The McKinsey 7S Framework in Organizations Problem Solving

Ensuring that all parts of your organization work in harmony

How do you go about analyzing how well your organization is positioned to achieve its intended objective? This is a question that has been asked for many years, and there are many different answers. Some approaches look at internal factors, others look at external ones, some combine these perspectives, and others look for congruence between various aspects of the organization being studied. Ultimately, the issue comes down to which factors to study.

While some models of organizational effectiveness go in and out of fashion, one that has persisted is the McKinsey 7S framework. Developed in the early 1980s by Tom Peters and Robert Waterman, two consultants working at the McKinsey & Company consulting firm, the basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successful.

The 7S model can be used in a wide variety of situations where an alignment perspective is useful, for example to help you:

• Improve the performance of a company.
• Examine the likely effects of future changes within a company.
• Align departments and processes during a merger or acquisition.
• Determine how best to implement a proposed strategy.

The McKinsey 7S model can be applied to elements of a team or a project as well. The alignment issues apply, regardless of how you decide to define the scope of the areas you study.

The Seven Elements

The McKinsey 7S model involves seven interdependent factors which are categorized as either "hard" or "soft" elements:

Hard Elements	Soft Elements
Strategy Structure Systems	Shared Values Skills Style Staff

"Hard" elements are easier to define or identify and management can directly influence them: These are strategy statements; organization charts and reporting lines; and formal processes and IT systems.

"Soft" elements, on the other hand, can be more difficult to describe, and are less tangible and more influenced by culture. However, these soft elements are as important as the hard elements if the organization is going to be successful.

The way the model is presented in Figure 1 below depicts the interdependency of the elements and indicates how a change in one affects all the others.

Let's look at each of the elements specifically:

• Strategy: the plan devised to maintain and build competitive advantage over the competition.
• Structure: the way the organization is structured and who reports to whom.
• Systems: the daily activities and procedures that staff members engage in to get the job done.
• Shared Values: called "superordinate goals" when the model was first developed, these are the core values of the company that are evidenced in the corporate culture and the general work ethic.
• Style: the style of leadership adopted.
• Staff: the employees and their general capabilities.
• Skills: the actual skills and competencies of the employees working for the company.

Placing Shared Values in the middle of the model emphasizes that these values are central to the development of all the other critical elements. The company's structure, strategy, systems, style, staff and skills all stem from why the organization was originally created, and what it stands for. The original vision of the company was formed from the values of the creators. As the values change, so do all the other elements.

How to Use the Model

Now you know what the model covers, how can you use it?

The model is based on the theory that, for an organization to perform well, these seven elements need to be aligned and mutually reinforcing. So, the model can be used to help identify what needs to be realigned to improve performance, or to maintain alignment (and performance) during other types of change.

Whatever the type of change - restructuring, new processes, organizational merger, new systems, change of leadership, and so on - the model can be used to understand how the organizational elements are interrelated, and so ensure that the wider impact of changes made in one area is taken into consideration.

You can use the 7S model to help analyze the current situation (Point A), a proposed future situation (Point B) and to identify gaps and inconsistencies between them. It's then a question of adjusting and tuning the elements of the 7S model to ensure that your organization works effectively and well once you reach the desired endpoint.

Sounds simple? Well, of course not: Changing your organization probably will not be simple at all! Whole books and methodologies are dedicated to analyzing organizational strategy, improving performance and managing change. The 7S model is a good framework to help you ask the right questions - but it won't give you all the answers. For that you'll need to bring together the right knowledge, skills and experience.

When it comes to asking the right questions, we've developed a Mind Tools checklist and a matrix to keep track of how the seven elements align with each other. Supplement these with your own questions, based on your organization's specific circumstances and accumulated wisdom.

7S Checklist Questions

Here are some of the questions that you'll need to explore to help you understand your situation in terms of the 7S framework. Use them to analyze your current (Point A) situation first, and then repeat the exercise for your proposed situation (Point B).

Strategy:

• What is our strategy?
• How do we intend to achieve our objectives?
• How do we deal with competitive pressure?
• How are changes in customer demands dealt with?
• How is strategy adjusted for environmental issues?

Structure:

• How is the company/team divided?
• What is the hierarchy?
• How do the various departments coordinate activities?
• How do the team members organize and align themselves?
• Is decision making and controlling centralized or decentralized? Is this as it should be, given what we're doing?
• Where are the lines of communication? Explicit and implicit?

Systems:

• What are the main systems that run the organization? Consider financial and HR systems as well as communications and document storage.
• Where are the controls and how are they monitored and evaluated?
• What internal rules and processes does the team use to keep on track?

Shared Values:

• What are the core values?
• What is the corporate/team culture?
• How strong are the values?
• What are the fundamental values that the company/team was built on?

Style:

• How participative is the management/leadership style?
• How effective is that leadership?
• Do employees/team members tend to be competitive or cooperative?
• Are there real teams functioning within the organization or are they just nominal groups?

Staff:

• What positions or specializations are represented within the team?
• What positions need to be filled?
• Are there gaps in required competencies?

Skills:

• What are the strongest skills represented within the company/team?
• Are there any skills gaps?
• What is the company/team known for doing well?
• Do the current employees/team members have the ability to do the job?
• How are skills monitored and assessed?

7S matrix questions

Using the information you have gathered, now examine where there are gaps and inconsistencies between elements. Remember you can use this to look at either your current or your desired organization.

