STRATEGIC MANAGEMENT ASSIGNMENT-1
Topic: - Detailed study of McKinsey 7-S framework
Submitted by:Mohammed.H.T 08d1634 V BBA ‘B’
INDEX
S NO.
TOPIC
PAGE NO.
1
The Mckinsey 7- S Framework
3 to 6
2
Description of 7-S
7 to 11
3
McKinsey's 7- S model of Hewlett-Packard (HP)
12 to 17
4
Comparitive McKinsey 7-S Model for HP, Dell & Acer
18 to 19
5
Recent News - Anatomy of Agile Enterprise
20 to 23
6
Conclusion
24
7
Bibliography
25
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THE McKINSEY 7-S FRAMEWORK-OVERVIEW Ensuring that all parts of the organization work in harmony Developed in the early 1980s by Tom Peters and Robert Waterman, two consultants working at the McKinsey & Company consulting firm, the basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successful. A framework for analyzing and implementing organizational change based on the interrelationship between seven key factors that contribute to organizational effectiveness: structure, strategy, systems, style, staff, skills, and super ordinate goals. The framework was devised to encourage managers to extend their thinking beyond the commonly accepted key variables of strategy and structure. [1] The key factors distinguishing the 7-S framework from the traditional approach to organizational effectiveness, in fact, focus on the c hange levers which leaders, as distinct from managers, have always manipulated to effect organizational change and to achieve superior performance. By extension, much of what the 7-S approach embodies is the direct result of observing organizations run by leaders as opposed to managers. [2]
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The 7S model can be used in a wide variety of situations where an alignment perspective is useful, for example to help you: •
Improve the performance of a company.
•
Examine the likely effects of future changes within a company.
•
Align departments and processes during a merger or acquisition.
•
Determine how best to implement a proposed strategy.
Note:-
[1] - Article Name:- Mckinsey 7s framework Source:-Dictionary of Human Resource Management; 2001, p209-209, 1/5p
[2] – Article Name:- Leadership, management, and the seven keys Author:- Craig M Watson Source:- McKinsey Quarterly; Autumn83, Issue 3, p45,
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
"Hard" elements are easier to define or identify and management can directly influence them: These are strategy statements; organization charts and reporting lines; and formal processes and IT systems.
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"Soft" elements, on the other hand, can be more difficult to describe, and are less tangible and more influenced by culture. However, these soft elements are as important as the hard elements if the organization is going to be successful. In terms of the McKinsey 7-S model, the typical manager is seen as over relying on the "hard" S’s (strategy, structure and systems), while the leader's mastery of the "soft" elements (style, skills, staff and shared values) helps to galvanize his organization into superior long-term performance. [3] Note:- [3] - Article Name:- Leadership, management, and the seven key Author:- Craig M Watson
Source:- McKinsey Quarterly; Autumn83, Issue 3, p44
McKINSEY 7 S MODEL IN DETAIL
The shape of the model was also 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
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organisations, the variables represented in the model were considered to be of crucial importance to managers and practitioners (Peters and Waterman, 1982). The analysis of several organisations using the model revealed that American companies tend to focus on those variables which they feel they can change (e.g. structure, strategy and systems) while neglecting the other variables. These other variables (e.g. skills, style, staff and shared values) are considered to be "soft" variables. Japanese and a few excellent American companies are reportedly successful at linking their structure, strategy and systems with the soft variables. The authors have concluded that a company cannot merely change one or two variables to change the whole organisation.
For long-term benefit, they feel that the variables should be changed to become more congruent as a system. The external environment is not mentioned in the McKinsey 7S Framework, although the authors do acknowledge that other variables exist and that they depict only the most crucial variables in the model. While alluded to in their discussion of the model, the notion of performance or effectiveness is not made explicit in the model. The operating principle at well-managed companies is to do one thing well," states Thomas Peters. "At IBM, the all-pervasive value is customer service. At Dana it is productivity improvement. At 3Mand H-P it is new product development. At P&G it is product quality. At McDonald's it is customer service, quality, and cleanliness and value. At all these companies, the values are pursued with an almost religious zeal. [4]
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Note:- [4] -
Article Name:- Leadership, management, and the seven keys
Author:- Craig M Watson
Source:- McKinsey Quarterly; Autumn83, Issue 3, p47
Description of 7 Ss Strategy : Strategy is the plan of action an organisation prepares in response to, or
anticipation of, changes in its external environment. Strategy is differentiated by tactics or operational actions by its nature of being premeditated, well thought through and often practically rehearsed. It deals with essentially three questions (as shown in figure 2): 1) where the organisation is at this moment in time, 2) where the organisation wants to be in a particular length of time and 3) how to get there. Thus, strategy is designed to transform the firm from the present position to the new p osition described by objectives, subject to constraints of the capabilities or the potential (Ansoff, 1965). Structure : Business needs to be organised in a specific form of shape that is generally
referred to as organisational structure. Organisations are structured in a variety of ways, 7
dependent on their objectives and culture. The structure of the company often dictates the way it operates and performs (Waterman et al., 198 0). Traditionally, the businesses have been structured in a hierarchical way with several divisions and departments, each responsible for a specific task such as human resources manag ement, production or marketing. Many layers of management controlled the operations, with each answerable to the upper layer of management. 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 ).
