How aligned are the “Ss” or design components? Do they “fit”? “f it”? Where is the misalignment?
At this point it is important to determine where the real p roblem of Pepsi continuous failure to reach organizational goals resides on. For this purpose we are going to use the McKinsey 7-S model de!eloped by "om Peters #obert $aterman $aterman and %ulien Phillips in the early &'()*s consultants from McKinsey + ,ompany consulting firm. Mind"ools.com Mind"ools.com ))(/. According to this model in order to achie!e organizational effecti!eness and success there must be a de!elopment alignment and mutually reinforcement of se!en interdependent factors which are categorized into 0hard1 elements2 strategy structure and system and 0soft1 elements2 staffing s3ills s3ills style and shared !alues. "he 4hard1 elements are easier to define or identify than the 0soft1 elements howe!er these are 5ust as important in order to gain organizational effecti!eness. Mind"ools.com Mind"ools.com ))(/. "his model helps diagnosing current situation of organizations related to effecti!eness. 6t also helps to impro!e o!erall performance of the company eamines effects effects of changes within the company and determines better implementations of strategies and to align department processes during a merger or ac8uisition. ac8uisition. Mind"ools.com Mind"ools.com ))(/. All of these these actions are to be addressed in relation to our case study if P,9A is to become effecti!e. 6n the case of this case study specifically specifically the 7-S model is going to be used to analyze the current situation of P,9A. $e are going to analyze the se!en elements of the model to determine whether there are aligned and supporting each other or if there is need to realign them to impro!e performance. Strategy
"he strategy of P,9A is currently suffering the effects of changes in strategy that Pepsi,ola ,ompany has suffered along the years. "he first change implemented was during the mid-
&'() when Pepsi-,ola ,ompany decided to ac8uire bottlers companies in order to obtain more control on product distribution. "his ac8uisition pro!o3ed a change on their strategy which shifted from a mar3eting focus to production one con!erting the Pepsi-,ola company into an operating company. "homas ,arriogia + Ayesha )):/. ;ater in 9o!ember &''( Pepsi,o decided to spin off its company-owned bottling operations. "his is how the Pepsi
first to increase !olume sales. Secondly they want to change from an operational company to a business mar3et oriented company by focusing on integrated cross-functional approach to the business with a customer?consumer segmentation dri!ing mar3et orientation planning strategically mar3eting and in!esting locally. "homas et al. )):/. "his has been clearly stated on their mission2 0"o be the fastest growing ma5or li8uid refreshment be!erage company in 9orth America by deli!ering preferred brands satisfying the greatest consumer needs le!eraging a targeted mar3et-dri!en approach enabled by inno!ation selling superiority Frito-;ay lin3ages and eecutional ecellence.1 "homas et al. )): p. &@/.
"he company*s sources of sustainable competiti!e ad!antage are2 uality and primarily the eposure of the product which needs of an eceptional national mar3eting and ad!ertising campaigns for all brands and the management of media plans and incenti!es to boost sales !olume. "hus P,9A has focused on creating new products de!eloping new distribution channels and increasing demand for total sales !olume. "homas et al. )):/. Structure
P,9A has a functional centralized structure with a high compleity that after its reorganization has been dealing with hierarchy and communication problems especially with functions that has any relation with P<=. 6n &''' the company had &@)))) employees worldwide and consisted of three di!isions> the soft drin3?be!erage di!ision Pepsi-,ola ,ompany/ Frito-;ay snac3 di!ision and the "ropicana orange 5uice di!ision. 6t handled business in the Bnited States and ,anada. "homas et al. )):/. 6t was in this same year when Phil Marineau 5oined Pepsi-,ola ,ompany as its ,CD an decided to form a group Eangar =roup/ to decide how to organize the company to achie!e the goal of becoming a mar3eting and concentrate company. "homas et al. )):/. "hey decided to organize P,9A around the geographies of the large retail customers instead of those of the bottlers> they decided not to focus on the bottler*s operations. "he fi!e main geographical regions of the Bnited States were di!ided into four territories called ,ustomer Mar3eting "erritories ,M"s/. "his di!ision would be focused on sales efforts in direct communication with large retail customers.