Click here to download our McKinsey 7S Worksheet, which contains a matrix that you can use to check off alignment between each of the elements as you go through the following steps:

• Start with your Shared Values: Are they consistent with your structure, strategy, and systems? If not, what needs to change?
  
• Then look at the hard elements. How well does each one support the others? Identify where changes need to be made.
  
• Next look at the other soft elements. Do they support the desired hard elements? Do they support one another? If not, what needs to change?
  
• As you adjust and align the elements, you'll need to use an iterative (and often time consuming) process of making adjustments, and then re-analyzing how that impacts other elements and their alignment. The end result of better performance will be worth it.

Tip: For similar approaches to this, see our articles on the Burke-Litwin Change Model, and the Congruence Model. You may also find our articles on the Change Curve, Impact Analysis and Lewin's Change Management Model useful.

Key Points

The McKinsey 7Ss model is one that can be applied to almost any organizational or team effectiveness issue. If something within your organization or team isn't working, chances are there is inconsistency between some of the elements identified by this classic model. Once these inconsistencies are revealed, you can work to align the internal elements to make sure they are all contributing to the shared goals and values.

The process of analyzing where you are right now in terms of these elements is worthwhile in and of itself. But by taking this analysis to the next level and determining the ultimate state for each of the factors, you can really move your organization or team forward.

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Using the Greiner Curve for Fast Growing Company and Anticipation of Problems

Surviving the crises that come with growth

Fast growing companies can often be chaotic places to work.

As workloads increase exponentially, approaches which have worked well in the past start failing. Teams and people get overwhelmed with work. Previously-effective managers start making mistakes as their span of control expands. And systems start to buckle under increased load.

While growth is fun when things are going well, when things go wrong, this chaos can be intensely stressful. More than this, these problems can be damaging (or even fatal) to the organization.

The "Greiner Curve" is a useful way of thinking about the crises that organizations experience as they grow.

By understanding it, you can quickly understand the root cause of many of the problems you're likely to experience in a fast growing business. More than this, you can anticipate problems before they occur, so that you can meet them with pre-prepared solutions.

Understanding the Theory

Greiner's Growth Model describes phases that organizations go through as they grow. All kinds of organizations from design shops to manufacturers, construction companies to professional service firms experience these. Each growth phase is made up of a period of relatively stable growth, followed by a "crisis" when major organizational change is needed if the company is to carry on growing.

Dictionaries define the word "crisis" as a "turning point", but for many of us it has a negative meaning to do with panic. While companies certainly have to change at each of these points, if they properly plan for there is no need for panic and so we will call them "transitions".

Larry E. Greiner originally proposed this model in 1972 with five phases of growth. Later, he added a sixth phase (Harvard Business Review, May 1998). The six growth phases are described below:

Phase 1: Growth Through Creativity

Here, the entrepreneurs who founded the firm are busy creating products and opening up markets. There aren't many staff, so informal communication works fine, and rewards for long hours are probably through profit share or stock options. However, as more staff join, production expands and capital is injected, there's a need for more formal communication.

This phase ends with a Leadership Crisis, where professional management is needed. The founders may change their style and take on this role, but often someone new will be brought in.

Phase 2: Growth Through Direction

Growth continues in an environment of more formal communications, budgets and focus on separate activities like marketing and production. Incentive schemes replace stock as a financial reward.

However, there comes a point when the products and processes become so numerous that there are not enough hours in the day for one person to manage them all, and he or she can't possibly know as much about all these products or services as those lower down the hierarchy.

This phase ends with an Autonomy Crisis: New structures based on delegation are called for.

Phase 3: Growth Through Delegation

With mid-level managers freed up to react fast to opportunities for new products or in new markets, the organization continues to grow, with top management just monitoring and dealing with the big issues (perhaps starting to look at merger or acquisition opportunities). Many businesses flounder at this stage, as the manager whose directive approach solved the problems at the end of Phase 1 finds it hard to let go, yet the mid-level managers struggle with their new roles as leaders.

This phase ends with a Control Crisis: A much more sophisticated head office function is required, and the separate parts of the business need to work together.

Phase 4: Growth Through Coordination and Monitoring

Growth continues with the previously isolated business units re-organized into product groups or service practices. Investment finance is allocated centrally and managed according to Return on Investment (ROI) and not just profits. Incentives are shared through company-wide profit share schemes aligned to corporate goals. Eventually, though, work becomes submerged under increasing amounts of bureaucracy, and growth may become stifled.

This phase ends on a Red-Tape Crisis: A new culture and structure must be introduced.

Phase 5: Growth Through Collaboration

The formal controls of phases 2-4 are replaced by professional good sense as staff group and re-group flexibly in teams to deliver projects in a matrix structure supported by sophisticated information systems and team-based financial rewards.

This phase ends with a crisis of Internal Growth: Further growth can only come by developing partnerships with complementary organizations.

Phase 6: Growth Through Extra-Organizational Solutions

Greiner's recently added sixth phase suggests that growth may continue through merger, outsourcing, networks and other solutions involving other companies.

Growth rates will vary between and even within phases. The duration of each phase depends almost totally on the rate of growth of the market in which the organization operates. The longer a phase lasts, though, the harder it will be to implement a transition.

Tip:
This is a useful model, however not all businesses will go through these crises in this order. Use this as a starting point for thinking about business growth, and adapt it to your circumstances.


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