Managing strategic alignment across various business operations becomes increasingly challenging as organizations pivot through ongoing changes.
One strategic tool used by businesses to manage this complexity and drive consistent alignment through change periods is the McKinsey 7S Model.
In this article, we will guide you through the basic principles of the McKinsey 7S Model and show you how to use it in practice based on a real-life example. And yes, you’ll also get a template that will help complete your own 7S Analysis. ;)
TL;DR
- The 7S Model is a strategic tool that helps you analyze organizational gaps, inconsistencies, and alignment issues.
- The framework divides organizations into seven categories and shows how key elements impact one another.
- Both “hard” and “soft” elements in the 7S Model are equally important when implementing change.
- Pros: The 7S Model helps you understand the broader impact of change initiatives on the entire organization.
- Cons: It doesn’t analyze external elements and their impact on organizations.
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What Is the McKinsey 7S Model?
The McKinsey 7S Model is a change management tool for analyzing organizational design, alignment, and performance. It offers a simplified method of identifying organizational gaps, inconsistencies, and conflicts. Additionally, it is useful for mapping out various types of change initiatives in complex environments.
As the name implies, there are seven components to the 7S Model—all of which start with an “S.”
These seven components are grouped into “hard” and “soft” elements. Both are equally important to driving successful change initiatives.
Hard elements
Hard elements are tangible, easy to identify, and can be directly impacted by management.
- Structure
- Strategy
- Systems
Soft elements
Soft elements are intangible and primarily driven by the organization’s corporate culture.
- Skills
- Style
- Staff
- Shared Values
7 Elements Of The McKinsey 7S Model
Let’s look at the different elements of the McKinsey 7S Model in more detail.
1. Structure
This is how the organization is set up for decision-making, ownership, and leadership. It includes hierarchy, the chain of command, and accountability between role players.
2. Strategy
The business’s approach to strategic planning and executing actions that ensure success, sustainability, and competitive advantage.
3. Systems
Systems refers to the processes, infrastructure, and workflows established and utilized within the organization.
4. Skills
Skills are the competencies and capabilities of people within an organization that help it reach business goals and objectives.
5. Style
Style is the way and manner in which people in the organization operate and interact. This includes interpersonal business relationships, management styles, and codes of conduct.
6. Staff
Staff encompasses human resources and talent management related to company decisions, like hiring, training, retention, and incentives.
7. Shared Values
These are the common objectives and values that help form an organization’s culture and align the other elements within the organization. In and outside of your organization, they influence employee, customer, and work experiences.
How to Use the McKinsey 7S Model? (In 7 Steps)
1. Analyze each component of the 7S Model
Here’s how you should take it step-by-step:
- Start in the middle and analyze Shared Values. This step should help you to identify if you have a clear understanding of where your company wants to be in the future.
- Move into the Hard elements (Strategy, Structure, and System).
- Finish with Soft Elements (Skills, Staff, and Style).
>>> Download your 7S Model template here.
You can use the following questions during your review process (also included in the template):
Strategy:
- How should we proceed to resolve the specific business problem?
- What is our strategy and its priorities?
- How will we achieve our strategic objectives?
- How do we compete in the market? What are our competitive capabilities?
- How does the organization respond to changes in customer demand or the business environment?
Structure:
- How is our organization organized?
- How are reporting and working relationships structured (hierarchical, flat, silos, etc.)? Who reports to whom?
- How are our employees aligned with the strategy?
- How do our teams align and collaborate on shared goals?
- What is our process for making decisions? Is it through centralization, empowerment, decentralization, etc.?
- How does the organization share information (formally and informally)?
Systems:
- Can we execute the strategy with the existing business system or do we have to develop a new one?
- How do we track progress and performance?
- What internal processes and guidelines do we have in place to stay on track?
Shared Values:
- What principles help us to achieve our goals?
- What makes us do what we do in the way we do it?
- What is our vision for the future? What is our mission to get there?
- What are our core values? How are we incorporating them into daily activities?
Skills:
- What are our strongest skills within the organization? What are our weaknesses?
- How are we going to fill the skill gap? Which skills are required?
- Is the current employee's skill set sufficient for the job?
- How do we monitor, assess, and improve skills?
Style:
- What leadership style and cultural qualities will help us to achieve a strategic objective?
- What is our current management approach?
- How are our employees respond to it?
Staff
- Is there anything we can do to support the growth of our team members?
- What are the current staffing needs?
- Are there any gaps in required capabilities or resources?
- What is our plan for addressing those needs?