"hey also designed a fountain di!ision which would handle national sales and mar3eting program de!elopment for restaurants. they were lac3ing direct communication and tactical support because of the elimination of the franchise manager position. "homas et al. )):/. Dne of the main problems of the new structure resides on the channels of communication and authority le!els in the new organization. Many of the employees do not e!en 3now who to report to or who to go to in case of any problem 5ust li3e happen to #od3in when did not 3now who his point person was when he had a 8uality issue with Mountain ew products. "homas et al. )):/. Many people were lea!ing the organization for reasons related to the reorganizations o!er the years. ecisions in the company are made from the top le!els without ta3ing into
consideration employee*s input. "his is a highly centralized company with two of the units reporting directly to the ,CD. "homas et al. )):/. Systems
"he principal system of P,9A is their distribution system which is based on a franchise system in which the largest focus of its costs went to2 #+ ad!ertising bottler funding retailer incenti!es and trade promotions. "homas et al. )):/. "he outcomes of this system ha!e been negati!e as well because without the cooperation of bottlers such as P<= to the eecution of plans and strategies within the calendar no goals can be accomplished. Dn the other hand there is the fact that top le!el management in P,9A pay more attention to distribution and budgeting systems but are not p aying enough attention to systems
related to the internal functioning of the company. "hose systems related to employee performance such a performance measurement or any reward systems. ue to this fact employees are feeling unappreciated which is c ausing se!eral problems to the organization from within. Shared Values
P,9A has focused on their product on increasing !olume sales without losing 8uality of product. "he main problem here is they ha!e focused so much on Pepsi products that ha!e left aside the most important asset of the company2 employees. "he company has a !ery wea3 organizational culture that has been affected o!er and o!er by se!eral reorganizations the company has suffered. 6n this process or continuous changing employees ha!e lost identity within the company as well as any feeling of commitment towards it. 0An employee sur!ey re!ealed that employees at the newly formed P,9A had little confidence in the senior team and they were unclear about the organization*s mission and !ision.1 "homas et al. )): p.&/. #esults from this sur!ey also showed that employees felt Pepsi did not !alue employees* opinions they felt there were many people with !ast Pepsi eperience that were being ignored. "homas et al. )):/. "here is a terrible disconnection from senior management members and P,9A employees. Cmployees do not 3now the mission !alues or goals of the company thus there is a lac3 of purpose towards what is that they do for the company which is causing se!eral problems to the company. "homas et al. )):/.
Style
As we ha!e mentioned before senior management le!el of P,9A is composed by !eterans 0cola warriors1 with strong personalities. "homas et al. )):/. Phil Marineau former ,CD of P,9A was a charismatic leader with strong opinions and creati!e ideas. Eis focused was more on product bran de!elopment and for purposes of the organization de!elopment and function he relied more on his IP of human resources. "homas et al. )):/. ,raig $eatherup chairman and ,CD of P<= has operationally focused analytical and confident in his eperience leadership style. Ee h as managed put P<= right in trac3 right after the separation from Pepsi,o. Many times $eatherup won battles for financial resources against Marineau due to his close ties to Pepsi,o Eead8uarters. "homas et al. )):/. Any of these leaders promoted employee in!ol!ement and the fact that both of them were people with strong ideas and personalities was being highly ineffecti!e for the purposes of helping wor3force adapting to changes. "hey are more competiti!e than cooperati!e and they need to understand that their companies depend on each other to achie!e organizational goals. 0"oday a leader whose style in!ol!es directing monitoring and controlling people and information is going to demoti!ate people. Eowe!er the leader whose style in!ol!es understanding contet and people ma3ing goals clear and belie!able learning from others building relationships and teams remo!ing roadbloc3s so that others succeed and practicing honest communication is going to be effecti!e in the 3nowledge?ser!ice world.1 BS Army ,orps of BS ))(/. "he main focus and competiti!e ad!antage of Pepsi is product inno!ation but if the leaders of the company are not fleible enough to be willing to build a learning organization will ne!er truly achie!e inno!ation and competiti!e ad!antage.