Systems: Every organisation has some systems or internal processes to sup port and
implement the strategy and run day-to-day affairs. For e xample, a company may follow a particular process for recruitment. These processes are normally strictly followed and are designed to achieve maximum effectiveness. Traditionally the organisations have been following a bureaucratic-style process model where most decisions are taken at the higher management level and there are various and sometimes unnecessary requirements for a specific decision (e.g. procurement of daily use goods) to be taken. 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). Style/Culture : All organisations have their own distinct culture and management style. It
includes the dominant values, beliefs and norms which develop over time and become
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relatively enduring features of the organisational life. It also entails the way managers interact with the employees and the way they spend their time. 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). Staff: Organisations are made up of humans and it's the people who make the real
difference to the success of the organisation in the increasingly knowledge-based society. The importance of human resources has thus got the central position in the strategy of the organisation, away from the traditional model of capital an d land. 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). Shared Values/Superordinate Goals : All members of the organisation share some
common fundamental ideas or guiding concepts around which the business is built. This may be to make money or to achieve excellence in a particular field. 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).
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On the issue of culture and its impact (whether Japan, for example, is more likely to produce leaders than the West), the 7-S framework offers important insights. First, good management does not depend on the presence of leadership, although in many cases it is enhanced by leadership qualities. What is crucial is the presence of the soft and the hard instruments in balance. Second, the Japanese are, apparently, more inclined to use the soft tests of management -as an extension of their cu ltural norms - than are Western managers whose culture stresses different values. Third, managerial performance Is multivariate. Culture certainly plays a part, but what is more significant is that excellent performance in organizations in Japan or in the West depends on achieving harmony among all seven keys to organization. [5]
Note:- [5] - Article Name:- Leadership, management, and the seven keys
Author:- Craig M Watson
Source:- McKinsey Quarterly; Autumn83, Issue 3, p51
Using the 7S Model to Analyze an Organization A detailed case study or comprehensive material on the organisation under study is required to analyse it using the 7S model. This is because the model covers almost all aspects of the business and all major parts of the organisation. It is therefore highly important to gather as much information about the organisation as possible from all available sources such as organisational reports, news and p ress releases although primary research, e.g. using interviews along with literature review is more suited. The researcher also needs to consider a variety of facts about the 7S model. The seven components described above are normally categorised as soft and hard components. The hard components are the strategy, structure and systems which are normally feasible and easy to identify in an organisation as they are normally well documented and seen in the form of tangible objects or reports such as strategy
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statements, corporate plans, organisational charts and other documents. The remaining four Ss, however, are more difficult to comprehend. The capabilities, values and elements of corporate culture, for example, are continuously developing and are altered by the people at work in the organisation. It is therefore only possible to understand these aspects by studying the organisation very closely, normally through observations and/or through conducting interviews. Some linkages, however, can be made between the hard and soft components. For example, it is seen that a rigid, hierarchical organisational structure normally leads to a bureaucratic organisational culture where the power is centralised at the higher management level. It is also noted that the softer components of the model are difficult to change and are the most challenging elements of any change-management strategy. Changing the culture and overcoming the staff resistance to changes, especially the one that alters the power structure in the organisation and the inherent values of the organisation, is generally difficult to manage. However, if these factors are altered, they can have a great impact on the structure, strategies and the systems of the organisation. Over the last few years, there has been a trend to have a more open, flexible and dynamic culture in the organisation where the employees are valued and innovation encouraged. This is, however, not easy to achieve where the traditional culture is been dominant for decades and therefore many organisations are in a state of flux in managing this change. What compounds their problems is their focus on only the hard components and neglecting the softer issues identified in the model which is without doubt a recipe for failure.
