The Seven Factors of the McKinsey 7S Model

Strategy

Strategy has a lot of different meanings. But in the McKinsey 7S model, strategy
refers to the approach that a company uses to gain a competitive advantage and
reach its long-term goals. A great strategy is one that is reinforced by a clear vision
and mission as well as strong values. Most importantly, a firm’s strategy should be in
alignment with the other six factors of the McKinsey 7S model. For instance, even if
a short-term strategy usually doesn’t help provide exceptional results, it may help a
company do so if it aligns with the other six factors.

Structure

As the name suggests, the term structure in the McKinsey 7S Model refers to
organizational structure. In simple terms, it involves the chain of command and
knowing who takes instructions from whom. Without proper structure, it’s really
difficult, if not impossible, to conduct daily operations successfully. A lack of structure
can lead to chaos and confusion. That’s why the McKinsey consultants who created
this consulting framework added structure to the model.

Systems

'Systems' refers to the processes and procedures that conducts a business’s daily
activities. A company’s standard operations consist of such procedures
and workflows Basically, systems determine how to do business and it includes
everything from production to distribution of goods and services.

Shared values

McKinsey consultants put shared values at the core of this model. If you see the
McKinsey 7S model presented as a diagram, you’ll find that all the other factors
revolve around ‘shared values’. Basically, shared values include norms
and behavior that are expected from all staff members. These are usually
mentioned in the company guidelines and employees are required to familiarize
themselves with them before commencing the job.

Skills

Again, as the name suggests, 'skills' refers to the skills and competencies of people
whom the company employs. To ensure that an organization has the right skill set to
achieve its goals, it can either upskill current employees or hire new ones.

Style

Style refers to the management style that is prevalent in a company. It also includes
the company’s informal rules and culture. A good leadership style is essential to
ensure job satisfaction and productivity.

Staff
This factor not only includes employees, but also involves how to hire, train, and
maintain them. One must also consider other factors, such as the size of the
workforce, its diversity, employee benefits, etc.

“The essence of strategy is choosing what not to do.” – Michael Porter

A Real-Life Example of the McKinsey 7S Model

Now that you know all the factors of this model, it’s time to apply it to a practical
situation. Today, we will use McDonald’s as an example and understand how the
fast-food chain leverages this consulting framework.

Strategy

Cost leadership has been the age-old strategy of McDonald’s. The company strives
to offer a wide range of items to its customers at the lowest possible price. Apart
from this, McDonald’s sets SMART goals to achieve its short-term and long-term
vision, and these goals are clearly communicated to all employees to ensure that
everyone is on the same page.

Structure

Because McDonald’s is present in dozens of countries and has such a huge

business, one may think that the company has a strict hierarchical structure.
However, that is not the case. The company has a flat structure and the manager of
each outlet usually manages assistants and employees. Even though some
managerial levels are present, all employees work as a team and have easy access
to senior leadership if needed.

Systems

From sales and marketing to operations and supply chain management, McDonald’s
has some of the most efficient systems in the world. In fact, the company’s systems
deserve a separate article of their own. Also, they constantly innovate to make their
systems better. For instance, one of the company’s recent endeavours was to
reduce the drive-through order time by 30 seconds.

Shared values

McDonald's core values are: Serve, Inclusion, Integrity, Community, and Family. The
aim behind living with these shared values is to be able to have a high level of
integrity, serve a wide range of customers, hire employees from different
backgrounds and encourage teamwork, and finally, give some profits back to the
community.

Skills
McDonald’s pays special attention to skills, training and workshops are regularly held
to ensure that staff is able to provide flawless service to customers.

Style

The leadership style at McDonald’s is participative. Seniors engage with employees

from different levels and ask them to share their feedback to improve strategy and
operations or to identify and resolve any conflicts.

Staff

The company is the world’s second-largest restaurant chain by revenue and employs
over 200,000 people worldwide. The McDonald’s team is a global family and
believes in diversity and acceptance, and that is the reason why people from
different backgrounds happily work for the company.

In Conclusion

So, that was the McKinsey 7S Model explained with an example. It is important to
understand all the seven factors individually and how to align each factor with the
others to ensure that an organization works effectively.

Example: The McKinsey 7-S Framework in Action

Whitehawk Electronics is a startup with five staff. As a new venture, it is still

based firmly on the vision and values of its founder, Alix, and its elements all
align. It sells into one market, and uses off-the-shelf IT and accounting systems.

As time goes on, the business grows, employing 30 staff, and diversifying into
different markets. New customer requirements demand new skills in marketing,
technology, product development, and financial management.

Alix carries out a 7-S analysis. She finds that Whitehawk's developing sales
strategy no longer aligns with its small-business skill set.
The rapid influx of new staff members, along with changes in technology,
means that some staff don't have the necessary systems skills. Worse still,
they're unclear on the organization's values and sense of purpose.

Alix uses the analysis to introduce onboarding and learning programs, bringing
all Whitehawk's key elements back into alignment.

If something within your organization or team isn't working, chances are there is
inconsistency between one or more of these seven elements.

Once you reveal these inconsistencies, you can work to align these elements to
make sure they are all contributing to your organization's shared goals and
values.

The process of analyzing where you are right now, in terms of these elements, is
worthwhile in itself. But for it to be truly effective, you'll also need to determine
the desired future state for each factor. This will help you make changes and
improve performance so that all seven factors are aligned across your
organization.