What is The McKinsey 7-S Model And Why It Matters In Business

The McKinsey 7-S Model was developed in the late 1970s by Robert Waterman and Thomas Peters, who were consultants at McKinsey & Company. Waterman and Peters created seven key internal elements that inform a business of how well positioned it is to achieve its goals, based on three hard elements and four soft elements.

Component	Description
Origin	Developed by management consultants at McKinsey & Company in the 1980s.
Purpose	The model is used to analyze and improve organizational effectiveness by considering seven interrelated elements that impact an organization’s ability to achieve its objectives and align with its strategy.
Components	The model comprises seven key elements, divided into “Hard Ss” and “Soft Ss”:
	1. Strategy: The organization’s plan for achieving its objectives and goals. This includes its competitive positioning, market approach, and strategic choices.
	2. Structure: The organizational design, hierarchy, and reporting relationships that determine how work is divided, coordinated, and controlled.
	3. Systems: The processes, procedures, and workflows that govern how tasks are executed, information is shared, and decisions are made.
	4. Shared Values: The core beliefs, principles, and cultural norms that define an organization’s identity and guide its behavior.
	5. Style: The leadership style and management approach demonstrated by leaders and key figures in the organization.
	6. Staff: The organization’s human resources, including their skills, competencies, and capabilities.
	7. Skills: The specific competencies and expertise of the workforce, including both technical and soft skills.
Interactions	The model emphasizes the interconnectedness of these elements, highlighting that changes in one area can impact others. Achieving alignment among all seven elements is key to organizational effectiveness.
Alignment Impacts	– Ensuring alignment between strategy and shared values to avoid conflicts.
	– Aligning staff competencies with systems and processes for optimal performance.
	– Adapting leadership styles to match the desired organizational culture.
Assessment	The model can be used to assess the current state of the organization and identify gaps or misalignments. This often involves surveys, interviews, and workshops.
Strategic Change	The 7-S Model is commonly used in change management initiatives. By understanding how each element contributes to the organization’s effectiveness, leaders can plan and execute changes more effectively.
Examples	– A company revises its strategy to focus on innovation (strategy) and restructures its teams to foster cross-functional collaboration (structure).
	– An organization adopts new technology (systems) and provides training to employees (skills) to support the digital transformation.
Applications	– Strategic planning and implementation.
	– Organizational change and transformation.
	– Performance improvement and process optimization.
	– Mergers and acquisitions integration.
	– Leadership development and succession planning.
Benefits	– Enhanced organizational alignment.
	– Improved decision-making and problem-solving.
	– Better adaptability to change.
	– Increased employee engagement and satisfaction.
	– Greater clarity in communication and goal setting.
Drawbacks	– Complexity: Analyzing and aligning all seven elements can be challenging.
	– Subjectivity: Assessments may vary based on individual perspectives.
	– Time-Intensive: Gathering data and implementing changes can be resource-intensive.
	– Overemphasis: Focusing too heavily on one element may neglect others.
Tools	Various tools and techniques can be used in conjunction with the 7-S Model, including SWOT analysis, stakeholder analysis, and change management frameworks.
Key Takeaway	Achieving alignment among strategy, structure, systems, shared values, style, staff, and skills is essential for organizational effectiveness and successful strategic implementation. The 7-S Model provides a holistic framework for understanding and optimizing these critical factors.

Understanding the McKinsey 7-S Model

McKinsey’s model applies to any situation where it is important to understand how the various parts of an organization interact with each other.

Within these interactions are the seven internal elements that McKinsey named, divided into categories, and classed as either “hard” or “soft”.

Hard elements

Hard elements are tangible and easy to identify. As a result, they are targeted for management with various strategies, plans or organizational templates.

They are:

Strategy

Detailing how an organization plans to build or maintain a competitive advantage.

Structure

How the organization is structured from a management and departmental perspective.

Common structures include hierarchical, centralized, and autonomous/outsourced.

Systems

Any process commonly found in daily business operations. For example, product development, manufacturing, or distribution.

