Analysis of 7s Framework_merged (1)
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ORGANIZATION THEORY AND DESIGN ASSIGNMENT
2012-2014
Analysis of Mckinsey 7s
Framework By
Pravin Bang
2012HR031
T A T A I N S T I T U T E O F S O C I A L S C I E N C E S
The McKinsey 7S Framework is a management model developed by business
consultants Robert H. Waterman, Jr. and Tom Peters. The 7S are structure,
strategy, systems, skills, style, staff and shared values.
The model is based on the theory that, for an organization to perform well, these
seven elements need to be aligned and mutually reinforcing. So, the model can
be used to help identify what needs to be realigned to improve performance, or
to maintain alignment (and performance) during other types of change. (Ref:
The McKinsey 7S Framework, Website-www.mindtools.com)
The 7S model is a tool for managerial analysis and action that provides a
structure with which to consider the company as a whole. It is a value-based
management (VBM) model that describes how one can holistically and effectively
organize a company. Together, these factors determine the way in which a
corporation operates.
It is a framework for analyzing organizations and their effectiveness. It looks at
the seven key elements that make the organization successful, or not. (Ref: 7-S
Framework of McKinsey, Website-www.vectorstudy.com)
The shape of the model (as shown in the figure ) was designed to illustrate the
interdependency of the variables. This is illustrated by the model also being
termed as the "Managerial Molecule". While the authors thought that other
variables existed within complex organisations, the variables represented in the
model were considered to be of crucial importance to managers and
practitioners. The framework suggests that these 7 factors influence an
organization’s ability to change. All of these factors are interconnected and
because of these interconnectedness, it would be difficult to make significant
progress in one of the areas without making progress in the others as well.
The 7S model is a tool for managerial analysis and action that provides a
structure with which to consider the company as a whole. It is a value-based
management (VBM) model that describes how one can holistically and effectively
organize a company. Together, these factors determine the way in which a
corporation operates.
It is a framework for analyzing organizations and their effectiveness. It looks at
the seven key elements that make the organization successful, or not.(Ref: 7-S
Framework of McKinsey, Website-www.vectorstudy.com)
The shared value as the central factor in the model underlines the fact that this
is the most important element in the growth of all other critical elements.
The 7s model falls under the 1st type (integral general or Internal G) of the four
Structural types approaches to organizational studies.
“Integral” as a general and holistic perspective which provides an inclusive view of organisational life but lacks a developmental understanding of change. This category describes a general theory or holistic approach towards integrating
perspectives on developing the organisation, its products and services and the quality of people’s lives. These theories fit under the popular, dictionary
definition of the word “integral” and are useful and important contributors to improving the understanding of organisational behaviour and the operations of organisations in practice.
The McKinsey 7S framework (Rasiel and Friga, 2001) used by many management consultants is an integral G type because it aims to integrate and
improve on a number of aspects of the organisation, e.g. staff, systems, and organisational structures. The 7S model, however, does not organise the seven areas into any coherent domains and does not recognise levels of development.
Nor does it recognise any developmental domains that might correspond to the four quadrants.
Many current organisational development and transformational theories might fall within the Integral G category. The theory of transformational leadership, for example, is a well researched and validated theory that covers a wide range of
behaviours and characteristics of highly effective leaders. However, it does not have clearly articulated domains or levels within its framework. It does attempt
to provide a broadly holistic view of leadership and, hence, it comes under the Integral G type.
(Ref: Ron Cacioppe, Mark G. Edwards, (2005),"Adjusting blurred visions: A typology of integral approaches to organisations", Journal of Organizational
Change Management)
The Seven Elements:
The McKinsey 7S model involves seven interdependent factors which are
categorized as either "hard" or "soft" elements.
Hard Elements Soft Elements
Strategy Shared values
Structure Skills
Systems Style
Staff
The seven elements are described as follows:
Strategy:
It is basically the plan devised to maintain and build a competitive advantage
over the competition. It is the integrated vision and direction of the company, as
well as the manner in which it derives, articulates, communicates and
implements that vision and direction. It determines the long term direction of
the company. .It deals with essentially three questions where the organization is
at this moment in time, where the organization wants to be in a particular length
of time and how to get there (Ansoff, 1965).
