What is McKinsey’s 7S model?
The 7-S framework was developed in the 1970s by Thomas J. Peters and Robert H. Waterman, who at the time were working as consultants for global business consulting firm McKinsey & Company.
They aimed to challenge the traditional way of working in which employees would work within the boundaries of their skills and their assigned tasks as well as their reporting lines. Instead, they hoped the framework would help businesses adapt to the increasingly complex business environment, in which coordination and flexibility were becoming more important than structure.
McKinsey’s 7S model analyses the interaction of seven key elements of any business – structure, strategy, systems, skills, style, staff and shared values. Each element begins with the letter S, which is why the model is called the 7-S framework.
Business leaders can use it like a mirror to see what is working or not working in their organisation. By taking each element one by one and assessing it with each other element, it is a simple way to ensure no part of the business is overlooked.
The elements of the 7S model
The shared values element lies at the heart of the 7-S model, as it is the most relevant to what the business aims to achieve. It is also the element within a business that does not change as often as the remaining six elements over time. For example, staff may come and go, but the business objective remains.
However, being at the heart of the model does not prevent other elements from being analysed with each other separately.
The model is often illustrated as a diagram, with shared values placed in the centre and the other six elements arranged in a circle around it.
Structure
Structure is the way the business is organised, such as hierarchy and reporting lines.
A business may need to change its structure, such as from a tiered management structure to a flat management structure, in order to achieve its strategic goals.
Strategy
Strategy is the long-term vision or business plan that drives its operations. The strategy may need to be adapted to address business performance and capabilities, such as delaying an expansion into new markets if their economic situation at the time is unstable.
Systems
While systems involves the type of computer software or machinery the business uses, it also refers to other processes ranging from HR activities to client management. New systems may need to be implemented to keep businesses moving forward, especially if their current processes are out of date.
Skills
Each employee holds skills, whether they be hard skills such as qualifications and technical capability or soft skills such as teamwork and time management. Businesses need to ensure their workforce has the right skills that are relevant to the work they are doing now or want to achieve in the future. For example, an employee may have exceptional communication skills and technical skills, however they need to upskill technologically to stay capable in the modern workplace.
Style
Style is the way the business, and particularly the senior leadership team, operates. For example, a business may have a collaborative, authoritative, visionary or consultative style.
A business may not need to change its style altogether but may bring in other styles when required, such as having an overall collaborative style that encourages new ideas but also incorporates authoritative measures to ensure certain legal obligations are met.
Staff
Staff refers to the employees themselves as well as the processes that manage them, such as recruitment, training and development and other human resources functions. The staff element may cover staffing levels as well as whether employees hold the skills required or ongoing talent management programs such as apprenticeship intakes.
Shared values
Shared values are the values that both employees and the business holds, such as providing exceptional customer service or striving for continuous improvement. What an employee values can naturally change depending on what stage their life is in. Or, a business may alter its values to adapt to changing business conditions, such as increasing its environmental awareness and responsibilities.
How to use the 7S model for strategic planning
Once a business leader has determined what the goal or strategy they seek to achieve will be, they can work through each element to decipher what is working well or what may need to be changed. There is no order to the model, so it does not matter which element that business leaders focus on first. They may already have an inkling that staff may be their challenge to achieving their goal and that their skills may be an issue, so they can start by analysing those two points. Or, leaders may feel the business style is not working well with existing systems.
Their intuition may be correct and by using the model, leaders may be able to determine adaptations to these elements that will help them achieve their goal. However, it is important that businesses do not stop once they are proven correct or find a new opportunity. Working through all seven elements is important to identify other areas that can be changed, as well as or instead of their initial findings.
There are four steps to using the model effectively.
Identify misalignments
This is the part of the process that will take the most time. Measure up each element to the others and identify challenges or inconsistencies. Avoid making a plan to tackle each misalignment as it arises – at this point, just noting it is enough.
For example, the business strategy may be to expand operations and therefore it will need to recruit more workers. However, it may not currently have enough staff to meet its workload demands. The business may also continuously struggle to find applicants who share business values.
Determine the optimal outcome
Identify ways to overcome the challenges to achieve the business strategy. There may not be a single solution so brainstorm several options.
For example, a training program may need to be implemented to train workers who have the right values but do not have the right skills. Or, the business may need to widen its recruitment activities to other locations to find the workers who hold the right values.
Decide on what changes are to be made
It may not be possible or practical to implement the best solution immediately. For example, an apprenticeship program will provide the workers with the right skills over time but more staff may be needed now. Or, there may be costs involved that the business cannot justify at this point in time.
A business may also have several changes across several areas that need to be made but does not have the financial or human resources to be able to achieve all at the same time. A priority list can be drawn up that outlines a plan of action to make the changes, with those that will have the best impact tackled first.
Make the changes
Follow through with the changes identified and do not let them fall to the wayside. Create an action plan and, if necessary, form a project team to lead the change. Regularly review the changes to be made to ensure they are being acted upon.
McKinsey’s 7S model has endured for more than 40 years because it has been so effective for so many businesses across the world. If strategic planning is important to business success, it may become a handy tool for any business leader.