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MCKINSEY’S 7S MODEL FOR HEWLETT-PACKARD
STRATEGY:-
The premium strategy followed by HP is to ensure customer satisfaction through the provision of high quality goods and services to earn their respect and loyalty. HP follows an ISO 9001:2000 quality policy to ensure that there is no sacrifice in terms of quality from the company. HP in fact integrates customer focused thinking in each and every aspect of the business to ensure an improvement in their strategies. An important internal strategy of HP is its focus on diversity and inclusion where it feels that all the employees put out their differences in the world; it will result in personal leadership from everyone in the company. Moreover, its major focused strategy is that behaviors and actions which
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support diversity and inclusion come from the conviction of employees which will make diversity and inclusion a conscious part of ho w they run the business throughout the world. Another strategy of HP is that their EMEA Business Management System is run in a centralized functional manner to ensure smooth operations of the business throughout the world.
SYSTEM:-
HP follows a unique and custom-designed system based on their area of operations which is known as the EMEA Business Management System. EMEA stands for Europe, Middle-East and Africa. The HP Business Management System in EMEA is a framework for process-based business management. It defines the key processes that create value for their customers. The process architecture is designed to meet customer expectations and provide leadership and support. All business-relevant processes are documented, with special emphasis placed on simplicity, clarity and disclosure of mandatory information such as links to other processes, responsibilities and performance metrics. A web-based tool delivers easy access and helps the process owner provide input and maintain information with minimum administrational effort. Document and data accuracy are automatically controlled by the system. In line with their ov erall strategy, they evaluate internal and external processes and use these findings to drive continuous improvements in the system. The HP management team empowers management representatives within each business function to lead the deployment of their total customer experience and quality strategy and to administer the Business Management System to best meet their customers’ changing business needs. The HR and Financial Systems in the company also are quite advanced. The HR system is guided and operated to carry out recruitment and selection, training and development, organization design, employee and industrial relations, compensation and benefits and workforce management programmes. The
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Finance section follows a system of tracking and consolidating actual results to review performances and make business decisions with accuracy. Its key focus is to improve processes, technology and systems to achieve high levels of automation and flexibility.
SKILLS:-
The skills required by HP employees are of technical as well as interpersonal in nature. HP stresses on its employees not only to be well versed in their respective hardware fields but also to be able to groom their interpersonal skills to ensure that the strategy of diversity acceptance and customer satisfaction are achieved at higher levels. Being known for providing a good workplace among multinationals its employees undergo several personality development workshops to improve their interpersonal skills. In the case of the job skills required HP looks not only for educational qualifications but also for fair amount of work experience. It believes that the overall development of an employee is through fabricating diversion, inclusion as a conscious part of them. In the words of Senior Vice President and Managing Director, HP EMEA and Technology Solutions Group who mentioned that,” Given our legacy, it’s only natural that we also provide our global team with advanced e-learning tools, and a learner site that makes it easy to pick and choose training courses based on your needs and interests. Learning at HP is flexible, fast and rewarding. HP encourages employees to plan and create their own development path, with the support you need to grow and win.”
STAFF:-
HP has a staff of more than one hundred thousand people coming from more than 170 countries around the world. There is a lot of diversity to be handled yet HP`s vision towards it has made its strategy to handle this diversity very successful. The staff of HP is trained in all dimensions so that they ultimately achieve their goal of earning the respect and loyalty from customers in the form of customer satisfaction. However there 14
has been a bit of downsizing during the period 2005-2007 where employee size has reduced by 20%.
SHARED VALUES:-
The shared values of HP are:-
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Passion for customers: - They put their customers before everything they do.
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Trust and respect for individuals: - A culture of inclusion is created which is built on trust, dignity and respect for all.
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Achievement and Contribution: - Strive for Excellence. Each person’s contribution in the organization is key to their success.
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Results through teamwork: - Collaboration is essential to efficiently serve the customers.
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Speed and Agility: - They are resourceful, adaptable and achieve results faster than their competitors.
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Meaningful Innovation: - Producing the useful and significant is their motto.
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Uncompromising integrity: - Honesty is the best policy along with due fairness and directness in their dealings.
STYLE:-
The management style followed at HP is known as ‘THE HP WAY’ which according to David Packard means ‘managing by walking around.’ At HP, managers are expected to get out of their executive cabins and discuss the site work with the line workers. Corporate objectives are laid down to ensure the proper functioning of The HP way. Managers need to build a framework of trust, integrity and framework in the
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organization. HP thinks ‘Belief in one another’ is the best way to manage the diversity in the organization. Hewlett and Packard themselves went to sites and discussed with the employees. Moreover, everything regarding important decisions made bust be made transparent to the employees by mangers at HP. The HP way has been a reason for many employees to continue for a long period of time at HP. This leadership style which was adopted in 1957 is still in the roots although little modifications have been made to survive in the competitive environment of the Notebook world. The adoption of this style and its traditional acceptance by the company has made it one of the best places to work in the world.