Structure:
It is the way the organization is structured and who reports to whom. Structure
is the skeleton, the form of shape, of organisations. It dictates the way it
operates and performs. Traditionally, businesses are structured with divisions,
departments and layers, in which the lower layers answer to upper layers.
Although this is still the most widely used organisational structure, the recent
trend is increasingly towards a flat structure where the work is done in teams of
specialists rather than fixed departments. The idea is to make the organisation
more flexible and devolve the power by empowering the employees and
eliminate the middle management layers (Boyle, 2007).[Abstract]
Systems:
Systems are routine processes and procedures followed within an organisation to
implement the strategy and to run day-to-day affairs. These processes are
mainly designed to achieve maximum effectiveness. Traditionally, the higher
management makes the most decisions. Increasingly, the organisation are using
innovation and new technology to make decision-making process quicker.
Traditionally the organisations have been following a bureaucratic-style process
model where most decisions are taken at the higher management level.
Increasingly, the organisations are simplifying and modernising their process by
innovation and use of new technology to make the decision-making process
quicker. Special emphasis is on the customers with the intention to make the
processes that involve customers as user friendly as possible (Lynch, 2005).
Skills:
Skills are the capabilities and Competencies of the staff within the organisation
as a whole.
Staff:
These are the human capital of the company and the way they are trained and
developed. The people hired should fit well in the job and should be engaged to
their roles. All leading organisations such as IBM, Microsoft, Cisco, etc put
extraordinary emphasis on hiring the best staff, providing them with rigorous
training and mentoring support, and pushing their staff to limits in achieving
professional excellence, and this forms the basis of these organisations' strategy
and competitive advantage over their competitors. It is also important for the
organisation to instil confidence among the employees about their future in the
organisation and future career growth as an incentive for hard work (Purcell and
Boxal, 2003).
Style:
It is the leadership approach of the top management and the company’s overall
operating approach. Broadly, it refers to the employees shared and the common
way of thinking and behaving—unwritten norms of behavior and thought. The
businesses have traditionally been influenced by the military style of
management and culture where strict adherence to the upper management and
procedures was expected from the lower-rank employees. However, there have
been extensive efforts in the past couple of decades to change to culture to a
more open, innovative and friendly environment with fewer hierarchies and
smaller chain of command. Culture remains an important consideration in the
implementation of any strategy in the organisation (Martins and Terblanche,
2003)
Shared Values:
It is called "superordinate goals" when the model was first developed, these are
the core values of the company that are evidenced in the corporate culture and
the general work ethic. Employees are expected to abide by the values even if
they are not demonstrably profitable. These values and common goals keep the
employees working towards a common destination as a coherent team and are
important to keep the team spirit alive. The organisations with weak values and
common goals often find their employees following their own personal goals that
may be different or even in conflict with those of the organisation or their fellow
colleagues (Martins and Terblanche, 2003).
Application of 7s models:
Analysing Examining Starbucks utilizing of the 7s method.
The company Starbucks the 41 year old Seattle based coffee retailer. Starbucks
corporation purchases and roasts high quality whole bean coffees and sells them
along with fresh, rich-brewed coffees, Italian style and espresso beverages.
The company objective is to “establish Starbucks as the most recognized and
respected brand in the world”. To achieve this goal, the company plans to
continue expanding its retail operations rapidly, growing its specialty operations
and selectively pursuing other opportunities to leverage their brand through the
introduction of new products and the development of new distribution channels.
The analysis of Starbucks organization by 7s frameworks led to the following
conclusions:
ƒ Shared values: The organization constantly refers to the “Starbucks
experience”, and rallies employees behind delivering and satisfying this notion.
ƒ Strategy: Starbucks has aggressively expanded throughout North American
and to locations around the world. The number of retail locations increased by
35% from 1998 to 2000. In bringing the Starbucks experience to consumers
world-wide, the company has decided that it must focus on its core competency;
namely coffee.
ƒ Structure: Starbucks has a functional structure that can be defined as
unstructured. This emphasizes the need for new ideas and employee input.
