Using the McKinsey 7S Framework to assess strategic alignment, strengths and weaknesses
McKinsey and Co's 7S model is a useful strategic analysis framework for:
- assessing internal strategic alignment, and
- analysing the strengths and weaknesses of an organisation.
See also 10 Essential Strategy Analysis Tools.
The McKinsey Consulting Firm identified strategy as one of seven characteristics of the best-managed companies. Each one starts with the letter S.
The 7Ses divide into two categories:
- Strategy, Structure and Systems are the "hardware" of success, whilst
- Style, Staff, Skills and Shared values are the "software" of success.
Companies in which these elements are present and aligned are usually more successful at executing strategy.
The Strategy dimension is about:
- the coherence of and degree of alignment around the strategy, vision and direction of the company, and
- how (the process by which) it derives, articulates, communicates and implements that vision and direction.
Things to consider:
- Does the firm have a clear strategy?
- Is the strategy and coherent set of inter-related choices about where to play and how to win, or is it just a laundry list of things to do?
- Is there a clear, logical and understood connection between and understanding of the firm's strengths and weaknesses, environmental context, strategic intent, strategic and business plans, and management information and control systems?
- Is the strategy known to and understood by the staff in the organisation? Is it communicated to everyone as appropriate in a way that accords it the right amount of attention?
- Is everyone aligned behind the strategy? Or do key individuals continue to pursue their own strategies and agendas, contrary to the strategy?
- Is the strategy acted on and implemented? Is it actively applied in the making of decisions on a day to day basis? (All too often, a strategy is a document which sits on an executive shelf while the organisation continues to act as it would have done, regardless.)
- Is the organisation opportunistic or is it inclined to develop strategies and plans and stick to them? Is the strategy deliberate or emergent?
- Is strategy formulated by an elite group (strategic planning group or senior executives) and handed down from the top, or using an inclusive, participative bottom-up process? (i.e. top-down or bottom-up?)
- Is the strategy evidenced-based, or does it rely on opinions and assumptions?
- Is the strategy forward-looking or is it stuck in the past?
- Is the strategy transformative (large and structural changes to the firm or industry) or incremental (smaller adjustments)?
- Is the strategy reviewed and cast in stone once a year, or more regularly (or even continuously)?
- What is the organisation's strategic style?
- Is the organisation focused on cost leadership, differentiation or focus/customer intimacy. (See also Porter's Generic Strategies and how to use them)
- Where does the organisation sit along The 5 Levels of Strategic Orientation.
- To what extent does the organisation have its own strategic capability versus relying on consultants?
- How does the organisation bring in objectivity and fresh thinking from outside the business and its industry?
Resources: You can take a free assessment of your organisation's strategy development and execution capability and get instead feedback on how you compare to other organisations. Just Free Assessment.
Structure includes staff reporting lines, as well as committee and other governance structures. Structure considers the depth and breadth of structures, levels of collaboration, centralisation and decentralisation. It also includes geographic structure - the physical location of people and capabilities relative to the markets they serve.
It is a truism of strategy that "structure follows strategy". The structure of an organisation, along with its policies and processes, has a direct bearing on how well it will perform.
There are a number of dimensions to consider.
- Is it flat and broad or deep and hierarchical?
- How many layers are there between the CEO and the front line?
- What are the typical spans of control for managers?
- Is it organised around brands, products, channels, customer segments, geographic or functional lines?
- How well does the organisation's structure map onto its value chain?
- Is decision-making authority devolved or highly centralised?
- Is the organisation's structure aligned with its strategy?
- Are there clear lines of accountability? Do key elements of its strategy span or fall between multiple decisions makers at the senior level, or are accountabilities clearly established?
- Consider also Porter's categorisation of group structures. This distinguishes between those which are efficient allocators of capital, those which are efficient allocators of resources and skills, and those which are structured around the sharing of capabilities.
Systems include computer systems, manual systems and informal practices. They cover all the processes in the Value Chain. These include core (operational) and supporting (HR, Finance, etc.) processes.
The decision-making systems within the organisation can range from management intuition to manual policies and procedures, to structured computer systems, to complex expert systems and artificial intelligence. The level of rigour of systems can range from rigid and bureaucratic, to more laissez-faire and flexible.
- Are the systems modern and efficient or out of date? Are they fit for purposes?
- To what extent are systems formally controlled by a central IT department or reliant on end-user-computing?
- Are systems bespoke or off-the-shelf? If bespoke is the development in-house or outsourced. If off-the-shelf, how heavily are the systems customised? What are the licensing and support arrangements?
