Strategy

The McKinsey 7S framework

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The McKinsey 7S framework is a straightforward but effective way of defining the essential parts of a business. There are seven critical factors (strategy, structure, processes, shared values, staff, skills, and style), and all seven must work together for the firm to run properly.

When to use it

● To increase a company's overall performance.
● To put a strategy into action.
● To diagnose issues within a company that is suffering with transformation.
● Following a substantial transition, to harmonize people and activities.

Origins

The McKinsey 7S framework has a well-known history. It was developed over a series of sessions in the late 1970s by Tom Peters, Robert Waterman, Anthony Athos, and Richard Pascale. Peters and Waterman were McKinsey consultants at the time, whereas Athos and Pascale were academics. The majority of organizing thought in the late 1970s was focused on the formal components of structure. In the mid-1970s, for example, the concept of matrix management evolved as a technique to help a company fulfill two quite diverse sets of goals.

While pursuing his MBA at Stanford, Tom Peters was heavily influenced by behavioural scientists such as James March and Karl Weick. This shifted his colleagues' conversations to some of the "softer" aspects of how people get things done in organizations, leading to the invention of the 7S framework. This approach was immediately adopted by McKinsey consultants all across the world, thanks in part to the power of alliteration. It was also mentioned in an article by Peters, Waterman, and Phillips in 1980, as well as in Peters' bestselling book In Search of Excellence, published in 1982.

The 7S framework was revolutionary because it combined all of the many parts of what makes a company run into a single diagram. Most people had been focusing on some parts but not others up to that point; the 7S framework forced them to take a more holistic approach. It is still in use to this day.

What it is

The McKinsey 7S framework is a method for analyzing an organization's internal status. There are four'soft' elements and three 'hard' elements (strategy, structure, and systems) (shared values, skills, staff and style). The framework is built on the premise that the seven elements are all significant, and that these seven elements must be coordinated and mutually reinforcing for the firm to operate well.

If a change is proposed, such as a new strategy, a merger, or a change in leadership, the framework can be used as a diagnostic tool (for example, to determine where the difficulties would occur) or as a method of executing the proposed change (such as to focus the change effort around one specific element). All seven elements must be in sync in order for the modification to be successful.

How to use it

The 7S framework is a high-level orienting device that assists you in making an early diagnosis of how a company operates and identifying major areas where issues may exist. Depending on where the issues arise, this analysis allows you to dive down into deeper detail. The following are the seven components:

● Strategy: The plan of action devised by the company's top executives to create and sustain a competitive edge.
● Structure: The formal assignment of people to their various areas of duty. The boxes and arrows on an organization chart depict structure graphicalally.
● Systems: The processes and norms (often quite informal) that guide people's day-to-day activities. Budgeting, performance management, and hiring are just a few examples. These systems currently rely heavily on information technology to function.
● Shared values: are people's underlying views about what constitutes appropriate behavior in the workplace. In the initial version of the 7S framework, these were referred to as'superordinate goals.' The term 'culture' is frequently used in this context.
● Style refers to how a company's leaders act, particularly in relation to other employees. Style is linked to common ideals, but it specifically applies to leadership behavior.
● Staff: The people who work for the company, including their attitudes and motives.
● Skills are the abilities that employees bring to their jobs.

For example, if you're a senior executive at a hotel chain looking to execute a new strategy focused on providing exceptional service, you'd utilize the 7S framework to figure out how the other six Ss should be adjusted to meet this new strategy. Do you, for example, need to hire new employees with more service-oriented attitudes? Do you need to send your current employees to a skills training course? Perhaps some senior people from the Four Seasons or the Ritz Carlton could be brought in to set the correct tone (style)? Or do you require a more effective IT system that will provide you with more information on your most significant clients (systems)? It's worth noting that shared values is in the middle of the structure because it's the most difficult to modify and also the most interconnected. While any of the other six elements can be thought of as 'levers' to pull, the common values are only progressively changed over time as a result of how the other elements fit together.

Top practical tip

Rather than being a model, the 7S is best thought of as a framework or checklist. To put it another way, it doesn't allow you to draw any firm-wide conclusions about what it should do differently, but it is really important for ensuring that you are looking in the appropriate places. It's especially helpful when you're nearing the end of a project. For example, if you've just finished putting together an action plan for the firm's priorities for the next six months, you can use the 7S framework to double-check that you haven't forgotten anything.

Top pitfall

When an organization is going through a change process, it is critical to keep things focused and plain so that people understand what is going on. So, at any given time, you're likely to be concentrating on only one or two of the 7S elements: a "values project," a "skills program," or an IT system deployment.

As a result, the trap would be to try to do too much at once. Even if changes must be made across the board, they must be implemented gradually rather than all at once.