message to the nerves in the arm. Hence, emphasizing more on the engagement of staffs from all levels. The McKinsey and co also stated that almost half (52%) of the companies employ only a few seniors in generating and developing a strategy. Most of these higher authorities don’t even know what is happening at the grass-root level. Such companies are oblivious to the fact that even a little involvement from a basement level employee in the strategy-making, can leave a huge impact (positive) on the execution of the plan.

Structure

This element is about how the organization is structured. It is the design or format employed in the arrangement of the departments. Along with the positioning, it also lays the foundation for hierarchy. Completion of tasks by who, assigned by whom, and who should bear accountability, all these comprise the structure. It is the organization’s layout as it mirrors its shortcomings and capabilities.

Without a stable structure, no strategy can be executed and put to action, as it represents the order and alignment of the departments. With the style and system factor, it can bring about smooth workflow solutions. It not only makes the workforce easy; instead, it also determines the type of tax your organization pays. Hence, it is crucial for startup companies to have a clear idea of the structure.

For the structure to remain strong there should be excellent communication within the company. The 2010 Deepwater Horizon tragedy is one of the significant downfalls of British Petroleum because of poor communication and management. It affected not only its business but also nature at a considerable scale.

Systems

The system factor here is the procedures practiced and the daily activities maintained in the organization. The methods such as the arrival of answers, board meetings and the provision of services, etc. form the organization system. For example, in an e-commerce company, the systems included will be the procedures in which managing, marketing, shipping, logistics, and customer support is done.

However, this factor still cannot function without linking with the other six elements. The staff should maintain a smooth system with practical skills, under a good leadership style developed from a strategy and built along with a structure, while till the end, keeping the shared values in mind.

Shared Values

Every establishment or organization, in their inception, creates certain norms and values which every member of the organization follows. These principles are called shared values. They act as the foundation from which all the other six elements grow. The values must be present in the strategy designed, in the company’s structure, in the working system, in the style of leadership, in the skills possessed by the employees, and in the functioning methods applied by the staff.

Skills

The skills factor here is the ability and attributes of the employee. It determines the work quality and the speed for the completion of the task, hence playing a crucial role. Around 2015, an online study was conducted among a sample of 200 plus human resource managers by the Harrison Poll. The study found that the top concern among 48% of the employers was the identification and selection of competent workers. Because, with greater skills, comes a greater chance for an efficient workflow towards the company’s growth.

However, this pipeline has for many companies, clogged. One of the various reasons for this problem seems to be the skill gap between the employers and the employees. If this skill gap reduces, then the benefits that come along with it include long-term profit and co-ordinate efficiency in the work processes. It also helps the employees work in the organization for a more extended period.

When framing a new strategy or structure, companies find themselves in a tight spot as they need to understand and discover the new skills that will be required. For instance, it is not possible for a stitching skill to find a place in a Saas business. This need proves the model’s idea that all the elements should be aligned. Most of the time, when a company is changing, many employees are discharged. The same 2015 study by the Harrison Poll was also conducted among 2,027 employees. It found that more than half of the samples (76%) agree that the employer should provide the employees with extra training in career development. This factor emphasizes the involvement of the leadership style in the skills factor.

Style

The style factor symbolizes the technique and fashion in which the company is handled. It revolves around the leadership qualities possessed by the individual or management group, who are in charge. With great power, come great responsibilities. Similarly, the leaders must have a wide range of qualities, to be able to take care of any responsibility handed to them.

One of the many reasons why IBM, MySpace, BlackBerry, Yahoo and many such, once prominent companies are close to losing relevance, is because of ‘active inertia’, as stated in this Harvard Business Review article. It is the act of not willing to change from the path which took them to success. Yes, change is risky, but without it, there is no chance for survival, which is similar to evolution. Hence, it is significant for a leader to be innovative and have change management skills. He/she must also have convincing skills and must be an excellent listener to innovative suggestions put forth by the employees. Nokia is an example for a company that overlooked ideas to change models, which was put forth by a few of its employees.

The leadership qualities can determine the style in which the organization will run. Leading by example, accountability, optimism, emotional intelligence, unforeseen event planning, inspirational, humility and understanding power are some of the essential qualities a leader must possess or at the least acquire. Some of the organizations with excellent management and leadership style include TATA, BMW, Apple, Netflix, etc. However, above all, a leader needs to understand that without the other six elements, his/ her skills are futile when it comes to managing an organization.

Staff

The staff element includes the number of employees and the type under which they fall. When compared to a living being, the employees are the cells of the organization. For instance, like cells, they are comparatively more in number. A single cell cannot make a huge impact, and the same goes for the employees. The staffs play a fundamental role in the working system of the organization. Therefore, it is surreal to imagine an organization function without staff.

With the system factor, most staffs find task automation very convenient as it allows them to manage time with other tasks efficiently. The process of opening emails, collecting data, and consolidating them are now evitable with the rise of many Saas business. Provided below is a link to discovering and understanding selected Saas automation tools that enable task improvement.

Like tumor cells that do not obey the signals or commands from the brain, similarly, there may be certain employees who disregard the work values and functions. Therefore, it is crucial for the higher authorities, always to check and regulate the work processes at every level. Since, the tumor could be anywhere, even in the brain. Identifying, locating and eliminating the tumor may be a tedious task, but it is too crucial to ignore. If such staff is overlooked, then it can be a significant threat to the organization as a whole. A real-life example of this could be the Enron scandal. However, we see that the tumor was in the brain (executives); hence, its death in the year 2001 was certain.