Remember, you may already be able to identify some of the issues in your organization. However, some problems may be less obvious.
An exercise like this can help you gain a better understanding of all the issues that are impacting alignment and organizational effectiveness.
2. Identify areas that are misaligned with your vision and strategy
Review your findings and use them to find gaps and inconsistencies in the organization. Create a list of these existing issues.
“If you want to go to the moon, you need to understand the distance you need to bridge to go from here to there.” – Thibault Mesqui, Managing Director, Heineken
Additionally, speak to other key stakeholders and get their opinions on different business areas and processes in your organization.
“When you involve people, when you ask them their opinions, they feel a lot more inclined to actually execute the thing later on.” - Ilana Rosen, Director of Strategy and Head of Enterprise Innovation at Old Navy
3. Define the desired state
You’ll then need to identify and articulate the organization's ideal alignment. Go through each “S” and use this question: “What do we need to change in each element so we can execute our strategy?”.
This will likely require additional research and consultations with external experts to understand what an optimal organizational design can look like and the possible obstacles that might stand in its way.
Remember, your “ideal” state should be informed by your company’s long-term strategic goals, conversations with role players, and other internal analyses.
Once you’re done, review everything and ensure it aligns with your company’s vision and strategy.
4. Prepare your change management plan
Analysis of the 7S Model holds no value if you don’t map out a change management action plan. Your organization needs a clear roadmap to get where it needs to be. Without it, you will either miss growth opportunities or continue to be stagnant.
As part of this step, clearly define your strategic objectives, key projects or initiatives, and KPIs. Co-create an action plan with the owners who will be responsible for executing it. This collaborative approach is essential if you want to get buy-in and maintain momentum.
Strategic planning can be challenging depending on your organization's size and existing processes.
An all-in-one strategy execution platform, like Cascade, can help simplify the strategic planning process with tools to lead, monitor, and manage key change initiatives and projects.
5. Execute your plan
Now it’s time to turn your plans into reality. Execution is the most crucial step in the change process.
Getting it right will result in impactful changes and help your organization reach important milestones. Getting it wrong will mean delays, lackluster outcomes, and failure.
But, strategy execution in a complex business environment can be tricky. Especially if you don’t have the right tools to align efforts, ensure accountability, and manage change initiatives.
Get ahead of the problem. Check out Cascade’s robust transformation management features and see how they can help you drive strategy execution to get results faster.
6. Review your progress against set targets
Monitoring progress is vital if you want your change initiative to have maximum impact.
Continually review the performance of your teams and projects to ensure your organization is constantly aligned and on track.
Cascade is one of the few platforms that make oversight and monitoring easy. Its focus on strategic alignment, powerful real-time reporting features, and drill-down capabilities give organizations a holistic overview of progress.
7. Adapt your plans and strategy if needed
Any good strategy will change, iterate, and adapt. Don’t be afraid to change your plans and approach as you progress.
Using insights, knowledge, and new information to improve your approach is important. Plans must be adjusted or refocused as your organization progresses toward its goals.
“The True North should not change that much, that frequently, but the components of the pillars that make up for the solution might evolve.” - Carlos Trad, Director of Global Business Strategy, Google.
McKinsey 7S Model Example: Chick-fil-A
Chick-fil-A is a popular fast-food restaurant with over 2000 locations in the US, Canada, and the UK. Here’s an example of how a McKinsey 7S Model might look for Chick-fil-A:
Structure
- A private family-owned fast-food franchise.
- Wholly-owned subsidiaries that supply franchisee restaurants.
- Individual Chick-fil-A restaurants are owned and operated by franchisees.
- Franchise owners (Operators) manage day-to-day operations in their stores.
Strategy
When it comes to growth, Chick-fil-A pursues a market development strategy. They are expanding into new markets with existing products through franchising. They also pursue international expansions by opening new locations outside the US, including Canada and UK. And they are planning to enter new markets, such as Asia.
System
- Franchise and licensing business with corporate offices to manage broad strategic initiatives.
- Corporate control of food production and distribution channels.
- A rigorous vetting process for all prospective franchise owners.
Shared values
Christian and family values play a large part in Chick-fil-A’s corporate identity. For example, all Chick-fil-A restaurants are closed on Sundays.
Chick-fil-A’s core values also play a big role in shaping their culture, work, and customer experience:
- “We are better together”
- “We're here to serve.”
- “We are purpose-driven.”
- “We pursue what's next.”
These values drive their presence and approach in the fast-food industry. And it proves to be worth the investment. Chick-fil-a is one of the most beloved fast-food chains in America, and it enjoys a reputation for providing the best customer service.