Soft elements

McKinsey defines soft elements as less tangible and more difficult to describe than hard elements.

They are also subject to change as corporate cultures and values evolve.

Let’s now look at the four soft elements:

Shared values

These are often the core values of an organization that define its culture and the way it does business.

Many regard shared values as the foundational building block for the other 6 elements in McKinsey’s model.

Style

Specifically, the management style of company leadership and the way that their behaviors and actions set the standard for other employees.

Staff

This refers to the number of personnel in the company and their motivation, preparedness, and ability to successfully do their jobs.

Skills

Skills describe the talents of an organization’s staff. Skill level determines the level of achievement in the organization and whether such skills are aligned with its goals.

Using McKinsey’s 7-S Model in practice

When using the model in a business setting, it is important to understand that each of the seven elements is interdependent. In other words, adjusting one element alters the other six.

To use McKinsey’s model, businesses should:

Analyze their shared values

Are they consistent with other elements such as structure and strategy? Remember: shared values determine the direction of the rest of the framework.

Analyze their hard elements

Do they work in harmony or there is discord?

What needs to change to bring them back into alignment?

Consider whether their soft elements support their hard elements

Again, it is important to identify and address any misalignment of goals.

Make adjustments throughout the process

The act of making frequent and sometimes complicated adjustments will require time and money, but the potential benefit of an aligned and strategic company is worth the expense.

McKinsey 7-S model example

In the final section, let’s analyze each of the seven hard and soft elements in terms of The Coca-Cola Company.

Strategy

According to its website, Coca-Cola is “evolving its business strategy to become a total beverage company by giving people more of the drinks they want – including low and no-sugar options across a wide array of categories – in more packages sold in more locations.”

In essence, this entails building a portfolio of customer-centric brands to ensure that the company’s beverage range remains relevant and attractive into the future.

Structure

The Coca-Cola Company is structured under four geographic segments (Europe, Middle East & Africa (EMEA), Latin America, North America, and Asia Pacific) and two non-geographic segments (Global Ventures and Bottling Investments Group).

Further to these segments are nine additional business units and several product-based divisions that house the company’s portfolio of around 200 brands.

Systems

The Coca-Cola System enables the company to be a global player and operate on a local scale at the same time.

The system comprises more than 250 bottling partners around the world, but the company does not own nor control all of them.

In any case, bottling partners support the manufacturing, packaging, merchandising, and even marketing of Coca-Cola beverages.

Many work with customers such as supermarkets, convenience stores, amusement parks, and cinemas to institute processes and strategies that are best suited to the local region or country.

Shared values

Coca-Cola’s core values include leadership, passion, diversity, equity, inclusion, quality, accountability, collaboration, human and workplace rights, and integrity.

These values contribute to an internal culture that helps the company remain globally dominant.

Style

Coca-Cola utilizes a multi-faceted leadership model that promotes a culture conducive to carrying out its purpose.

These components include:

Be the role model

Employees should adopt a growth mindset and create an environment where trust and safety are prioritized.

They should also be courageous and aim for the correct outcome as opposed to the most comfortable one.

Set the agenda

This means crafting a bold vision with ambition, communication, and adaptability.

Individuals must take inspiration from external sources and ensure all perspectives are heard before decisions are made.

Help people be their best selves

The best leaders build and develop talent by listening more than they talk and setting an example with irresistible passion.

Staff

The Coca-Cola Company offers employees ”the kind of competitive compensation you would expect from a world leader.”

In addition to attractive salaries, the company offers various perks under its Total Rewards Program.

These include medical, dental, and vision plans, supplemental health plans, tax-free accounts, financial programs, and career development opportunities.

Skills

The company has a culture of continuous learning where all employees are encouraged to grow both personally and professionally.

Learning program content is provided by several educational and leadership partners, including Cornell University, Harvard University, FranklinCovey, and MindGym.

A particular focus on leadership development and role modeling supports key elements of Coca-Cola’s leadership structure and culture.