STRUCTURE:-
The organization structure of HP can be seen from two viewpoints:On the basis of area of activity:-
Hewlett Packard
Americas Houston, Texas
Europe, Middle East, Africa Geneva, Switzerland
Asia Pacific Hong Kong
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On the basis of product there are seven business segments. •
Enterprise Storage and Servers ("ESS"),
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HP Services ("HPS"),
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HP Software,
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Personal Systems Group ("PSG"),
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Imaging and Printing Group ("IPG"),
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HP Financial Services ("HPFS"), and
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Corporate Investments.
The three business segments ESS, HPS and HP Software are structured beneath the broader Technology Solutions Group (TSG) in order to capitalize on up-selling and cross-selling opportunities, and given the solution sale approach across the HP enterprise offerings
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COMPARITIVE MCKINSEY 7S MODEL FOR HP, DELL AND ACER STRATEGY: The three companies have very vibrant and strong fundamental strategies. While HP`s strategy is mainly in two halves; firstly it is customer oriented which is achieved through the provision of high quality goods and services and employee oriented which is seen through the incorporation of diversity and inclusion in the company objectives. Moreover Dell’s strategy is to maximize flexibility and minimize the costs through proper operational expansion. Finally, Acer’s strategy is brand management and brand diversification where it has gone for rapid and vast expansion through the optimum utilization of its resources. SYSTEM:-
The EMEA business management system followed at HP mainly is a very advanced system designed to bring about continuous improvement in the entire organization. Moreover, Dell follows a management system based on customer leverage to build upon its direct customer relationships network. Acer, on the other hand , follows a very strict product standardization system and a very sustainable environmental management system. The human resources system and the financial systems in all the three companies are very advanced. SKILLS:-
A common trend seen in the skills required by the employees of the three companies is that of interpersonal skills and the companies also provide extensive training to their employees at different levels and in various fields of expertise. HP also requires work experience and technical skills to ensure diversity and inclusion. Dell uses more of mentoring techniques to develop a variety of skills in the employees. Acer on the other hand has technical based expert programmes and the skills system is also a little orthodox. STAFF:-
The staff of all the companies are directed towards the company goals and objectives and also come from diverse backgrounds. HP has one lakh people coming from 170 countries who strive to expertise in all the dimensions of the field while Dell has 65,200 employees who aim at customer satisfaction. Acer on the other hand has a smaller labor force of 5300 employees in more than 100 countries to provide maximum efficiency.
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SHARED VALUES:-
The shared values of all the three companies are very core to the companies’ antecedents and their values. HP believes in teamwork, innovation, achievement, contribution and passion for its customers. Dell’s shared values are that of integrity and ethical behavior. Acer’s values are purely based on the well-being of its customers, employees and its shareholders. It also believes that work is worship and to work wisely and accordingly. STYLE:-
The style followed by the three companies is very different from each other. HP follows the HP way which indicates ‘managing by walking around’. Dell has on the other a mix of participatory and democratic style of managing. Acer on the other hand a very flexible style of managing to ensure participation and development. Yet the main motto of all the companies behind the adoption of their respective styles is the progress of the company as well as the stakeholders of the company.
STRUCTURE:-
All the three companies follow the organization structure based on the area of activity or geographic activity mainly divided into Asia, Europe, North America, Middle East and Australia. HP also follows an organization structure based o its produ cts while Dell also follows a departmental organization structure.
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RECENT NEWS Anatomy of Agile Enterprise Stratification Underlies Agility, Part 3: Strategy
By Janne J. Korhonen on May 31, 2010 By "strategy", Waterman et al. (1980) refer to "those actions that a company plans in response to or anticipation of changes in its external environment − its customers, its competitors". Strategy is an organization's way of creating unique value and improving its position vis-à-vis competition. While strategy is a critical variable in organization design, its successful execution lies in other dimensions of the 7S framework. As the direct actions are seeking stability and rejecting change, there is no strategy at Stratum I. The diagnostic accumulation at Stratum II is also reactive in nature and does not call for much planning ahead. The first level that can justifiably be said dealing with strategy is Stratum III.