- How flexible are the systems/development capability? Can they easily adapt to changes in the environment and strategy?
- What is the quality, in terms of errors, exceptions and downtime, etc?
- Are adequate Disaster Recover Plans ("DRP") in place?
Style refers to the employees' shared and common way of thinking and behaving - unwritten norms of behaviour and thought. This is often called culture.
- Are people generally relaxed and informal, or more formal?
- Is the culture collegiate and consensus-driven, or more hierarchical and individualistic?
- Are leaders authoritative, or persuasive? Do they lead by example, or by fiat? Are leaders visible and available or remote?
- Is there a culture of busy work, or is it more results-based?
- How does the organisation reward and celebrate success?
- How politically charged is the environment?
- Do staff respect or fear their colleagues and leaders?
- Is the culture one of leadership and transformation, or managerial and weighted towards the status quo?
- Are people open to change and transformation, or do they prefer to stick to "the way it has always been done"?
- Are there single points of accountability, or are decisions made by a consensus?
- Do interactions tend to be polite and cordial, or with the acceptance of conflict?
- Is the organisation focused on specific priorities, or is it open to new opportunities as they emerge?
- Is the organisation comfortable with risk, or is it risk-averse?
- Is the organisation comfortable with formal processes, or does it encourage improvisation?
Staff means that the company has hired able people, trained them well and assigned them to the right jobs. Selection, training, reward and recognition, retention, motivation and assignment to appropriate work are all key issues.
- Is the selection, training and reward of staff all aligned to the strategy?
- Is the organisation able to attract and retain the staff if needs?
- Are job responsibilities clear (up-to-date) and aligned to the strategy?
- How are different people matched to different roles?
- How does the organisation manage under-performance? How does the organisation identify and treat high performers?
- How is training done: externally, internally; in classrooms or on-the-job? How are role modelling and mentoring used?
- What is the ratio of fixed to variable pay? What is the degree of variation in variable pay between high and low performers?
Levels of skill and knowledge required can range from the PhD level qualifications required for highly technical or scientific work to relatively unskilled labour such as supermarket shelf stacking. The levels of skills required by different functions within the same business may vary significantly.
- Are staff skilled in their work, in general, and/or relative to the competition?
- Does the organisation promote specialisation and focus, or generalisation and rotation?
- Does the firm nurture skills internally, or hire them in?
- Does the firm have ready access to a market of skilled resources?
- How do staff stay up-to-date with developments in their fields?
- Are existing skills, or the investment in growing or acquiring skills, aligned with the firm's strategic priorities?
- What is the mix of skilled versus unskilled (or less skilled) work and staff?
- Are the skills and knowledge required generic to the industry or field, or specific to the firm?
7. Shared Values
Values are things that you would strive for even if they were not demonstrably profitable. Things that are worth doing in and of themselves. Shared values mean that the employees share the same guiding values. Values act as an organisation's conscience, providing guidance in times of crisis.
- Does the organisation have clearly articulated values?
- Are those values a laundry list of the usual keywords ("Integrity", "Teamwork", "Putting the Customer First") or has the organisation imbued them with real and personal meaning?
- To what extent do all staff and leadership align with and practice the values?
- Is it evident that the values influence decisions on a day to day basis?
- Does the organisation value "hard heads" (rational thinking, value maximisation, etc.) or "soft hearts" (social good, etc.).
- To what extent do people outside of the organisation (customers, suppliers, distributors) recognise those values in the organisation? What is the tangible evidence of the organisation's values/
Example: 'The Johnson and Johnson Tylenol case is an example where a credo helped provide guidelines for practical decision making. When tainted Tylenol was discovered, Johnson and Johnson's leaders could quickly make a decision to immediately, publicly, remove all Tylenol from the nation's shelves, because they were following the organisation's credo - which said that Johnson and Johnson's first responsibility was to provide quality products to doctors, nurses and patients. This dramatic action helped ensure a reinstatement of both public trust and employee pride in the integrity of the company, and led to higher long-term sales.'[Senge, Ross, Smith, Roberts and Kleiner: 1994]
Identifying corporate values is also the first essential step in defining the organisation's role in the larger community in which it functions.
See also: Values on StratNavApp.com, including a list of the 10 most common corporate values.
With all of the above questions, the answers themselves are often less important that:
- The impact those answers have on the organisation,
- The internal consistency between the answer overall, and as provided by different subgroupings within the organisation. For example, it can be a problem if senior management provide one set of answer, while the rest of the organisation provides another.