Case Studies

Technology Startup:
- Strategy: Developing disruptive technology solutions for specific industries.
- Structure: Flat organizational structure with cross-functional teams.
- Systems: Agile development processes and rapid prototyping.
- Shared Values: Innovation, adaptability, and a customer-centric approach.
- Style: Entrepreneurial leadership with a focus on risk-taking.
- Staff: Highly skilled engineers and developers.
- Skills: Technical expertise in emerging technologies.
Manufacturing Company:
- Strategy: Cost leadership strategy with a focus on efficient production.
- Structure: Hierarchical organizational structure with specialized departments.
- Systems: Lean manufacturing processes and quality control systems.
- Shared Values: Operational excellence, quality, and safety.
- Style: Leadership by data-driven decision-making and process optimization.
- Staff: Skilled production workers and engineers.
- Skills: Technical skills related to manufacturing processes.
Nonprofit Organization:
- Strategy: Providing social services to underserved communities.
- Structure: Functional departments and volunteer networks.
- Systems: Grant management, fundraising, and volunteer coordination.
- Shared Values: Social justice, compassion, and community empowerment.
- Style: Collaborative and empathetic leadership.
- Staff: Diverse team of social workers, volunteers, and administrators.
- Skills: Counseling, community outreach, and fundraising skills.
Retail Chain:
- Strategy: Market expansion and customer experience enhancement.
- Structure: Centralized with regional and local store management.
- Systems: Inventory management, point-of-sale systems, and customer loyalty programs.
- Shared Values: Customer satisfaction, innovation, and employee development.
- Style: Leadership focused on customer service and sales targets.
- Staff: Store associates, visual merchandisers, and managers.
- Skills: Salesmanship, customer service, and visual merchandising.
Consulting Firm:
- Strategy: Providing tailored management consulting services.
- Structure: Matrix organization with industry-specific practice areas.
- Systems: Project management methodologies and knowledge sharing platforms.
- Shared Values: Excellence, client-centricity, and intellectual rigor.
- Style: Collaborative leadership with an emphasis on thought leadership.
- Staff: Consultants with expertise in various industries.
- Skills: Analytical, problem-solving, and communication skills.
Healthcare Institution:
- Strategy: Delivering high-quality patient care and medical research.
- Structure: Hospital departments, medical staff, and administrative units.
- Systems: Electronic health records, patient scheduling, and medical protocols.
- Shared Values: Patient-centered care, medical ethics, and research excellence.
- Style: Leadership focused on patient safety and medical advancements.
- Staff: Physicians, nurses, medical technicians, and researchers.
- Skills: Medical expertise, patient care, and research capabilities.
E-commerce Startup:
- Strategy: Online retail and fast delivery services.
- Structure: Agile and cross-functional teams for rapid product development.
- Systems: E-commerce platforms, supply chain management, and data analytics.
- Shared Values: Customer convenience, innovation, and data-driven decisions.
- Style: Entrepreneurial leadership promoting creativity and experimentation.
- Staff: Software developers, logistics experts, and digital marketers.
- Skills: E-commerce technology, data analysis, and digital marketing.

Key takeaways

The McKinsey 7-S Model argues that there are seven internal elements of a business that need to be aligned for that business to be successful.
Of the seven internal elements, three are ”hard” elements that are easy to identify and measure. The remaining four are “soft”, in that they are intangible and hard to quantify precisely.
The McKinsey 7-S Model is an iterative and often resource-intensive process, but the potential benefits of using this model make it a worthy investment.

