2.13 McKinsey 7S Model

It is rare that a single element of your business will either drive success or prevent it completely. Instead, different parts of the business overlap and interact to create success or failure. The McKinsey 7S model is a simplified way of looking at your organization and each element which may affect the company’s success or failure.

In order for your business to be successful, you need to do well in each of these areas. As all elements are interconnected in the framework, each influences how well your organization does in the other areas.

Elements of the McKinsey 7S Model

The framework divides the factors into two groups - Hard S areas and Soft S areas. The top three, Strategy, Structure, and Systems, are hard areas. This means that these areas are easier to identify, manage, and work with. They are very tangible. The rest - Staff, Style, Skills, and Shared Values - are soft areas, meaning that they are harder to manage because they are difficult to define, alter, and control.

Hard areas:

  1. Strategy

  2. Structure

  3. Systems

Soft areas:

  1. Staff

  2. Style

  3. Skills

  4. Shared Values

Strategy

Strategy is a company’s plan for how to be successful - how to stay ahead of competitors, how to grow, and how to improve on all these areas. Do your employees act in accordance with your strategy? Does your strategy drive growth? Does your strategy create long-term results?

Structure

Structure refers to the organization (structure) of your business - the organization of different departments and teams, as well as the leadership hierarchy. Can employees communicate problems to managers? Do you lose a lot of efficiency waiting for approval or other bureaucratic processes? Are your employees engaged and dedicated to the success of the company?

Systems

Systems are the business processes that make up your company. Do you have smaller profit margins than many companies in your industry? Do your manufacturing processes frequently cause delays in the orders you are sending out? Is your workplace a safe environment?

Skills

Skills are the things your employees are good at doing. Do you have productive employees who surprise you with how much they accomplish? Are there technical issues that you frequently have to hire outside help to solve? Could you get one very skilled employee instead of two lesser skilled employees? Do you have a competitive advantage thanks to your employee skills?

Staff

Staff deals with who you hire, how many of each type of job you need, and other Human Resource functions. These include recruitment, training, motivation, and compensation. Do you have enough people to keep up with the tasks at hand? Are employees frequently idle? Do you have the greatest number of people in the departments which drive the most growth in your company?

Style

Style means leadership style, or how the top-level managers lead the company and interact with each other and employees. Are your employees motivated by what your leaders say and do? Do you have lots of workplace conflict? High turnover? Perhaps solving issues in leadership will solve many issues throughout the company.

Shared Values

Shared Values means that each of the elements of the model are interconnected around the standards and culture that guide both how employees act and what the company chooses to do. These are the foundation of your organization. Do you have strong mission and vision statements? Are you an ethical corporation? Do you accomplish good in the world?

The McKinsey Model takes these categories and looks closely at each to see if it is working or not and how well each supports or tears diminishes others. You must balance the different areas of the company, addressing the elements which are either significantly better or significantly worse than the others. For instance, if your business has a fantastic strategy and great skills, it would seem that your company will be successful, however, if your systems are inefficient (maybe your computer systems are ancient and crash often), it is possible that your strengths will be undermined. Great strengths within the company may be utilized to improve those areas in which the company is lacking. A careful analysis of these 7 items will show your company’s balance and give a fairly accurate forecast into the future success of the firm.

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