What is McKinsey 7S Model?

Introduction
This paper discusses McKinsey's 7S Model that was created by the consulting company McKinsey and Company in the early 1980s. Since then it has been widely used by practitioners and academics alike in analysing hundreds of organisations. The paper explains each of the seven components of the model and the links between them. It also includes practical guidance and advice for the students to analyse organisations using this model. At the end, some sources for further information on the model and case studies available on this website are mentioned.

The McKinsey 7S model was named after a consulting company, McKinsey and Company, which has conducted applied research in business and industry (Pascale & Athos, 1981; Peters & Waterman, 1982). All of the authors worked as consultants at McKinsey and Company; in the 1980s, they used the model to analyse over 70 large organisations. The McKinsey 7S Framework was created as a recognisable and easily remembered model in business. The seven variables, which the authors term "levers", all begin with the letter "S":

Figure 1
Figure 1: McKinsey's 7S Model

These seven variables include structure, strategy, systems, skills, style, staff and shared values. Structure is defined as the skeleton of the organisation or the organisational chart. The authors describe strategy as the plan or course of action in allocating resources to achieve identified goals over time. The systems are the routine processes and procedures followed within the organisation. Staff are described in terms of personnel categories within the organisation (e.g. engineers), whereas the skills variable refers to the capabilities of the staff within the organisation as a whole. The way in which key managers behave in achieving organisational goals is considered to be the style variable; this variable is thought to encompass the cultural style of the organisation. The shared values variable, originally termed superordinate goals, refers to the significant meanings or guiding concepts that organisational members share (Peters and Waterman, 1982).

The shape of the model (as shown in figure 1) was also designed to illustrate the interdependency of the variables. This is illustrated by the model also being termed as the "Managerial Molecule". While the authors thought that other variables existed within complex organisations, the variables represented in the model were considered to be of crucial importance to managers and practitioners (Peters and Waterman, 1982).

The analysis of several organisations using the model revealed that American companies tend to focus on those variables which they feel they can change (e.g. structure, strategy and systems) while neglecting the other variables. These other variables (e.g. skills, style, staff and shared values) are considered to be "soft" variables. Japanese and a few excellent American companies are reportedly successful at linking their structure, strategy and systems with the soft variables. The authors have concluded that a company cannot merely change one or two variables to change the whole organisation.

For long-term benefit, they feel that the variables should be changed to become more congruent as a system. The external environment is not mentioned in the McKinsey 7S Framework, although the authors do acknowledge that other variables exist and that they depict only the most crucial variables in the model. While alluded to in their discussion of the model, the notion of performance or effectiveness is not made explicit in the model.

Description of 7 Ss
Strategy: Strategy is the plan of action an organisation prepares in response to, or anticipation of, changes in its external environment. Strategy is differentiated by tactics or operational actions by its nature of being premeditated, well thought through and often practically rehearsed. It deals with essentially three questions (as shown in figure 2): 1) where the organisation is at this moment in time, 2) where the organisation wants to be in a particular length of time and 3) how to get there. Thus, strategy is designed to transform the firm from the present position to the new position described by objectives, subject to constraints of the capabilities or the potential (Ansoff, 1965).

Figure 2Structure: Business needs to be organised in a specific form of shape that is generally referred to as organisational structure. Organisations are structured in a variety of ways, dependent on their objectives and culture. The structure of the company often dictates the way it operates and performs (Waterman et al., 1980). Traditionally, the businesses have been structured in a hierarchical way with several divisions and departments, each responsible for a specific task such as human resources management, production or marketing. Many layers of management controlled the operations, with each answerable to the upper layer of management. Although this is still the most widely used organisational structure, the recent trend is increasingly towards a flat structure where the work is done in teams of specialists rather than fixed departments. The idea is to make the organisation more flexible and devolve the power by empowering the employees and eliminate the middle management layers (Boyle, 2007).

Systems: Every organisation has some systems or internal processes to support and implement the strategy and run day-to-day affairs. For example, a company may follow a particular process for recruitment. These processes are normally strictly followed and are designed to achieve maximum effectiveness. Traditionally the organisations have been following a bureaucratic-style process model where most decisions are taken at the higher management level and there are various and sometimes unnecessary requirements for a specific decision (e.g. procurement of daily use goods) to be taken. Increasingly, the organisations are simplifying and modernising their process by innovation and use of new technology to make the decision-making process quicker. Special emphasis is on the customers with the intention to make the processes that involve customers as user friendly as possible (Lynch, 2005).

Style/Culture: All organisations have their own distinct culture and management style. It includes the dominant values, beliefs and norms which develop over time and become relatively enduring features of the organisational life. It also entails the way managers interact with the employees and the way they spend their time. The businesses have traditionally been influenced by the military style of management and culture where strict adherence to the upper management and procedures was expected from the lower-rank employees. However, there have been extensive efforts in the past couple of decades to change to culture to a more open, innovative and friendly environment with fewer hierarchies and smaller chain of command. Culture remains an important consideration in the implementation of any strategy in the organisation (Martins and Terblanche, 2003).

Staff: Organisations are made up of humans and it's the people who make the real difference to the success of the organisation in the increasingly knowledge-based society. The importance of human resources has thus got the central position in the strategy of the organisation, away from the traditional model of capital and land. All leading organisations such as IBM, Microsoft, Cisco, etc put extraordinary emphasis on hiring the best staff, providing them with rigorous training and mentoring support, and pushing their staff to limits in achieving professional excellence, and this forms the basis of these organisations' strategy and competitive advantage over their competitors. It is also important for the organisation to instil confidence among the employees about their future in the organisation and future career growth as an incentive for hard work (Purcell and Boxal, 2003).