Key Highlights of the McKinsey 7-S Model:

Development and Origin: The McKinsey 7-S Model was developed by Robert Waterman and Thomas Peters, consultants at McKinsey & Company, in the late 1970s. It is a management framework designed to assess and improve the effectiveness of an organization.
Seven Internal Elements: The model comprises seven internal elements, categorized into “hard” and “soft” elements. The hard elements are Strategy, Structure, and Systems, while the soft elements include Shared Values, Style, Staff, and Skills.
Hard Elements:
- Strategy: This element focuses on how an organization plans to build or maintain a competitive advantage. It involves defining the direction and goals of the business.
- Structure: Refers to the organizational hierarchy and how departments and functions are organized. Common structures include hierarchical, centralized, and autonomous/outsourced.
- Systems: Encompasses the processes and routines that are part of daily business operations, such as product development, manufacturing, and distribution.
Soft Elements:
- Shared Values: Core values that define the organization’s culture and guide its actions. Shared values are considered foundational and influence the other six elements.
- Style: The leadership style and behaviors exhibited by company leadership, which set the tone and expectations for employees throughout the organization.
- Staff: Refers to the number of personnel in the organization, their motivation, preparedness, and ability to perform their roles effectively.
- Skills: Describes the talents and capabilities of the organization’s staff and whether these skills align with its goals and strategy.
Interdependence: The model emphasizes that these seven elements are interdependent. Changing one element can impact the others, and alignment among them is crucial for organizational success.
Practical Application: To use the McKinsey 7-S Model effectively, organizations should:
- Analyze their shared values to ensure they align with other elements.
- Assess the harmony or discord among their hard elements (strategy, structure, systems).
- Examine whether soft elements (shared values, style, staff, skills) support the hard elements.
- Be prepared to make adjustments throughout the alignment process.
McKinsey 7-S Model Example (The Coca-Cola Company):
- Strategy: Coca-Cola’s strategy involves becoming a total beverage company by expanding its product range and offering low and no-sugar options.
- Structure: Coca-Cola is structured into geographic and non-geographic segments, supported by numerous business units and product divisions.
- Systems: The Coca-Cola System includes over 250 bottling partners worldwide, facilitating local-scale operations with global reach.
- Shared Values: Core values include leadership, diversity, and integrity, contributing to the company’s global dominance.
- Style: Coca-Cola promotes a multi-faceted leadership model emphasizing growth mindset, trust, and adaptability.
- Staff: The company offers competitive compensation and benefits, including medical plans and career development opportunities.
- Skills: Coca-Cola fosters a culture of continuous learning and development, with partnerships with educational institutions.
Key Takeaways: The McKinsey 7-S Model underscores the importance of aligning these seven internal elements for organizational success. It is an iterative process that requires careful assessment and potential adjustments but offers substantial benefits in terms of strategic alignment and effectiveness.

Comparison’s Table	McKinsey 7-S Model	SWOT Analysis	Kotter’s 8-Step Change Model	5 Whys Analysis
Purpose	Analyze organizational effectiveness and alignment.	Assess internal and external factors affecting a business.	Guide organizational change processes.	Identify root causes of problems or issues.
Focus	Seven interrelated elements: strategy, structure, systems, shared values, style, staff, skills.	Strengths, weaknesses, opportunities, threats.	Eight steps for successful organizational change.	Repeated questioning to uncover deeper causes of issues.
Key Features	Analytical framework for assessing organizational performance and alignment.	Internal and external analysis to inform strategic decision-making.	Sequential steps for planning and implementing change initiatives.	Iterative questioning to uncover underlying causes.
Application	Organizational assessment, strategy development, change management.	Strategic planning, decision-making, performance evaluation.	Change management, transformation initiatives.	Problem-solving, process improvement.
Strengths	Comprehensive analysis of multiple organizational dimensions.	Identifies internal and external factors affecting business performance.	Provides a structured approach to change implementation.	Systematic approach to identifying root causes.
Weaknesses	Complex and may require extensive data collection.	Limited to assessing current situation, may overlook future trends.	Rigidity in sequential steps may not suit all change contexts.	Relies on subjective interpretation and expertise.
Scope	Analyzes internal aspects (strategy, structure, systems, shared values, style, staff, skills).	Considers internal and external factors (strengths, weaknesses, opportunities, threats).	Guides organizational change processes from planning to implementation.	Focuses on uncovering root causes of specific problems or issues.
Emphasis	Organizational alignment and effectiveness.	Strategic decision-making and planning.	Guiding successful change implementation.	Root cause analysis and problem-solving.