Financial and Strategic Management

What is McKinsey’s 7-S Framework?

McKinsey developed the 7-S framework management model which organize seven factors to organize a company in a holistic and effective way with the objective to diagnose the causes of organization problem and formulate a program for improvement due to the implementation of the strategy which is associated with the change in the organization.

Organizational change is not simply a matter of structure although the structure is a significant variable in the management change. Effective organizational change may be understood to be a complex relationship between the 7-S i.e. strategy, structure, systems, style, skills, staff, and shared values (superordinate goals).

(i) Strategy
Strategy means to achieve objectives. It provides the direction and the scope of the organization over the longterm. Strategy refers to actions the organization plans or undertakes in response to or in anticipation of the external environment. It includes purposes, missions, objectives, goals, and major action plans and policies. A strategy targets gaining a competitive advantage over rivals.

(ii) Structure
It is a basic framework to designate responsibilities and functions. Organization structures prefer relatively more durable organizational arrangements and relationships. It prescribes the formal relationship among various positions and activities.  Organizational structure performs the following functions:
(a) Dividing the whole organization into activities, departments, setting division of labor, and delegation of authority.
(b) Facilitating coordination and control of various activities in the framework of organizational mission, purposes, and goals.
(c) Reduction of uncertainty through forecasting research and planning in the organization.
(d) Prediction of the future and designing the future course of action.

(iii) System
It is, a management tool for planning, decision-making, communication control, and the procedures and processes regularly followed by an organization. Systems in the 7-S framework signify all the rules and regulations, procedures both formal and informal that complement the organizational structure. It includes production, planning and control system, budgeting and budgetary control system, financial and cost account system, training and development system, performance evaluation system, and so on. Change in a strategy is implemented through changes in the system.

(iv) Style
The style stands for the patterns of behavior and managerial style of top management over a period of time. It is visible through the relationship among the three levels of management or managers, an organizational culture which is a reflection of the value system. The style has to change with the change in strategy, system, and structure.

(v) Staff
It is the human resources of the organization i.e., the kind of specialties or professions represented in an organization such as engineers, specialists in different areas: finance, personnel, legal, etc. Staffing is the process of recruiting and selecting persons for the organization, training and developing them, placing them in their post so as to reap the potential from each of them. According to the 7-S framework, the term ‘staff’ refers to the way organizations introduce young recruits into the main streams of their activities and the manner in which they manage their careers as the new entrants develop into future managers.

(vi) Skills
It means an organization and individual capabilities. Skill is an ability or proficiency in performing a particular task. It includes those characteristics which most people use to describe a company. Skills are developed over a period of time and as a result of the interaction of a number of factors, performing certain tasks successfully over a period of time, kind of people in the organization, top management style, the organizational structure, the external influences, etc. Skills are the dominant capabilities and competencies possessed by the organization through its people.

(vii) Shared Values (Super Ordinate Goals)
Superordinate goals stand for the company’s mission, vision, values, philosophy in the backdrop of which organizational goals and objectives are set and strategies are formulated. It’s a set of values and aspirations that goes beyond a conventional formal statement of corporate objectives. These are essential as they inspire the members of the organization and provide a definite direction to its operations.

Some of the important benefits of McKinsey’s 7-S Framework Model are as follows:
(i) It is a diagnostic tool for understanding the organization which is non-effective.
(ii) It helps to guide organizational change.
(iii) It combines rational and hard elements with emotional and soft elements;
(iv) Managers must act on all Ss in parallel and all S’s are interrelated.

About the author

Shreya Kushwaha

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