=ary #od3in has a different leadership style> he has paid close attention to employees* opinion since the moment he started at P,9A. Ee loo3ed at the results from the employee sur!ey that was re8uested by Marineau before lea!ing to gauge the culture of the organization. "hen he addressed employees of P,9A in a meeting and made a commitment with them to address all the issues they had had mentioned on the sur!ey. Ee made clear his dedication to impro!ing the wor3 en!ironment. "homas et al. )):/. Staffing
"he employee demographic of the company resides primarily on !eterans. "he ma5ority of the chairmen and ,CDs in the company are !eterans 0,ola $arriors1 nic3name after the fierce competition Pepsi-,ola ,ompany had with ,oca-,ola ,ompany as they fought for the first spot 3nown as the 0,ola $ars1. "hese !eterans who represent the senior team ha!e strong personalities and are decided to ma3e the new structure wor3 before implementing any changes. "hey ha!e !ast eperience in the soft drin3 business. "homas et al. )): /. #od3in is dealing with the issue of hiring new people to bring inno!ation to the company but fears to lose that !ast 3nowledge from their senior team. "homas et al. )):/. "here seems li3e there is no support once the employee begins in any of the positions within the company by the structure of the company so it happened with the ,M" directors. "homas et al. )):/. Skills
At the moment the organization is really good at all the mar3eting acti!ities such as product inno!ation brand de!elopment and positioning and detecting new mar3ets. "he s3ills they are lac3ing from at the moment and need to learn is how to manage people and build a strong culture to impro!e the wor3 en!ironment.
Alignment "here is a misalignment among the se!en elements of the model. According to the model Shared Ialues is the central element to the de!elopment of all of the other critical elements. All of the other elements stem from what the organization stands for. As these core !alues change all the other elements change. Mind"ools.com ))(/. "herefore we will ta3e the Share Ialues of P,9A as a base for determining how the realignment needs to be done. "he three hard elements structure strategy and systems are not aligned with the shared !alues of the company and do not support each other. First it is only fair to say that they are not e!en any shared !alues among employees in the company the mission and ob5ecti!es ha!e not been well communicated to employees most of them do not e!en 3now what the company stands for. "hus there is no way that the strategy is being eecuted by any of the employees if they do not 3now what the ultimate goal and ob5ecti!es are. Systems are failing to communicate these shared !alues as well as to achie!e the strategy ob5ecti!es and the failures of the systems are mainly because of errors in the structure. Dn the other hand s3ills and the staff element are misaligned with the style and shared !alues elements. ;eaders are not ta3ing into consideration s3ills or !alue of employees for any ma3ing-decision process or either to listen to their complaints. "he main factor that is causing the misalignment of elements is that leaders ma3ing changes are not ta3ing into consideration the people who is charge of ma3ing e!erything happen. "hey need to listen to the people who is really who does the wor3 who is in direct contact with customers and who has the s3ills to do the 5ob> to decide on the structure new strategies and systems to impro!e performance and therefore achie!e effecti!eness. "hey need to communicate
any decisions and the ob5ecti!es and primarily the mission so that employees 3now what they stand for. #eferences -
"he boo3
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Kotelni3o! Iadim. ))(/. 7-S Model2 A Managerial "ool for Analyzing and 6mpro!ing Drganizations. 100 Ventures.com. #etrie!ed %uly &( ))( from2 http2??www.&)))!entures.com?businessJguide?mgmtJineJ7s.html
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Mind"ools.com. ))7/. The McKinsey 7S Framework. Mind "ools ;td. #etrie!ed %uly &( ))( from2 http2??www.mindtools.com?pages?article?newS"#J'&.htm
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Mind"ools.com. ))7/. 7S $or3sheet. Mind"ools ;td. #etrie!ed %uly &( ))( from2 http2??www.mindtools.com?pages?article?wor3sheets?7S$or3sheet.pdf
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BS Army ,orps of Cngineers. "he 7 Ss of ,ulture. Learning Organization. #etrie!ed %uly &( ))( from2 http2??www.h8.usace.army.mil?cepa?learning?se!en.htm