Skills
The company invests heavily in upskilling franchise owners through training, support, and investments.
They also provide staff members with opportunities to grow and move into new roles. For example, in 2019, Chick-fil-A gave employees $15.3 million in educational scholarships.
Style
In the fast-food industry, Chick-fil-A is known for its unique management style and the trust it places in franchise owners.
- Known for its servant-leadership style of management.
- The corporate office is known as the “Support Center.”
- Franchisees are known as “Operators,” and employees are known as “Team members.”
Staff
Chick-fil-A represents over 170,000 Team Members, Operators, and Staff. This is how the
- Corporate: Strategy, licensing, business development, marketing, compliance, and human resources.
- Franchise owners: Business management, operations, and people management.
- Restaurant staff: Food preparation, front-of-desk service, customer relations, cleaning, and team management.
Now let’s take a look at the 7S Model in action…
The example above suggests Chick-fil-A's operations are aligned and efficient. But what happens if Chick-fil-A decides to enter a new market with a new product? For the sake of example, let's ignore the fact that a diversification strategy like this would be a bold and risky move based on the Ansoff matrix.
Using the 7S Model, they might realize that they lack the right management staff to help them through this transition. In terms of Staff, they will need to hire people with the right skills and experience to fill these gaps. Looking at Skills, they might even identify that franchise owners and restaurant staff will need additional training because the new product requires new processes and workflows.
Strategy is another area they should consider.
Their strategy needs to change and it might even require a new approach to strategic planning. They might also realize that their current approach to strategy execution isn’t fast enough and it will need to change if they want to outperform competitors and stay relevant.
A McKinsey 7S Framework forces leaders to do their homework and identify gaps that could result in a failed strategy execution. As a leader, you don't want to be in that 90% of strategies that fail.
Note: The above is just an example illustrating different scenarios. You should do your own research and apply the model to your organization.
What Are The Benefits Of Mckinsey 7S Model?
The key benefits of the 7S model framework are:
- It shows the wider impacts of changes on organizations.
- Simplifies the process of planning and executing change initiatives.
- Helps align different segments of business units during periods of change.
- Useful for different types of change initiatives.
As with every strategy framework, it also has some disadvantages:
What Are The Disadvantages Of Mckinsey 7S Model?
The disadvantages of the 7S Model are:
- It requires a lot of research and benchmarking to be used effectively.
- Ignores the impact of the external environment on businesses.
When Should You Choose the McKinsey 7S Model?
The McKinsey 7S Model is a simplified method of understanding organizational structures and how they impact one another. It is beneficial for identifying key organizational elements impacting performance, such as gaps, inconsistencies, and misalignment.
The 7S Model is a great strategic tool for analyzing organizational design and change management in complex environments. It can be used for various types of organizational change initiatives, such as:
- Diversity, Equity, and Inclusion (DEI) initiatives
- Innovation
- Digital transformation
- Restructuring due to M&A
- Market Development
Organizations embarking on any transition, reinvention, or reorganization can use this model to bolster strategic planning and execution.
McKinsey 7S Model + strategy execution = 🔥
7S Model analysis it’s not enough. Yes, you get insights into business areas that need to improve or change within the organization. But that’s just a starting point.
You need to create your action plan and execute it to close the gap between misaligned elements and your strategy. This is the only way you can create a well-oiled machine that drives business results. And you need the right tools that will help you measure and monitor performance.
Recommended reading: 23 Best Strategy Tools For Your Organization in 2022
FAQs about the McKinsey 7S Model
Is the McKinsey 7S Model still relevant?
Yes, the McKinsey 7S Model remains relevant for businesses and NGOs. It is an important strategic framework for analyzing an organization's alignment and potential future obstacles.
What is the difference between a hard strategy and a soft strategy?
Hard strategies involve planning, executing, and monitoring systems, processes, and structures. The benefits of these initiatives are usually clear and measurable. Soft strategies focus on changes in management style, work culture, and people.
Who introduced the 7S Framework?
The Mckinsey 7S Framework was introduced in the late 1970s by Tom Peters and Robert Waterman, who worked as consultants at McKinsey & Company.
What is the difference between the McKinsey 7S Model and a SWOT analysis?
The difference between McKinsey 7S Model and SWOT Analysis involves each model’s focus and analytical approach. The 7S Model is internally focused and looks at seven elements that affect business performance. SWOT is internally and externally focused and analyses the potential impact of four factors on organizations.
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