What are the elements of McKinsey 7S model?

The 7 S Model

The 7 S model considers seven elements of organisations, three ‘hard’ (strategy, structure and systems) and four ‘soft’ (shared values, skills, staff, and style), all of which are interrelated.

The model is often visualised as a sort of web, with shared values in the centre.

The 7 S model emerged from the realisation, revolutionary at the time, that organisations were considerably more than their structure.

This new understanding was seen to explain a good deal of the issues with failing organisational change, since many organisations set out to change their structure, and then wondered why this did not have more impact. This model set out to provide a way of looking at an organisation more holistically, across both implicit and explicit areas, and to try to identify all the elements that made up the organisation.

The model suggests that these seven elements must be aligned, or consistent. By looking at each element in turn, therefore, and gathering information about it, it is possible to identify whether any of the seven are out of line. Any potential lack of alignment may be preventing the organisation from achieving its stated objectives.

Seven Elements of Organisations

Strategy is the organisation’s plan for the future, and how it will achieve sustainable competitive advantage

Many organisations publish details of their strategy, even if only internally. It is important to consider implicit as well as explicit strategy, however, including how the organisation deals with competitive pressure, and how it responds to changes in customer demand. The issue of how strategy adapts to external changes can be very informative as it says a lot about the implicit strategy of the organisation.

2. Structure

Structure is the organisational hierarchy, including reporting arrangements.

This area is very much the formal structure: the organisational chart. However, it should also include consideration of whether the formal structure fully sets out the power relationships (for example, are there junior members of the hierarchy who have considerably more power than would be expected?).

It may also be helpful to consider aspects like whether decision-making is centralised or decentralised, and the communication lines of the organisation, as these explain the implicit structure.

3. Systems

Systems includes all the processes and procedures used within the organisation

This element ranges from HR and pay systems to filing, email and other communication technology. It also includes both organisation-wide and team systems, especially if these are conflicting in some way. For example, sometimes official systems are too complicated or not up to the job, so teams have found a way round them: this is an important element of how the organisation works, and may affect the ability of teams to work together.

4. Shared Values

Shared values are the core values of the organisation, shown in the culture and general ‘feel’ of the organisation.

Shared values may be implicit or explicit, but are central to the organisation, which is why they are placed in the middle of the ‘web’. Everything else emerges from them. The shared values are likely to be linked to the purpose of the firm, or the vision of the founders, or an understanding about why the organisation exists.

Organisational members should all be able to articulate the shared values of their team and the organisation, including the ‘feel’ of the organisation, and whether this has changed recently. It is likely to be a problem if the team and organisational values conflict in some way.

The importance of shared values

There is a story about a visitor to NASA during the 1960s asking a janitor what he did in the organisation.

He answered ‘I’m helping to put a man on the moon’.

This story is probably apocryphal (because why would anyone ask a janitor what he did), but it serves to illustrate the importance of shared values.

5. Style

Style describes the style of leadership in the organisation

There are many different styles of leadership (and for more about this, you may like to read our page on Leadership Styles). All of them have a different effect on the organisation and its members, and it is worth exploring the nature of the leadership style of the whole leadership team, not just the CEO.

It is also worth considering whether there is (or needs to be) genuine team-working, or simply groups working together. For more about this, see our pages on Working in Teams and Groups.

6. Staff

Staff describes the organisation’s employees and their general characteristics

This will include issues like demographics and diversity, and therefore whether the organisation is drawing on the widest possible talent pool. It should also consider ways of working, and whether the organisation enables and supports remote and part-time working, and other flexible practices.

It also, however, includes issues like turnover and whether posts remain unfilled for any length of time, as this gives information about the way the organisation is seen, and how it treats its employees.

7. Skills

Skills describes the employees’ competences and capabilities

This element considers the employees’ existing skills and competences, and how they are developed. It also, however, covers how skills are assessed and monitored, and any gaps identified and filled. It can also be helpful to consider what the organisation or team has a reputation for doing well and badly.

Analysis is only the start

The McKinsey 7 S model is a very good way of examining an organisation, and identifying elements that may not be contributing effectively to success. It is therefore a useful tool for using in a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis, to identify the strengths and weaknesses. As with any tool, however, the analysis, and identifying potential problems and solutions, is only the start.

The next step is to do something about it, and for that, you may want to read our pages on Strategic Thinking, Action Planning, and Change Management.

Although invented in the late 1970s, the McKinsey 7S model still helps businesses of all sizes succeed. A conceptual framework to guide the execution of strategy.

In this guide, we’ll walk you through the 7S of the McKinsey Framework and how to apply it to evaluate and improve performance.

McKinsey 7-S Model Definition

The McKinsey 7S model is one of the most popular strategic planning tools. Businesses commonly use it to analyze internal elements that affect organizational success.

The model recognizes 7 of these elements and considers them to be interlinked, therefore it’s difficult to make significant progress in one area without making progress in other areas as well. Accordingly, to be successful, the organization should ensure that all these elements are aligned and reinforced.

The model divides these 7 elements into two categories;

Hard elements – Strategy, Structure, Systems (these are easier to be identified and defined and can be directly influenced by the management)

Soft elements – Shared Values, Skills, Style, Staff (these are harder to be defined because they are less tangible, but are just as important as the hard elements)

You can use the framework

To successfully execute new strategies
To analyze how different key parts of your organization work together
To facilitate changes in the organization
To help align processes during a merger or acquisition
To support management thinking during strategy implementation and change management

The 7 Elements of the McKinsey 7-S Framework

Strategy
Structure
Systems
Skills
Staff
Style
Shared values

Let’s dig into these elements in more detail.

