McKinsey 7S

In the ACCA SBL syllabus, the only model covered on company culture is the cultural web. However, another good model that can be used is McKinsey 7S Model. What is the McKinsey 7S Model?The McKinsey 7S Model refers to a tool that analyses a company’s “organisational design.” The goal of the model is to depict how effectiveness can be achieved in an organisation through the interactions of seven key elements – Structure, Strategy, Skill, System, Shared Values, Style, and Staff.The focus of the McKinsey 7s Model lies in the interconnectedness of the elements categorised by “Soft Ss” and “Hard Ss” – implying that a domino effect exists when changing one element to maintain an effective balance. Placing “Shared Values” as the “center” reflects the crucial impact of changes in founder values on all other elements.Structure of the McKinsey 7S ModelStructure, Strategy, and Systems collectively account for the “Hard Ss” elements, whereas the remaining are considered “Soft Ss.”

Structure

The structure is how a company is organised – chain of command and accountability relationships that form its organisational chart.

Strategy

Strategy refers to a well-curated business plan that allows the company to formulate a plan of action to achieve sustainable competitive advantage, reinforced by the company’s mission and values.

Systems

Systems entail the business and technical infrastructure of the company that establishes workflows and the chain of decision-making.

Skills

Skills form a company’s capabilities and competencies that enable its employees to achieve its objectives.

Style

The attitude of senior employees in a company establishes a code of conduct through their interactions and symbolic decision-making, which forms the management style of its leaders.

Staff

The staff involves talent management and all human resources related to company decisions, such as training, recruiting, and rewards systems

Shared Values

The mission, objectives, and values form the foundation of every organisation and play an essential role in aligning all key elements to maintain an effective organisational design.Application of the McKinsey 7S ModelThe subjectivity surrounding the concept of alignment concerning the seven key elements explains why this model seems to have a complicated application. However, it is suggested to follow a top-down approach – ranging from broad strategy and shared values to style and staff.Step 1: Identify the areas that are not effectively alignedIs there consistency in the values, strategy, structure, and systems? Look for gaps and inconsistencies in the relationship of elements. What needs to change?Step 2: Determine the optimal organisation design.It is vital to consolidate the opinions of top management and create a generic optimal organisational design that will allow the company to set realistic goals and achievable objectives. The step requires a tremendous amount of research and analysis since there are no “organisational industry templates” to follow.Step 3: Decide where and what changes should be madeOnce the outliers are identified, a plan of action can be created, which will involve making substantial changes to the chain of hierarchy, the flow of communication, and reporting relationships. It will allow the company to achieve an efficient organisational design.Step 4: Make the necessary changes.Implementation of the decision strategy is a make-or-break situation for the company in realistically achieving what they set out to do. Several hurdles in the implementation process arise, which are best dealt with by a well-thought-out implementation plan.Advantages of the ModelIt enables different company parts to act in a coherent and “synced” manner.It allows for the effective tracking of the impact of the changes in key elements.It is considered a longstanding theory, with numerous organisations adopting the model over time.Disadvantages of the ModelIt is considered a long-term model.With the changing nature of businesses, it remains to be seen how the model will adapt.It seems to rely on internal factors and processes and may be disadvantageous in situations where external circumstances influence an organisation.Practical ExampleThe McKinsey 7S model can be applied when changes are being brought into the organisation that may affect one or more of the shared values. Suppose a company is planning to undertake a merger. It will affect how the company is organised since new staff will be coming in. It will also affect the company’s structure, along with strategic decision-making, as new ideas flow in through synergy.In such a case, the McKinsey 7s model can first identify the inconsistent areas – here, it would primarily be the structure, staff, and strategy. After identifying the relevant areas, the company can make effective decisions to optimally re-organise and incorporate the changes to streamline the merger process – after conducting extensive research and analysis of the consequences that the changes bring to the company.

Evita Veigas

29 April 2023