McKinsey 7s Model

Ovidijus Jurevicius | December 20, 2013

Definition

McKinsey 7s model

is a tool that analyzes firms organizational design by looking at 7 key internal

elements: strategy, structure, systems, shared values, style, staff and skills, in
order to identify if they are effectively aligned and allow organization to achieve
its objectives.

Understanding the tool

McKinsey 7s model was developed in 1980s by McKinsey consultants Tom Peters,

Robert Waterman and Julien Philips with a help from Richard Pascale and Anthony G.
Athos. Since the introduction, the model has been widely used by academics and
practitioners and remains one of the most popular strategic planning tools. It sought to
present an emphasis on human resources (Soft S), rather than the traditional mass
production tangibles of capital, infrastructure and equipment, as a key to higher
organizational performance. The goal of the model was to show how 7 elements of the
company: Structure, Strategy, Skills, Staff, Style, Systems, and Shared values, can be
aligned together to achieve effectiveness in a company. The key point of the model is
that all the seven areas are interconnected and a change in one area requires change
in the rest of a firm for it to function effectively.

Below you can find the McKinsey model, which represents the connections between
seven areas and divides them into Soft Ss and Hard Ss. The shape of the model
emphasizes interconnectedness of the elements.
The model can be applied to many situations and is a valuable tool when organizational
design is at question. The most common uses of the framework are:

To facilitate organizational change.

To help implement new strategy.
To identify how each area may change in a future.
To facilitate the merger of organizations.

7s factors

In McKinsey model, the seven areas of organization are divided into the soft and hard
areas. Strategy, structure and systems are hard elements that are much easier to
identify and manage when compared to soft elements. On the other hand, soft areas,
although harder to manage, are the foundation of the organization and are more likely to
create the sustained competitive advantage.
 Hard S Soft S

Strategy Style

Structure Staff

Systems Skills

Shared Values

Strategy is a plan developed by a firm to achieve sustained competitive advantage and

successfully compete in the market. What does a well-aligned strategy mean in 7s
McKinsey model? In general, a sound strategy is the one thats clearly articulated, is
long-term, helps to achieve competitive advantage and is reinforced by strong vision,
mission and values. But its hard to tell if such strategy is well-aligned with other
elements when analyzed alone. So the key in 7s model is not to look at your company
to find the great strategy, structure, systems and etc. but to look if its aligned with other
elements. For example, short-term strategy is usually a poor choice for a company but if
its aligned with other 6 elements, then it may provide strong results.

Structure represents the way business divisions and units are organized and includes
the information of who is accountable to whom. In other words, structure is the
organizational chart of the firm. It is also one of the most visible and easy to change
elements of the framework.

Systems are the processes and procedures of the company, which reveal business
daily activities and how decisions are made. Systems are the area of the firm that
determines how business is done and it should be the main focus for managers during
organizational change.

Skills are the abilities that firms employees perform very well. They also include
capabilities and competences. During organizational change, the question often arises
of what skills the company will really need to reinforce its new strategy or new structure.

Staff element is concerned with what type and how many employees an organization
will need and how they will be recruited, trained, motivated and rewarded.

Style represents the way the company is managed by top-level managers, how they
interact, what actions do they take and their symbolic value. In other words, it is the
management style of companys leaders.

Shared Values are at the core of McKinsey 7s model. They are the norms and
standards that guide employee behavior and company actions and thus, are the
foundation of every organization.

The authors of the framework emphasize that all elements must be given equal
importance to achieve the best results.

Using the tool

As we pointed out earlier, the McKinsey 7s framework is often used when organizational
design and effectiveness are at question. It is easy to understand the model but much
harder to apply it for your organization due to a common misunderstanding of what
should a well-aligned elements be like.

We provide the following steps that should help you to apply this tool:

Step 1. Identify the areas that are not effectively aligned

During the first step, your aim is to look at the 7S elements and identify if they are
effectively aligned with each other. Normally, you should already be aware of how 7
elements are aligned in your company, but if you dont you can use the checklist
from WhittBlog to do that. After youve answered the questions outlined there you
should look for the gaps, inconsistencies and weaknesses between the relationships of
the elements. For example, you designed the strategy that relies on quick product
introduction but the matrix structure with conflicting relationships hinders that so theres
a conflict that requires the change in strategy or structure.
Step 2. Determine the optimal organization design

With the help from top management, your second step is to find out what effective
organizational design you want to achieve. By knowing the desired alignment you can
set your goals and make the action plans much easier. This step is not as
straightforward as identifying how seven areas are currently aligned in your organization
for a few reasons. First, you need to find the best optimal alignment, which is not known
to you at the moment, so it requires more than answering the questions or collecting
data. Second, there are no templates or predetermined organizational designs that you
could use and youll have to do a lot of research or benchmarking to find out how other
similar organizations coped with organizational change or what organizational designs
they are using.

