7S model for strategic planning and analysis was created by the McKinsey & Company. This model was proposed by Peters and Waterman in 1984, and takes into account following intangible characteristics of the organization:
- Shared values – the rules of conduct and philosophy widely known in the organization, which all employees are driven by,
- Strategy – followed by the organization,
- Structure – the formal relationship between the parts that make up the organization. It relates to the relations between business levels, branches and departments,
- Systems – that carry out specific activities, processes, or are used to solve problems in a company,
- Staffing – which means the recruitment of new employees, requirements planning and competences of already employed workers,
- Skills – capabilities of the organization and the skill level presented by members of the organization,
- Style – the treatment of members of the organization in mutual contacts and above all management style.
7S model is not a recipe for building a perfect strategy, but it is a stimulus to rethink the internal activities of the company that affect its future development.
Application of the McKinsey 7S Model
The subjectivity surrounding the concept of alignment concerning the seven key elements contributes to why this model seems to have a complicated application. However, it is suggested to follow a top-down approach – ranging from broad strategy and shared values to style and staff.
Step 1: Identify the areas that are not effectively aligned
Is there consistency in the values, strategy, structure, and systems? Look for gaps and inconsistencies in the relationship of elements. What needs to change?
Step 2: Determine the optimal organization design
It is important to consolidate the opinions of top management and create a generic optimal organizational design that will allow the company to set realistic goals and achievable objectives. The step requires a tremendous amount of research and analysis since there are no “organizational industry templates” to follow.
Step 3: Decide where and what changes should be made
Once the outliers are identified, the plan of action can be created, which will involve making concrete changes to the chain of hierarchy, the flow of communication, and reporting relationships. It will allow the company to achieve an efficient organizational design.
Step 4: Make the necessary changes
Implementation of the decision strategy is a make-or-break situation for the company in realistically achieving what they set out to do. Several hurdles in the process of implementation arise, which are best dealt with a well-thought-out implementation plan.
Advantages of the Model
- It enables different parts of a company to act in a coherent and “synced” manner.
- It allows for the effective tracking of the impact of the changes in key elements.
- It is considered a longstanding theory, with numerous organizations adopting the model over time.
Disadvantages of the Model
- It is considered a long-term model.
- With the changing nature of businesses, it remains to be seen how the model will adapt.
- It seems to rely on internal factors and processes and may be disadvantageous in situations where external circumstances influence an organization.
The McKinsey 7S model can be applied in circumstances where changes are being brought into the organization that may affect one or more of the shared values. Suppose a company is planning to undertake a merger. It will affect how the company is organized since new staff will be coming in. It will also affect the structure of the company, along with strategic decision-making, as new ideas flow in through synergy.
In such a case, the McKinsey 7s model can be used to first identify the inconsistent areas – here, it would primarily be the structure, staff, and strategy. After identifying the relevant areas, the company can make effective decisions to optimally re-organize and incorporate the changes in a way that streamlines the merger process – after conducting extensive research and analysis of the consequences that the changes bring to the company.
You can apply the McKinsey 7-S framework to almost any organizational or team effectiveness issue. The 7-S’ refer to:
- Shared values.
If something within your organization or team isn’t working, chances are there is inconsistency between one or more of these seven elements.
Once you reveal these inconsistencies, you can work to align these elements to make sure they are all contributing to your organization’s shared goals and values.
The process of analyzing where you are right now, in terms of these elements, is worthwhile in itself. But for it to be truly effective, you’ll also need to determine the desired future state for each factor. This will help you make changes and improve performance so that all seven factors are aligned across your organization.