Why learn about and apply the McKinsey 7S Framework? In the business world, you either change or become a victim of change. It’s just that simple.
But the more an organization grows -- both in size and complexity -- the harder it becomes to manage that change. Over the years, a variety of models for change management have emerged. These range from Nudge theory to Lewin's to the Kübler-Ross change curve.
Yet the McKinsey 7S Framework has withstood the test of time. This change model was first developed in the late 1970s and it remains relevant today. This framework seeks to help you:
- Create and implement a strategy
- Improve a company or group's performance
- See change on the horizon and forecast likely effects
- Align processes and departments in case of a merger or acquisition
In this post, we'll tell you more about the McKinsey 7S framework and how you can apply it to your growing business.
What Is the McKinsey 7S Framework?
In the 1970s, nascent computer technologies were poised to disrupt our economy and how we do business. While working for McKinsey & Company, a worldwide management consulting firm, Tom Peters visited 62 client companies. During this process, he did an audit of the organizational effectiveness of these companies, along with related strategic issues.
Instead of seeing change as limited to one action or impacting only one area, Peters took a more holistic approach. Over the course of his research, he developed a theory of overlapping concerns and dependencies. In order to effect productive change, all of these elements need to be in balance.
By 1980, Peters and two co-authors published their findings. In it, they described two categories of “elements” — hard and soft. They then further divided them into a seven-part interdependent change model system.
These "hard elements" consist of three factors that management wields direct control over.
- Strategy: A company’s plan for creating and maintaining a competitive advantage in the marketplace.
- Structure: The organizational chart, which identifies levels of responsibility, workflow patterns, and reporting hierarchies.
- Systems: The formalized day-to-day tasks and activities employees engage in to complete their work.
These four factors are less tangible and based more on a shared company culture. Not only are they as important as the hard elements, but they are far more difficult for management to control.
- Shared Values: The sum of the other six elements which collectively creates the core values of an organization.
- Skills: The combined competencies and strengths of the employees and the organization.
- Style: Methods of leadership and other interpersonal behaviors among the different groups within an organization.
- Staff: The employees’ makeup in terms of their demographics and their personal outlooks.
In Search of Excellence
Peters and Robert H. Waterman, Jr., also with McKinsey, further advanced the McKinsey 7S Framework in their 1982 book In Search of Excellence. Over the years, this has sold over 3 million copies, making it one of the bestselling business books ever. The authors narrowed the original list of 62 companies down to 43. Their case studies covered a diverse range of companies like McDonald’s, Walmart, and Merck. They broke their findings down into eight thematically-ordered chapters.
McKinsey 7S Framework Chapters
- A Bias for Action: Puts an emphasis on decisiveness to keep change from getting bogged down in red tape.
- Close to the Customer: Establish an ongoing two-way communication with clients and customers.
- Autonomy and Entrepreneurship: Invest in innovation to prevent stagnation.
- Productivity Through People: Empower employees as opposed to seeing them as replaceable widgets.
- Hands-On, Value-Driven: Manage through displays of behavior which embody values the organization prizes.
- Stick to the Knitting: Stick with what you know how to do.
- Simple Form, Lean Staff: Keep management structures lean to avoid organizational bloat.
- Simultaneous Loose-Tight Properties: Allow autonomy in day-to-day production processes while tying everything back to core values.
Since the debut of In Search of Excellence, the McKinsey 7S Framework is in use everywhere from Starbucks in particular to Enterprise Resource Planning (ERP) in general.
The Case Study
One case study examines the Ithaca Beer Company (IBC). This upstate New York brewery sought to expand its competitive and strategic position in the regional craft beer market. A close analysis showed four of the 7S elements were critical – strategy, staff, skills, and shared values. Meanwhile the remaining three were more tangential at the time. The authors noted these three secondary elements – style, systems, and structure – would likely grow more important over time. This would, in turn, require contingency planning to allow for further development as the business continued to grow.
The McKinsey 7S Framework Legacy
One frequent criticism of In Search of Excellence since it first published is the negative outcomes. Some of the companies in it went out of business (Wang Labs and Amdahl) or lost market share through poor performance (Atari and Kodak). As the authors of the IBC study above noted, however, the McKinsey 7S Framework is meant to provide a snapshot. No change model can predict enduring success or failure over time.
McKinsey 7S Framework Snapshot
In any organization or group, the concerns of day-to-day management often obscure bigger issues looming on the horizon. Plus, when you've got blinders on, it can lead to not seeing how all the pieces of an organization fit together into a greater whole.
The McKinsey 7S Framework’s legacy lies in its organic, holistic approach to analyzing a large organization’s features and functions. In the end, it’s this winning combination of the seeing both the big picture in conjunction and all the smaller moving parts that can create the path to productive change.
Want to learn even more about the McKinsey 7S Framework and its long-lasting impact? Check out these McKinsey & Company resources.