Step 3. Decide where and what changes should be made

This is basically your action plan, which will detail the areas you want to realign and how
would you like to do that. If you find that your firms structure and management style are
not aligned with companys values, you should decide how to reorganize the reporting
relationships and which top managers should the company let go or how to influence
them to change their management style so the company could work more effectively.

Step 4. Make the necessary changes

The implementation is the most important stage in any process, change or analysis and
only the well-implemented changes have positive effects. Therefore, you should find the
people in your company or hire consultants that are the best suited to implement the
changes.

Step 5. Continuously review the 7s

The seven elements: strategy, structure, systems, skills, staff, style and values are
dynamic and change constantly. A change in one element always has effects on the
other elements and requires implementing new organizational design. Thus, continuous
review of each area is very important.

Example

Well use a simplified example to show how the model should be applied to an existing
organization.

Current position #1

Well start with a small startup, which offers services online. The companys main
strategy is to grow its share in the market. The company is new, so its structure is
simple and made of a very few managers and bottom level workers, who undertake
specific tasks. There are a very few formal systems, mainly because the company
doesnt need many at this time.

Alignment

So far the 7 factors are aligned properly. The company is small and theres no need for
complex matrix structure and comprehensive business systems, which are very
expensive to develop.

McKinsey 7s Example (1/3)

Aligned?

Strategy Market penetration Yes

Structure Simple structure Yes

Systems Few formal systems. The systems are mainly concerned Yes
with customer support and order processing. There are no
or few strategic planning, personnel management and new
business generation systems.
 Skills Few specialized skills and the rest of jobs are undertaken Yes
by the management (the founders).

Staff Few employees are needed for an organization. They are Yes
motivated by successful business growth and rewarded
with business shares, of which market value is rising.

Style Democratic but often chaotic management style. Yes

Shared Values The staff is adventurous, values teamwork and trusts each Yes
other.

Current position #2

The startup has grown to become large business with 500+ employees and now
maintains 50% market share in a domestic market. Its structure has changed and is
now a well-oiled bureaucratic machine. The business expanded its staff, introduced new
motivation, reward and control systems. Shared values evolved and now the company
values enthusiasm and excellence. Trust and teamwork has disappeared due to so
many new employees.

Alignment

The company expanded and a few problems came with it. First, the companys strategy
is no longer viable. The business has a large market share in its domestic market, so
the best way for it to grow is either to start introducing new products to the market or to
expand to other geographical markets. Therefore, its strategy is not aligned with the rest
of company or its goals. The company should have seen this but it lacks strategic
planning systems and analytical skills.
Business management style is still chaotic and it is a problem of top managers lacking
management skills. The top management is mainly comprised of founders, who dont
have the appropriate skills. New skills should be introduced to the company.

McKinsey 7s Example (2/3)

Aligned?

Strategy Market penetration No

Structure Bureaucratic machine Yes

Systems Order processing and control, customer support and No

personnel management systems.

Skills Skills related to service offering and business support, but No

few managerial and analytical skills.

Staff Many employees and appropriate motivation and reward Yes

systems.
 Style Democratic but often chaotic management style. No

Shared Values Enthusiasm and excellence No

Current position #3

The company realizes that it needs to expand to other regions, so it changes its strategy
from market penetration to market development. The company opens new offices in
Asia, North and South Americas. Company introduced new strategic planning systems
hired new management, which brought new analytical, strategic planning and most
importantly managerial skills. Organizations structure and shared values havent
changed.

Alignment

Strategy, systems, skills and style have changed and are now properly aligned with the
rest of the company. Other elements like shared values, staff and organizational
structure are misaligned. First, companys structure should have changed from well-
oiled bureaucratic machine to division structure. The division structure is designed to
facilitate the operations in new geographic regions. This hasnt been done and the
company will struggle to work effectively. Second, new shared values should evolve or
be introduced in an organization, because many people from new cultures come to the
company and they all bring their own values, often, very different than the current ones.
This may hinder teamwork performance and communication between different regions.
Motivation and reward systems also have to be adapted to cultural differences.

McKinsey 7s Example (3/3)

Aligned?
 Strategy Market development Yes

Structure Bureaucratic machine No

Systems Order processing and control, customer support, Yes

personnel management and strategic planning systems.

Skills Skills aligned with companys operations. Yes

Staff Employees form many cultures, who expect different No

motivation and reward systems.

Style Democratic style Yes

Shared Enthusiasm and excellence No

Values

Weve showed the simplified example of how the Mckinsey 7s model should be applied.
It is important to understand that the seven elements are much more complex in reality
and youll have to gather a lot of information on each of them to make any appropriate
decision.
The model is simple, but its worth the effort to do one for your business to gather some
insight and find out if your current organization is working effectively.