Companies must adapt to change to stay competitive and grow in today’s challenging market. Change is crucial for keeping pace with the industry, but it’s important not to impose it abruptly on employees and teams.
Forced or unexpected changes often meet with resistance. Organizations can adopt change management models, like McKinsey’s 7-S framework, to navigate this transformation smoothly.
This model, developed in the 1980s by McKinsey & Company, is particularly effective for companies undergoing change and restructuring.
It moves beyond traditional methods, focusing mainly on structure and strategy.
The McKinsey 7-S Model is designed to set clear objectives, ensure better alignment across the organization, and boost overall performance, making it a valuable tool for managing change.
By the end of this article, you will understand the following:
- What the McKinsey 7-S Model is and its seven elements
- Its benefits and limitations
- The best way to implement it within your organization
- How to build a checklist for this model, together with some practical examples
What is the McKinsey 7-S Model?
The McKinsey 7-S Model serves as a guide for managing organizational change, focusing on the design of a company. It emphasizes the interplay of seven crucial components: structure, strategy, system, shared values, skills, style, and staff.
This model underscores the ripple effect caused by altering any single element, necessitating a rebalancing of the whole system.
What key elements of the McKinsey 7-S Model do you need to consider?
The McKinsey 7-S Model comprises seven core elements, grouped into ‘hard’ and ‘soft’ categories:
- Easily identified and influenced by management.
- Includes Structure, Strategy, and Systems.
- Intangible, culture-driven aspects.
- Encompasses Shared Values, Skills, Style, and Staff.
Below, we have outlined explanations of each of the seven elements, as well as questions to answer:
This involves a comprehensive plan for implementing a successful change process and achieving a competitive advantage. It should align with the other six elements and align with a clear vision, mission, and values.
Types of questions you need to consider to assess whether you need any changes to your existing strategy include:
- What type of customers does the business possess?
- What kind of markets does the company operate in?
- What are the organization’s current competitive benefits, and will these change?
- What are the organization’s main strategic priorities?
- What resources does the organization need to remain competitive?
This element refers to the organizational framework and hierarchy. It’s vital for maintaining order, clarifying roles, and ensuring employee accountability.
The type of questions that your business needs to answer before assessing whether there are any necessary changes to its existing structure are:
- What is the organizational structure of the company?
- What levels of leadership exist, and how are they structured?
- How do different departments collaborate and coordinate their efforts?
- How do team members work together towards common goals?
These are the daily processes and procedures that govern business operations. Systems, including Standard Operating Procedures (SOPs), significantly affect productivity and decision-making.
The types of questions that you should be using to evaluate current systems are:
- What essential management procedures do senior leaders use to manage the company? How would you describe the distinct features of these management processes, i.e., informal vs formal?
- Which key metrics or variables receive the most attention and management?
- What are the current lines of communication that exist between management and staff?
This involves the core values that dictate an organization’s ethos. Effective change management relies on these values to foster desired employee behavioral changes.
When evaluating existing shared values, your organization should aim to answer the following:
- What are the company’s core values? Are these values the ones that the current organization was built on?
- Do you see these core values implemented within the inner workings of each team?
- Describe the organization’s overall culture.
This element relates to the management approach within an organization, influencing employee productivity measurement and satisfaction.
Measuring the current impact of style on your company involves responding to these questions:
- Describe your company’s contemporary management style.
- Is there managerial effectiveness?
- How does staff react to this style?
- What achievements, behaviors, duties, or tasks does management typically reward?
- What types of employees exist within your organization? Do they like to collaborate, compete, or cooperate?
This focuses on the workforce, including talent needs, workforce size, employee motivation, training, and reward systems.
Using the staff element of this model involves asking questions like:
- What demographics does the management team comprise (educational background, age, gender, etc.), and how is this developing?
- What are the notable characteristics and achievements of the current senior managers compared to the emerging management group?
- How much emphasis does the company place on its human resources (employee development, training, etc.)?
- What types of positions or knowledge are present across teams within the company?
This last element concerns the abilities of employees to perform tasks. Addressing skills gaps is crucial, as they can cause productivity losses and increased pressure on experienced staff. Identifying and bridging these gaps through targeted training is essential.
The questions that need to be answered as part of this element are:
- Which teams possess the employees with the most helpful skill sets?
- What critical business activities necessary for the firm’s success are currently areas of weakness?
- What is the organization best known for in the industry (customer service, marketing, etc.)
- What are the critical business activities essential to the company’s success at which it excels, and how are these strengths developing?
Benefits of the McKinsey 7-S Model
The benefits of the McKinsey 7-S Model include highlighting the extensive effects of changes within an organization, assisting in planning the necessary steps to achieve desired organizational goals, ensuring the alignment of various departments, processes, and less tangible factors.
Next, this model promotes cohesive and unified actions across different company segments. It also facilitates efficient monitoring of changes’ effects on crucial elements.
Limitations of the McKinsey 7-S Framework
Despite its strengths, the McKinsey 7-S Framework also presents several drawbacks. It is seen as a model suited for long-term application, raising questions about its adaptability in the rapidly evolving business landscape.
The framework focuses predominantly on internal factors and processes, which might be less effective when external forces significantly impact an organization. Implementing this model can be complex, necessitating extensive research and benchmarking.
Additionally, its successful application often depends on the backing of top-level management.
