Pros and cons of McKinsey 7s Model

Introduction

McKinsey 7s model was developed in 1980s by McKinsey consultants Tom Peters, Robert Waterman and Julien Philips with a help from Richard Pascale and Anthony G. Athos. Since the introduction, the model has been widely used by academics and practitioners and remains one of the most popular strategic planning tools. It sought to present an emphasis on human resources (Soft S), rather than the traditional mass production tangibles of capital, infrastructure and equipment, as a key to higher organizational performance. The goal of the model was to show how 7 elements of the company: Structure, Strategy, Skills, Staff, Style, Systems, and Shared values, can be aligned together to achieve effectiveness in a company. The key point of the model is that all the seven areas are interconnected and a change in one area requires change in the rest of a firm for it to function effectively (Jurevicius, 2013).

Source: You tube

Below you can find the McKinsey model, which represents the connections between seven areas and divides them into ‘Soft Ss’ and ‘Hard Ss’. The shape of the model emphasizes interconnectedness of the elements.

Source: slideshare.net  

The model can be applied to many situations and is a valuable tool when organizational design is at question. The most common uses of the framework are:

• To facilitate organizational change.
• To help implement new strategy.
• To identify how each area may change in a future.
• To facilitate the merger of organizations.

As per Kenton (2019) stated there are two types of elements such as:

Hard elements: Strategy, Structure, Systems

Hard elements can be easily defined and directly influenced. They are the (often) more tangible elements of a business, like the strategy documents and mission statements that your company uses to inform its decisions. They also include the organizational charts that demonstrate the reporting structure in your business and the systems that you have in place to ensure everything is running smoothly (such as your IT servers and related data storage methods

Soft elements: Staff, Skills, Style, Shared Values

As hard elements provide the framework of how a company operates, soft elements are the less tangible qualities that a company demonstrates through its work. They are the people that comprise the workforce, the skills they offer, the office culture that evolves from their co-operation with different teams, and the combined outward impression they give the world.

McKinsey 7s model in Virgin Group  

Virgin Empire consisting of more than 200 companies in more than 30 countries. Branson has invested on companies with long term capital growth or which achieves long term value creation

And feels this as the best approach for private companies.

 
Even when there were barriers in the virgin group journey, such as 1972-82 recessions, 1990-91 Persian Gulf War, Branson did not fall back. He continually expended the group into areas which were dominated by the big companies while selecting some divestment. The following are the models to determine the factors that have influenced the company and the strategies employed.

McKinsey’s 7 S Model contains factors/variables that are either hard element or the soft element. Branson intuitive decision making style, his new way of looking at the old problem and his flexibility has helped him make virgin where it stands today. In the beginning, he relied on his instinct while going into the music industry. Virgin Direct broke the orthodox belief and sold products that could be easily understood by everyone. The group is a family rather than a hierarchy offering short lines of communication and flexible response capability. Even though the companies run their own affairs they help each other in the process (Virgin, n.d. a). 

Virgin group has little formal structure or management. Branson and a small core of long term associates form the senior management team of the Virgin Group. They held the key executive positions within the individual operating companies. Virgin Management Ltd (VML) provides advisory and managerial support to all of the different Virgin companies (Virgin, n.d. a). Shared values are one of the important factors in the virgin group.

 Branson philosophy that shaping the business around the people is one of the crucial factors for the company success. This has created the environment for the culture for innovation. Branson has proved to be one of the finest leaders with great leadership skills known for the continuing business model innovation. Virgin Group has empowered their staffs and has been able to draw talented people within the group (Virgin, n.d. b). Most of them have started a new venture which are encouraged and guided till they become a fully-fledged members of the Virgin family (Virgin, n.d. a). Virgin Group has created an environment for their staff to work and they are encouraged to develop proposals for new businesses. Branson looks at the ideas of others within the Group and is prepared to invest in new start ups. He provides full authority and offers minority share holdings to the managers of subsidiaries. Staffs are given a great deal of responsibilities and freedom which has given them a feeling of involvement. Staffs are provided and encouraged with financial rewards and other benefits.

Pros and cons of McKinsey 7s Model

Source: Theinvestorsbook (Prachi, 2019)

Conclusion

McKinsey’s 7s framework has always been a subject to debate. It is a useful tool for analysis, planning and managing the execution of the goals set by an organization. The 7S model to help analyze the current situation, a proposed future goal and then identify gaps and inconsistencies between them. It’s then a question of adjusting and tuning the elements to ensure that your organization works effectively and well towards achieving that end goal. Nowadays, companies are becoming more and more complex. As technology evolves, so do the processes of a company. And as the company scales up, more processes are added, which require more people to manage them

References

Jurevicius, O (2013). McKinsey 7s model. Strategic management insight. Available at:

https://strategicmanagementinsight.com/tools/mckinsey-7s-model-framework.html [Accessed 7th July 2020].

Kenton, W (2019). McKinsey 7s model. Investopedia. Available at: https://www.investopedia.com/terms/m/mckinsey-7s-model.asp [Accessed 7th July 2020].

McKinsey’s 7s framework. Tallyfy. Available at:

https://tallyfy.com/mckinsey-7s-framework/ [Accessed 7 July 2020].

Prachi, M 2019. McKinsey 7s model. Theinvestorsbook. Available at:

https://theinvestorsbook.com/mckinsey-7s-model.html [Accessed 8th July 2020].

https://www.slideshare.net/mukthu/7s-framework-51248764 [Accessed 7th July 2020]. 

http://pravab.blogspot.com/2010/05/virgin-group.html [Accessed th July 2020].

https://www.youtube.com/watch?v=Sh4epiY-W4s