McKinsey 7S Framework

The McKinsey 7S Framework is a model for the structural analysis of a business that isolates seven elements: strategy, structure, shared values, system, skills, style, and staff. The ability to evaluate the effectiveness of an organization begins by establishing elements critical to any organization and then measuring how effectively each operates and, far more importantly, how they work in cooperation with all the other elements. This holistic approach to management organization prepares executives to make significant changes to a business effectively and efficiently, for example, a merger or acquisition; the relocation of company headquarters or its facilities; the expansion into new services or productions; the installation of major new technology systems; the expansion into new markets or into global internet services; downsizing; changing management teams; or advanced internal restructuring. If an organization is merely approached as a structure that can be easily modified, the complexity of that organization, how it is in fact a matrix of elements that directly impact each other, can be significantly compromised.

Background

In the early 1980s, two young executives working in San Francisco for McKinsey & Company, a prestigious New York–based international business management consulting firm, agreed to study the operations of more than forty major American corporations. Tom Peters and Robert H. Waterman Jr. carefully worked out a model for the structural analysis of a business that isolated seven elements critical to any organization’s effectiveness. As each element began with the letter S, the model, when the details of it were first published in 1982, became known as the McKinsey 7S Framework. The book, In Search of Excellence, became a major bestseller and the subject of a critically acclaimed series on PBS. Peters and Waterman’s model revolutionized how organizations were perceived and continued to be frequently cited as one of the most influential and useful organizational management templates in business.

Peters and Waterman began by distinguishing what they termed Hard Elements and Soft Elements common to any organization’s structure. Hard Elements were relatively easy to observe and easy to measure as they impacted the day-to-day operations of any business. The Soft Elements, on the other hand, dealt more with the intangibles of a business, the ethics, values, and competencies of the workers up and down the organizational structure. Peters and Waterman argued that these Hard and Soft Elements could not be isolated if a business was attempting to determine areas to improve. It would do no good to work on only one area—that would be like a person exercising one arm in a gym. Change one area and the business would effectively change all areas. The revolutionary concept here was that these elements were interrelated.

Before going into business management, Peters had been trained as a civil engineer and Waterman as a geophysicist. They brought to business management the perception that any system is, at its heart, a cooperative structure, a single great organic whole. The model was at once remarkably simple—seven interrelated areas to empower organization’s to inventory their own effectiveness—and yet quite complex, as it required business managers to work against conventional thought and accept that structure and organization were not the same thing.

Overview

The Hard Elements of an organization included

• Strategy—the business’s mission statement, its specific plans to remain competitive, how it intends to use available resources to achieve specific goals
• Structure—how the business is organized, specific and documented flow charts that indicate how decisions are to be implemented, how information is to move through the network; in short, the specific chain of command within the units/departments of the business
• Systems—the actual information systems that create the network, the process for data storage and retrieval, the flow of real financial resources, as well as the specific protocols that define the day-to-day routine operations.

The four Soft Elements included:

• Shared Values—the specific virtues that define a company, what it stands for, the ethics of the company, most often drawn from the business’s founders and exemplified by the organization’s operations
• Skills—the specific competencies and capabilities (or lack thereof) of the workforce
• Style—the business’s leadership style, whether the senior management team gets involved in the daily operations or delegates those responsibilities, and whether operations generally run from the top down or rely more on independent divisions and maverick operators; ultimately, whether the organization works cooperatively, each division working tightly with the rest of the business operations to reach specific goals, or competitively, each division, even each executive, largely working for their own success, job security, and professional advancement
• Staff—the entire range of workers, the employees themselves and their attitudes, their relationships with other workers, their vision of the company’s purpose, their commitment to the company mission, their flexibility, their training, and, ultimately, their work ethic.

Within the 7S framework, no one element can dominate. Like the stars that make up a constellation, these elements together can shape the business. No one element can be singled out for improvement, although Peters and Waterman emphasized that at the center of the business model are the shared values, that core of essential virtues that impacts every aspect of the operation. Further, no one element can be scapegoated to explain away a business’s poor performance, and no one element can be held responsible for a business’s success. Each contributes to the operations of the organization. Before a company commits to major systemic changes, executives can measure each element of the operation to find gaps, strengths, problems, and deficiencies. The template empowers executives, eager for the business to grow, to exert a more dominant part, to approach the organization less as a structure, hard and static, and more as a system, fluid and dynamic, certainly, but ultimately cooperative.

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