Strategy

A strategy is a plan the company develops to maintain its competitive advantage in the market. It consists of a set of decisions and action steps that need to be taken in response to the changes in the company’s external environment which includes its customers and competitors.

An effective strategy would find external opportunities and develop the necessary resources and capabilities to convert the environmental changes into sources of new competitive advantage.

Structure

The structure is the organizational chart of the company. It represents how the different units and divisions of the company are organized, who reports to whom and the division and integration of tasks. The structure of a company could be hierarchical or flat, centralized or decentralized, autonomous or outsourced, or specialized or integrated. Compared to most other elements, this one is more visible and easier to change.

Organizational Chart (Click on the template to edit it online)

Systems

These are the primary and secondary activities that are part of the company’s daily functioning. Systems include core processes such as product development and support activities such as human resources or accounting.

Skills

Skills are the skill set and capabilities of the organization’s human resources. Core competencies or skills of employees are intangible but they a major role in attaining sustainable competitive advantage.

Staff

The most valuable strategic asset of an organization is its staff or human resources. This element focuses on the number of employees, recruitment, development of employees, remuneration and other motivational considerations.

Style

This refers to the management style of the company leadership. It includes the actions they take, the way they behave, and how they interact.

Shared Values

Shared values are also referred to as superordinate goals and are the element that is in the core of the model. It is the collective value system that is central to the organizational culture and represents the company’s standards and norms, attitudes, and beliefs. It’s regarded as the organization’s most fundamental building block that provides a foundation for the other six elements.

McKinsey 7S Model (Click on the template to edit it online)

How to Use the McKinsey 7-S Model

The model can be used to do a gap analysis or to determine the gap between what the company is currently doing and what it needs to do to successfully execute the strategy.

Step 1: Analyze the current situation of your organization

This is where you need to understand the current situation of the organization with regard to the 7 elements. Analyzing them closely will give you a chance to see if they are aligned effectively.

The following checklist questions will help you explore your situation.

Strategy

What’s the objective of your company strategy?
How do you use your resources and capabilities to achieve that?
What makes you stand out from your competitors?
How do you compete in the market?
How do you plan to adapt in the face of changing market conditions?

Structure

What’s your organizational structure?
Who makes the decisions? Who reports to whom?
Is decision-making centralized or decentralized?
How do the employees align themselves to the strategy?
How is information shared across the organization?

Sytems

What are the primary processes and systems of the organization?
What are the system controls and where are they?
How do you track progress?
What are the processes and rules the team sticks with to keep on track?

Skills

What are the core competencies of the organization? Are these skills sufficiently available?
Are there any skill gaps?
Are the employees aptly skilled to do their job?
What do you do to monitor, evaluate and improve skills?
What is it that the company is known for doing well?

Staff

How many employees are there?
What are the current staffing requirements?
Are there any gaps in the required resources?
What needs to be done to address them?

Style

What is the management style like?
How do the employees respond to this style?
Are employees competitive, collaborative or cooperative?
What kind of tasks, behaviors, and deliverables does the leadership reward?
What kind of teams are there in the organization? Are there real teams or are they just nominal groups?

Shared Values

What are the mission and vision of the organization?
What are your ideal and real values?
What are the core values the organization was founded upon?
How does the company incorporate these values in daily life?

Step 2: Determine the ideal situation of the organization

Specify where you ideally want to be and the optimal organizational design you want to achieve, with the help of the senior management. This will make it easier to set your goals and come up with a solid action plan to implement the strategy.

Since the optimal position you want to be in is still not known to you, you will have to collect data and insight through research on the organizational designs of competitors and how they coped with organizational change. Answering the questions above are just the starting point.

To understand what your organization is best at, use the Hedgehog Concept by Jim Collins

Step 3: Develop your action plan

Here you will identify which areas need to be realigned and how you would do that. The result of this step should be a detailed action plan listing the individual steps you need to take to get to your desired situation, along with other important details such as task owners, timeframes, precautions and so on.

Action Plan Template (Click on the template to edit it online)

Step 4: Implement the action plan

Successfully executing the action plan is depended on who executes it. Therefore you need to make sure that you assign the tasks to the right people in your organization. Additionally, you can also hire consultants to guide the process.

Step 5: Review the seven elements from time to time

Since the seven elements are subjected to constant change, reviewing them periodically is essential. A change in one element will affect all the others, which will require you to implement a new organization design. Review the situation frequently to stay aware of the remedial action you might want to take.

Advantages and Disadvantages of McKinsey 7-S Model

Advantages

Considers 7 elements of strategic fit, which is more effective than the traditional model that only focuses on strategy and structure
It helps align the processes, systems, people, and values of an organization
Since it analyzes each element and the relationship between them in detail, it ensures that you miss no gaps caused by changed strategies
Helps organizations identify how they should align the different key parts of the organization to achieve their goals

Disadvantages

It requires the organization to do a lot of research and benchmarking, which makes it time-consuming
It only focuses on internal elements, while paying no attention to the external elements that may affect organizational performance.
It requires the help of senior management which may not be readily available depending on how busy they are

To analyze and understand the performance or the functioning of the organization use Weisboard’s six box model framework.

What’s Your Take on the McKinsey 7-S Model?

The McKinsey 7S model is a proven framework for helping organizations understand how to get from their current situation to the situation they prefer to be in.

Maybe you are a big fan of the McKinsey 7S model. Maybe you prefer another strategy framework that has worked well for you. We’d love to hear what you feel about the subject; give your feedback in the comments section below.