Shared Values/Superordinate Goals: All members of the organisation share some common fundamental ideas or guiding concepts around which the business is built. This may be to make money or to achieve excellence in a particular field. These values and common goals keep the employees working towards a common destination as a coherent team and are important to keep the team spirit alive. The organisations with weak values and common goals often find their employees following their own personal goals that may be different or even in conflict with those of the organisation or their fellow colleagues (Martins and Terblanche, 2003).

Using the 7S Model to Analyse an Organisation
A detailed case study or comprehensive material on the organisation under study is required to analyse it using the 7S model. This is because the model covers almost all aspects of the business and all major parts of the organisation. It is therefore highly important to gather as much information about the organisation as possible from all available sources such as organisational reports, news and press releases although primary research, e.g. using interviews along with literature review is more suited. The researcher also needs to consider a variety of facts about the 7S model. Some of these are detailed in the paragraphs to follow.

The seven components described above are normally categorised as soft and hard components. The hard components are the strategy, structure and systems which are normally feasible and easy to identify in an organisation as they are normally well documented and seen in the form of tangible objects or reports such as strategy statements, corporate plans, organisational charts and other documents. The remaining four Ss, however, are more difficult to comprehend. The capabilities, values and elements of corporate culture, for example, are continuously developing and are altered by the people at work in the organisation. It is therefore only possible to understand these aspects by studying the organisation very closely, normally through observations and/or through conducting interviews. Some linkages, however, can be made between the hard and soft components. For example, it is seen that a rigid, hierarchical organisational structure normally leads to a bureaucratic organisational culture where the power is centralised at the higher management level.

It is also noted that the softer components of the model are difficult to change and are the most challenging elements of any change-management strategy. Changing the culture and overcoming the staff resistance to changes, especially the one that alters the power structure in the organisation and the inherent values of the organisation, is generally difficult to manage. However, if these factors are altered, they can have a great impact on the structure, strategies and the systems of the organisation. Over the last few years, there has been a trend to have a more open, flexible and dynamic culture in the organisation where the employees are valued and innovation encouraged. This is, however, not easy to achieve where the traditional culture is been dominant for decades and therefore many organisations are in a state of flux in managing this change. What compounds their problems is their focus on only the hard components and neglecting the softer issues identified in the model which is without doubt a recipe for failure. Similarly, when analysing an organisation using the 7S model, it is important for the researcher to give more time and effort to understanding the real dynamics of the organisation's soft aspects as these underlying values in reality drive the organisations by affecting the decision-making at all levels. It is too easy to fall into the trap of only concentrating on the hard factors as they are readily available from organisations' reports etc. However, to achieve higher marks, students must analyse in depth the cultural dimension of the structure, processes and decision made in an organisation.

For even advanced analysis, the student should not just write about these components individually but also highlight how they interact and affect each other. Or in other words, how one component is affected by changes in the other. Especially the "cause and effect" analyses of soft and hard components often yield a very interesting analysis and provides readers with an in-depth understanding of what caused the change.

Sources for Data on McKinsey's 7S Model
The main source of academic work on the 7S model has to be the writings of Waterman et al. (1980; 1982), and Pascale and Athos (1981) who came up with the idea and applied it to analyse over 70 large organisations. Since then, it has been used by hundreds of organisations and academics for analytical purposes. Many such case studies can be obtained from the academic journals and the books written on the topic. A few case studies, for example the analyses of Coca-Cola and energy giant Centrica (Owner of British Gas), are also available at this website.

If you found this article useful please have a look at the other articles we have written: Ansoff analysis, Porter's 5 Forces analysis, SWOT analysis, BCG Growth-Share Matrix, Porter's Generic Strategies, Scenario Planning, Value chain analysis, Pest Analysis, Balanced Scorecard, Competitor Analysis, Critical Success Factors, Industry Lifecycle, Marketing Mix and Product Life Cycle.

References
Ansoff, I. (1965) Corporate Strategy, McGraw-Hill, London

Boyle, S. (2007) "Impact of Changes in Organisational Structure on Selected Key Performance Indicators for Cultural Organisations", International Journal of Cultural Policy, Vol. 13 (3), pp.319–334.

Lynch, R. (2005) "Corporate Strategy" (4th edition), Prentice Hall, UK.

Martins, E. and Terblanche, F. (2003) "Building Organisational Culture that Stimulates Creativity and Innovation", European Journal of Innovation Management, Vol. 6 (1), pp.64–74.

Pascale, R. and Athos, A. (1981) "The Art of Japanese Management", London: Penguin Books.

Peters, T. and Waterman, R. (1982) "In Search of Excellence", New York, London: Harper & Row.

Price, A. and Chahal, K. (2006) "A Strategic Framework for Change Management", Construction Management and Economics, Vol. 24 (3), pp.237–251.

Purcell, J. and Boxal, P. (2003) "Strategy and Human Resource Management (Management, Work and Organisations)", Palgrave Macmillan, UK.

Waterman, R. Jr., Peters, T. and Phillips, J.R. (1980) "Structure Is Not Organisation" in Business Horizons, Vol. 23(3), pp.14–26.

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