ƒ Systems: The firm has several important systems in place within the
organization. These deal primarily with product knowledge, and product
development. Examining Starbucks using the 7s method .
ƒ Skills: Starbucks has a distinct competitive advantage with its front line
employees who are knowledgeable and friendly. Further, the Starbucks coffee
experience is reinforced through strategic alliances with major grocery stores,
hotels, and airlines.
ƒ Staff: Through generous benefits packages, and comprehensive training,
Starbucks is able to have high quality employees in a retail environment, while
minimizing the challenges facing many other traditional retailers including
employee turnover or employee motivation.
ƒ Style: The style for the organization is defined as innovative, flexible and
team-orientated.
(Ref: Examining Starbucks utilizing the 7s method and less than perfect
information (2001), Tim Glowa)
Application of 7s Model on Xerox Corporation:
XEROX CORPORATION On the eve of the twenty-first century, Xerox Corporation seemed on top of the world, with fast-rising earnings, a soaring stock price, and a new line of computerized copier-printers that were technologically superior to rival products. Less than two years later, many considered Xerox a has-been, destined to fade into history. Consider the following events: • Sales and earnings plummeted as rivals caught up with Xerox’s high-end digital machines, offering comparable products at lower prices. • Xerox’s losses for the opening year of the twenty-first century totaled $384 million, and the company continued to bleed red ink. Debt mounted to $18 billion. • The stock fell from a high of $64 to less than $4, amid fears that the company would file for federal bankruptcy protection. Over an 18-month period, Xerox lost $38 billion in shareholder wealth. • Twenty-two thousand Xerox workers lost their jobs, further weakening the morale and loyalty of remaining employees. Major customers were alienated, too, by a restructuring that threw salespeople into unfamiliar territories and tied billing up in knots, leading to mass confusion and billing errors. • The company was fined a whopping $10 million by the Securities and Exchange Commission (SEC) for accounting irregularities and alleged accounting fraud. What went wrong at Xerox? The company’s deterioration is a classic story of organizational decline. Although Xerox appeared to fall almost overnight, the organization’s problems were connected to a series of organizational blunders over a period of many years. BACKGROUND Xerox was founded in 1906 as the Haloid Company, a photographic supply house that developed the world’s first xerographic copier, introduced in 1959. Without a doubt, the 914 copier was a money-making machine. By the time it was retired in the early 1970s, the 914 was the best-selling industrial product of all time, and the new name of the company, Xerox, was listed in the dictionary as a synonym for photocopying. Joseph C. Wilson, Haloid’s longtime chairman and president, created a positive, people-oriented culture continued by his successor, David Kearns, who steered Xerox until 1990. The Xerox culture and its dedicated employees (sometimes called “Xeroids”) were the envy of the corporate world. In addition to values of fairness and respect, Xerox’s culture emphasized risk taking and employee involvement. Wilson wrote the following for early recruiting materials: “We seek people who are willing to accept risk, willing to try new ideas and have ideas of their own . . . who are not afraid to change what they are doing from one day to the next, and from one year to the next . . .” Xerox continued to use these words in its recruiting efforts, but the culture the words epitomize had eroded.(Ref: Understanding the Theory and Design
of Organizations Page no. 3 – 5, Richard Daft ) Application of 7s Framework to analyze the case of Xerox corporation: Strategy: Xerox outsourced much of the production to outside contractors. Applied High degree of Focus on Innovation and sevice. Many money losing operations were closed to cut down on the operating cost
System: High Degree of focus on Research and Development which can fuel growth in the
long run. Skills: The Employee workforce of Xerox were highly Innovative and Research oriented. It
was these same skills that fuelled the exponential growth of Xerox in initial years. Shared values: Mulachy was firmly committed to the principles of ethical business practices. Mulcahy has also responded to global stakeholders with a firm commitment to
human rights. Her personal involvement in settlement of long investigation into fraudulent accounting practices showed her commitment towards ethical business practices.
Style: As as leader Mulachy was willing to change the status quo. Mulachy was a very strong decision maker and took very did whatever she could to
Reduce operational costs.