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McKinsey 7S Framework is a strategic planning tool designed to help an organization understand if is it set-up in a way that allows it to achieve its objectives. Before the advent of the 7S Model, when managers thought about organizational design, they tended to focus on structure and strategy. They thought about who is responsible for what, who reports to whom, how many layers of management there should be, and how to beat the competition. However, as organizations got larger and more complex, coordination became just as important, if not more important, than structure.
Background
The model was developed by McKinsey & Company in the 1980s. Specifically, it was developed by Robert H. Waterman, Jr. and Tom Peters. Peters and Waterman also wrote the book In Search of Excellence: Lessons from America's Best-Run Companies, and developed the Management By Walking Around (MBWA) model.
Why Use the 7S Framework?
The model is most widely used to assist with: โ Organizational change. โ Mergers and acquisitions. โ Implementation of a new strategy. โ Understanding the weaknesses (blind spots) of an organization.
The McKinsey 7S Framework
The McKinsey 7S Framework represented by the following diagram.
There are many things to note from this diagram: โ All the areas are interconnected. This means that a change to one area will have implications for all other areas. โ There is no hierarchy and all areas are the same size. This indicates that all areas are considered to be equally important. โ The areas are divided into hard and soft areas. Hard areas are easy for management to influence and change. Soft areas are more woolly and influenced by the culture of the organization. โ Positioning Shared Values in the center of the 7Ss indicates that the organization's values are central to all elements. Let's examine each area of the McKinsey 7S Framework in turn.
1. Strategy
The organization's plan to win in the marketplace. How will it gain a comparative advantage over the competition? Learn more about Strategy.
2. Structure
The following checklist can help you determine where you are now. Note that these questions are based on the Strategy Diamond framework. Current Situation Checklist Strategy: In what arena will we compete? What vehicle will we use to get to market? How do we differentiate ourselves? What major steps do we need to take? What value will we extract from the strategy? Structure: What is the structure of the organization? Are decisions centralized? What are the formal and informal channels in the organization? How are the structure and the employees aligned with the strategy? Systems: What are the most important processes of the organization? What are the most important systems of the organization? Where are the checks and controls in these systems? Are they fit for purpose? Style: What is the leadership style? Does the organization reward how things get done as well as what gets done? Do teams collaborate or compete? How do management and employees interact? Staff: Where are our strengths? Where are the gaps? Are we missing staff or entire capabilities? Should we outsource? Skills: What are the core competencies of the organization? Are there any skills gaps? Is the right training and development in place? Do we have the right employee onboarding process? What is the company known for doing really well? Shared Values: What are the values of the organization? How do the values manifest themselves in everyday life? How would you describe the culture of the organization?
2. Determine the desired situation
The second step is to determine where you want to be and what the corresponding organizational design looks like when you get there. If you understand where you want each of the 7 areas to be then it's going to be much easier to create your plan to get there.
3. Determine your action plan to reach the desired situation
In this step, you detail your plans for changing each of the seven areas.
4. Execute the action plan.
Here you implement your action plan. As the changes are critical to the organizations future success it's important to make sure you have the right people both executing and sponsoring the plan.
5. Perform a periodic review of the situation.
The seven areas are not static. They are dynamic and constantly changing. Because a change in one area always impacts all of the other areas it is important to regularly review the situation and take remedial action to recalibrate your plans if necessary.
McKinsey 7S Model Example
For this example we're going to keep it simple an use the McKinsey 7s model to examine a startup that has just begun to see its sales grow rapidly.
Step 1: Current Situation
The company has just 5 employees. This was fine while the product was being initially developed but now that the company has begun to experience sales growth it's woefully inadequate. The company's strategy is to grow domestically and also tentatively expand into another country. At the moment systems and processes are virtually nonexistent as everyone is sitting within talking distance of the CEO who is coordinating everyone directly. McKinsey 7S Example: Current Situation 7S Comment Aligned ? Strategy: Market penetration with tentative expansion. YES Structure : No real structure. YES Systems: No real systems. YES
Steps 3, 4, & 5
The final three steps are all about creating and executing the plan to create alignment between all the 7Ss of the McKinsey 7S Model to enable the organization to achieve its growth goals. The first thing this company decides is that the transformation shouldn't be lead by the CEO. It will hire a senior project manager to lead the transformation. The second decision this company makes is to admit that it doesn't have any talent in the areas of HR and finance, so it's going to bring in specialist consultants to help it establish these areas. And so this organization continues to build its plan. Once the plan is complete, it then needs to execute the plan, monitoring it and adjusting it as new information comes to light.
McKinsey 7S Strengths and Weaknesses
The strengths of the McKinsey 7S Framework include: โ It shows the wider impacts of any change. โ It helps an organization work out what it needs to do to get where it wants to be. โ It helps to align departments, processes, and softer issues. The weaknesses of the McKinsey 7S Framework include: โ It can be complicated to use and requires lots of research and benchmarking. โ It needs the support of very senior management. โ It is an internally focussed tool. It doesn't look at all at the external environment.
Summary
The McKinsey 7S Framework can help an organization understand how to get from where it is now to where it wants to be. It is particularly good at helping organizations take into consideration how a change to one area can have a wider impact on the organization.