Implementing the McKinsey 7-S Framework within your organization
You can use the McKinsey 7-S Model to pinpoint which framework aspects require realignment for enhanced performance or to preserve alignment and performance amidst various changes.
Such changes encompass organizational restructuring, implementation of new organizational change processes, mergers, introduction of new systems, or shifts in leadership.
To effectively apply the 7-S model for organizational improvement and alignment, consider the following action steps:
- Identify gaps and align processes with your overarching business strategy
This phase involves aligning new strategic initiatives with the organization’s overall objectives. It’s not just about setting new priorities but ensuring they resonate with the company’s long-term goals.
This step requires thorough analysis and reevaluation of current projects and activities, determining their relevance to the new strategy. It’s about ensuring that every initiative undertaken adds strategic value and contributes significantly to the organization’s growth and success.
- Ensure your budgets and performance data work with these processes
Once the initiatives are aligned, the next step is ensuring that the budgets and employee performance metrics align with these initiatives. This means reallocating resources, both financial and human, to areas that are critical to the new strategy.
Departments must manage their budgets effectively and set performance targets that reflect the strategic priorities. This alignment ensures the organization’s resources are optimally utilized to support the strategic direction.
- Restructure your organization to become more agile
A strategic shift often necessitates an organizational restructuring. The structure of the company must facilitate the smooth implementation of the strategy. This might involve redefining roles, establishing new departments, or altering communication channels.
The aim should be to create an organizational structure that is agile and flexible, capable of supporting and enhancing the strategy rather than hindering it.
- Create an action plan to engage staff
Develop a detailed change management action plan guide for rolling out the identified changes to staff. The success of any strategy largely depends on the people who implement it. This phase focuses on getting the staff on board with the new strategy.
It involves educating and training employees, ensuring they understand the strategy’s ‘what’ and the ‘how’ and the ‘why.’ Staff engagement also means addressing concerns, inviting feedback, and fostering a culture where employees are compelled to contribute to the strategic goals.
- Continuously monitor progress and adapt if needed
The final phase is an ongoing process. Strategies must not be static but develop with the changing business environment. Regularly monitor these elements and their interrelationships to sustain the momentum of change and ensure performance and business realignment if necessary.
It’s also about proactively identifying areas where the strategy may not deliver as expected and being ready to adapt and make changes as necessary. This phase ensures the strategy remains relevant and effective in achieving the desired outcomes.
McKinsey 7-S Model practical examples
When an organization undergoes changes that impact its shared values, the McKinsey 7-S model is beneficial.
Here are three examples of how the McKinsey 7-S Model can work in practice, with two real-life scenarios:
Example 1: A company planning a merger
A merger will inevitably influence the organization’s structure as it onboards new staff members. The merger also impacts the company’s strategic direction, bringing fresh perspectives and ideas.
In this scenario, the McKinsey 7-S model aids in pinpointing areas of inconsistency, which, in the case of a merger, typically includes the structure, staff, and strategy.
The company can make informed decisions to effectively reorganize and assimilate the changes by identifying these critical areas. This process involves thorough research and analysis to understand and mitigate the impact of organizational change, thereby facilitating a smoother merger process.
Example 2: A company dealing with the different stages of growth
As another example, let’s use the scenario when a company launches as a startup with only five employees. This early phase is strongly influenced by the founder’s vision and values, with a cohesive approach. The startup operates in a single market, using standard IT and accounting systems.
As the company developed, it expanded to 30 employees and ventured into various markets. This growth necessitates new expertise in marketing, technology, product development, and financial management to meet diverse customer needs.
The founder, observing these changes, conducts a 7-S analysis. They discover that the company’s developing sales strategy is misaligned with its original small-business capabilities.
The influx of new employees and technological advancements reveal gaps in system skills among some staff members. There needs to be more clarity regarding the company’s core values and mission.
Now, the founder can leverage the McKinsey 7-S Framework to implement effective onboarding and learning programs, realigning the organization’s key elements.
Example 3: How Ithaca Beer company success can be seen through the McKinsey 7-S Framework
This analysis of the growth of Ithaca Beer company using the McKinsey 7-S Framework by J. Bruce Tracey and Brendan Blood for the Cornell Hospitality Report show that the model is an excellent tool for evaluating what a company needs for success and growth. But it also indicates that each company’s unique context will require a tailored approach to this framework.
This example reveals that certain factors are more crucial than others. Specifically, four of the 7-S elements are particularly relevant: one hard skill—strategy, and three soft skills—staff, skills, and shared values.
Overall, IBC’s strategy of community orientation and brand-focused growth, coupled with its emphasis on people, are the main drivers of its success. These factors align with the 7-S model’s premise, demonstrating that while strategy, staff, skills, and shared values are paramount in IBC’s competitive environment, other 7-S elements also support the company’s ongoing success.
The future of the McKinsey 7-S Framework
The McKinsey 7-S Model evaluates an organization’s alignment and efficiency by scrutinizing seven internal aspects to manage complex change. This model examines strategy, structure, systems, skills, staff, style, and shared values to assess organizational coherence and performance.
To apply this model within an organization, the process involves gathering information, conducting a 7-S analysis, assessing alignment, developing an action plan, identifying areas of alignment, involving stakeholders, monitoring progress, and reviewing outcomes.
While the model offers a comprehensive examination of various organizational facets, its complexity lies in effectively evaluating each of the seven elements, which can be challenging. You might also find that not all seven elements are relevant to the change you are going through, so you must tailor this framework to your needs.
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