Stratum III Stratum III is about making trade-offs between carrying out the known work load with a completion date of three to six months later and predicting the changing requirements of the as-yet-unknown but probable work load for an additional year by extrapolating from current trends. Changes are incremental and strategies based on experience. Operations Strategy at this level is specific to an op erating unit, e.g. a sales office or retail outlet, and has a defined scope. The major emphasis is on cost-effectiveness and on maximizing resource productivity, leveraging any synergies and distinctive competencies that the business has. Operations Strategy contributes to the functional strategy of Stratum IV. 21
Stratum IV At Stratum IV, changes are discontinuous, but p redictable, and strategies are based on observable opportunities. Related change is sought through pairwise comparison of Stratum III systems, considering whether known alternative systems exist that might allow the work to be done better. Functional Strategy at this level is about efficient and effective development and coordination of resources within the key functional areas. The strategic issues are related to business processes and the value chain. Functional Strategy provides Business Unit and Corporate Strategies with information on resources and cap abilities and translates higher-level strategic plans to actionable departmental plans.
Stratum V Stratum V seeks novel change. It cannot be predictably forecast what the future holds and how to plan for it. Discontinuous changes are unpredictable and call for creative strategies that change the very business model of the business. Work above this level is increasingly about creating the future rather than predicting it. Business Unit Strategy at this level is developed within a single-business company or a business unit of a multi-business corporation. It focuses on the business model, on positioning the business vis-à-vis product/service life-cycles, on the distinctive competencies to pursue, on scope of the business, and on the integration of functional strategies.
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Stratum VI Ascending to Stratum VI denotes a major transition to the next order of complexity: from the relatively stable, closed and controllable system of a self-sufficient business or business unit to the relatively fluid, open and interdependent "system of systems" of networked organizations. The focus of strategy is on value innovation, co-creation and dynamics of the business ecosystem. Inter-organizational Strategy at this level is concerned with the relationships between the organization and its partners, competitors, suppliers, customers, and associations. Typically, inter-organizational strategies such as joint ventures and alliances have not been seen as integral to the organization's strategic framework. However, in the face of intensifying competition and globalization, inter-enterprise networking has grown in importance and deserves dedicated attention. Mo st notably, virtual organizations, where individual companies are concentrating on their core competencies while relying on external parties to provide complementary skills, are becoming the unit of competition. This calls for a new perspective to strategy.
Stratum VII Stratum VII is about developing and pursuing alternative worldwide strategic plans to provide society with new concepts and ideas. Corporate Strategy at this level focuses on h ow multi-business organizations develop their existing business units, acquire or create new ones, and retreat from businesses to ensure sustainable corporate viability. Diversified companies do not compete in individual markets; only their businesses do. Thereby, Corporate S trategy must focus on the success of each of its Stratum V business units.
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Stratum VIII Stratum VIII is about setting the corporate mission and vision. Enterprise Strategy at this level addresses the organization's role in society, including all aspects of its environment: economic, social, political, legal, and technological. Stakeholders are identified, at least implicitly, and it is considered how the enterprise serves them. The mission and purpose of the enterprise is defined. Answers to fundamental questions such as "How do we fit in?" and "What do we stand for?" provide the guidelines to more specific strategies at lower strata.
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CONCLUSION
The awareness created by the 7-S approach to organizational effectiveness should benefit organizations run by either leaders or traditional managers, as we have used the terms. Outstanding companies are distinguished not by the leaders who head them or by the managers who run them, but rather by the manner in which leadership and management are harmonized to create a climate in which work is both uncommonly meaningful and unusually effective. [6]
As per my learning, the Mckinsey 7 S framework is one of the most advanced techniques for analyzing the organizational environment and today it is used by many companies such as IBM, Infosys, Oracle to understand their organization and make effective changes so as to make the environment conducive.
Mckinsey 7 S framework has been used by more than 70 companies to make a fruitful gain out of it. The entire framework created is for the overall development of the individual and the organization and the achievement of the integrated goals of the organization and individual.
Therefore, I would like to conclude that the challenges of the future can be efficiently tapped by the usage of such efficient frameworks and maximum achievement of the set strategic goals and objectives would be possible
Note:- [6]- Article Name:- Leadership, management, and the seven keys
Author:- Craig M Watson
Source:- McKinsey Quarterly; Autumn83, Issue 3, p 52
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BIBLIOGRAPHY
Books:-
Management Concepts by S.A Sherlekar Himalaya Publishing House Edition:- 2004 Pages – 80-81 Journals:-
The Icfai Journal on Business Strategy, Vol No. VI, Issue No. 4, Pg 42-56 Websites: -
http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=6753733&site=ehostlive" "http://search.ebscohost.com/login.aspx? direct=true&db=buh&AN=25505911&site=ehost-live" http://university-essays.tripod.com/mckinsey_7s_framework.html
http://www.mindtools.com/pages/article/newSTR_91.htm http://www.ebizq.net/blogs/agile_enterprise/2010/05/stratification-underlies-agilitypart-3-strategy.php http://hsc.csu.edu.au/ind_tech/ind_study/organisation/figure2.gif
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