How to Use the McKinsey Model

It is a global understanding that the McKinsey model is complicated when put for application, especially since it does not talk about any specific degree of effectiveness and no good example was set by the companies who we know, had applied it. However, that is the story of several management models. But what keeps this model relevant is its perspective of what’s significant, especially since it talks about the factors that can comprise of the organization.

To every keen organization, presented below is a step by step process of how you can use the much-debated McKinsey model. Note: always bear in mind to regularly keep the 7s in check.

Step 1: Recognize the loose threads

It is effortless to judge the flaws in others, but it is challenging when correcting oneself. Hence, the first step is about self-evaluation. It is significant for organizations to check and maintain the working structure and system regularly. Even small matters need to be taken care of right away. So, see that all the elements are aligned and that there are no loose threads because, with one cut, everything will tumble together.

Step 2: Set your goals

After making sure everything is in check, sit down to set goals for the organization to meet. Set deadlines and create purpose in the workforce. With all the elements connected, use it as a template to design the strategy. Thereby, making sure the plan or goal set up is in alignment with the rest.

Step 3: Identify what needs changing

While designing the strategy, you would have come across many segments of the organization that wouldn’t align with the work plan. Therefore, take time to decide the changes that need to be done, create new parts if necessary, and focus on maintaining the alignment.

Step 4: Put your plan to action

Executing the project is not only tedious as it also brings up new questions and may require more than what was assigned. It could even take more days than the planned deadline. Hence, it is even more critical for the executive team to stay connected to all the levels of the organization. For successful execution, always make sure to keep the elements connected.

Practical Example Applying McKinsey’s 7s Framework

Below is an example of a progressive company applying McKinsey’s 7s framework.

Stage 1:

It is an established company that provides video-on-demand services internationally. The strategy designed is to gain more viewers, both nationally and globally. It has a functional structure with several departments. It has a two cloud operating system with more than 5000 employees. It follows a transformational leadership style, where the managing level is interactive and works with all the departments. The staff is enthusiastic and creative. They also have sound judgment, technical, and communication skills. The shared values abided by the members of the company are honesty, passion, and courage.

Stage 2:

After the implementation of the plan, the company can see a rise in the number of viewers. Now the company has more recruits, with advanced skills that will be applicable internationally. However, an analysis states that most of the viewers are from the same state because the content provided is more inclined nationally. Hence, the company’s new strategy is to offer video contents which the international viewers can relate to, thereby, expanding globally into an MNC.

However, to match the strategy, a divisional structure will need to replace the functional structure. There will be clashes in the shared values. The leadership style also will differ globally, and person to person.

Advantages of McKinsey’s 7s Model

Now that you have gone through the trouble of understanding what the McKinsey’s 7s model is, you can proceed to read about its uses and the situations where its application is considered to provide an upper hand. The emphasis of the model must be applied before anything to see the working of the framework. That is, all the elements must receive treatment with the same magnitude. The uses of the model include:

Produce questions and develop answers:

The model helps an organization in regular self-evaluation. This process helps the organization raise queries and finds the loose thread in its system. It also helps in arriving at answers as to how the thread can be tightened or replaced.

During Mergers or Acquisitions:

Most of the time, to sustain themselves from an emerging loss, organizations merge with other companies, or other companies to buy them. This act of acquisition or merging is innately risky. There are several examples of mergers that went on to become successful (Disney and Pixar), while there are ones which only took them to their downfall (AOL and Time Warner).

The key to a successful merge comes with researched and well-developed strategy, mutual shared values, structure, leadership style (one of the significant reasons why Sprint and Nextel merger failed), etc. The McKinsey 7s model helps organizations in finding the key, as it can act as an analysis, strategy and managing tool.

For any change or development in the organization:

Change in an organization is as uncertain as a merger. However, change is good, especially in this fast-paced world. Netflix is one of the prominent examples for a company who managed the transition and adapted to its surrounding. However, change is not required in some cases, yet. Hence, it is essential for organizations to self evaluate, come up with the right game plan, and understand the working system. Organizations can always use the McKinsey model to determine these factors.

For recognizing potential changes:

After applying the change, it is required for the organizations to always keep a vigilant eye for future changes. Even in this situation, organizations can find the model useful.

Limitations and disadvantages of the model

• When designing a strategy and executing it, there are more elements to be concerned about apart from the other specified six elements.
• There is no proper evidence to substantiate this model.
• Emphasized only in the internal components and overlooked quite a few external factors such as capital, machinery, and infrastructure.

Conclusion

As mentioned earlier, McKinsey’s 7s framework has always been a subject to debate. In its style, it doesn’t include equally critical external factors, yet determines their results with emphasis on the internal factors such as organization structure and human resource. It is a useful tool for analysis, planning and managing the execution of the goals set by an organization.

If you’ve ever used McKinsey’s Framework before, then you know it’s not enough.

Nowadays, companies are becoming more and more complex. As technology evolves, so do the processes of a company. And as the company scales up, more processes are added, which require more people to manage them, and so on…

When this happens, it can be difficult to keep track of everything. Who is taking care of onboarding new employees? Who will take care of scaling sales while this happens? Has this documented been submitted already?

These are all questions that become more difficult to answer as your company grows.

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Once you do, let us know in the comments section below, how Tallyfy helped your company improve processes. Also, if you have any questions regarding the article, or you feel like something is unclear, let us know in the comments section down below.

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