Mc Kinsey 7S Model & Its Implementation in Infosys

12 *Introduction* The McKinsey 7S Framework gEnsuring that all parts of your org anization work in harmonyh How do you go about analyzing how well your organization is positioned to achieve its intended objective? This is a question that has been asked for many years, and there are many different answers. Some approaches look at internal factors, others look at external ones, some combine these perspectives, and others look for congruence between various aspects of the organization being studied. Ultimately, the issue comes down to which factors to study. While some models of organizational effectiveness go in and out of fashion, one that has persisted is the McKinsey 7S framework. It's all very well devising a strategy, but you have to be able to implement it if it's to do any good. The Seven S Framework first appeared in " The Art of Japanese Management" by Richard Pascale and Anthony Athos in 1981. They had been looking at how Japanese industry had been so successful, at around the same time that Tom Peters and Robert Waterman were exploring what made a company excellent. The Seven S model was born at a meeting of the four authors in 1978. It went on to appear in "In Search of Excellence" by Peters and Waterman, and was taken up as a basic tool by the global management consultancy McKinsey: it's sometimes known as the McKinsey 7S model. The Seven-Ss is a framework for analyzing organizations and their effectiveness. It looks at the seven key elements that make the organizations successful, or not: strategy; structure; systems; style; skills; staff; and shared values. The model shows that organizational immune systems and the many interconnected variables involved make change complex, and that an effective change effort must address many of these issues simultaneously. 3 7-S Model ± A Systemic Approach to Improving Organizations The 7-S model is a tool for managerial analysis and action that provides a structure with which to consider a company as a whole, so that the organization's problems may be diagnosed and a strategy may be developed and implemented. The 7-S diagram illustrates the multiplicity interconnectedness of elements that define an organization's ability to change. The theory helpe d to change manager's thinking about how companies could be improved. It says that it is not just a matter of devising a new strategy and following it through. Nor is it a matter of setting up new systems and letting them generate improvements. To be effective, your organization must have a high degree of fit, or internal alignment among all the seven Ss. Each S must be consistent with and reinforce the other Ss. All Ss are interrelated, so a change in one has a ripple effect on all the others. It is impos sible to make progress on one without making progress on all. Thus, to improve your organization, you have to master systems thinking and pay attention to all of the seven elements at the same time. There is no starting point or implied hierarchy - different factors may drive the business in any one organization. 4 The 7S McKinsey model Hard ³Ss´ Strategy Structure Systems Soft ³Ss´ Shared Values Skills Style Staff 5 # The 3Ss across the top of the model are described as 'Hard Ss': - 1>Structure Structure is the organizational chart and associated information that shows who reports to whom and how tasks are both divided up and integrated. In other words, structures describe the hierarchy of authority and accountability in an organization, the way the organization's units relate to each other: centralized, functional divisions (top-down); decentralized (the trend in larger organizations); matrix, network, holding, etc. These relationships are frequently diagrammed in organizational charts. Most organizations use some mix of structures - pyramidal, matrix or networked ones - to accomplish their goals. 2>Strategy Strategies are plans an organization formulates to reach identifie d goals, and a set of decisions and actions aimed at gaining a sustainable advantage over the competition . It is the direction and scope of the company over the long term. It is the plan devised to maintain and build competitiv e advantage over the competitors. 3>Systems Systems define the flow of activities involved in the daily operation of business, including its core processes and its support systems. They refer to the procedures, processes and routines that are used 6 to manage the organization and characterize how important work is to be done. Systems in Business System:y Business Process Management System (BPMS) y Management information system y Innovation system y Performance management system y Financial system/capital allocation system y Compensation system/reward system y Customer satisfaction monitoring system etc. # The 4Ss across the bottom of the model are less tangible, more cultural in nature, and were termed 'Soft Ss' by McKinsey. These are :- 4>Shared Values The interconnecting center of McKinsey's model is: Shared Values Shared values are commonly held beliefs, mindsets, and ± its assumptions that shape how an organization behaves corporate culture. Shared values are what engender trust. Values are the identity by which a company is known throughout its business areas, what the organization stands for and what it believes in, it central beliefs and attitudes. These values must be explicitly stated as both corporate objectives and individu al values. When the model was first developed, these are the core values of the company that are work ethic. evidenced in the corporate culture and the general 7 ***Placing Shared Values in the middle of the model emphasizes that these values are central to the development of all the other critical elements. The company's structure, strategy, systems, style, staff and skills all stem from why the organization was originally created, and what it stands for. The original vision of the company was formed from the values of the creators. As the values change, so do all the other elements*** 5>Style "Style" refers to the cultural style of the organization, how key managers behave in achieving the organization's goals, how managers collectively spend their time and attention, and how they use symbolic behavior.How management acts is more important than what management says. Style represents the leadership approach of top management and the company's overall operating approach . 6>Staff "Staff" refers to the number and types of personnel within the organization and how companies develop employees and shape basic values. It is the company's people resources and how they are developed, trained, and motivated. 8 7>Skills "Skills" refer to the dominant distinctive capabilities and competencies of the personnel or of the organization as a whole. "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. "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. The way the model is presented in Figure above depicts the interdependency of the elements and indicates h ow a change in one affects all the others. For example, a change in HR -systems have an like internal on career plans and management training will impact organizational culture (management style) and thus will affect structures, processes, and finally characteristic competences of the organization. In change processes, many organizations focus their efforts on the hard S¶s:Strategy, Structure and Systems. They care less for the soft S¶s, Skills, Staff, Style and Shared Values. Peters and Waterman in ³In Search of Excellence´ commented however, that most successful companies work hard at these soft S¶s. The soft factors can make or break a successful change process, since new structures and strategies are difficult to build upon inappropriate cultures and values. These problems often come up in the dissatisfying results of spectacular mega-mergers. The lack of success and synergies in such mergers is often based in a clash of completely different cultures, values, and styles, which make it difficult to establish effective common systems and structures. 9 Use of 7-S Model:The 7S model can be used in a wide variety of situations where an alignment perspective is useful, for example to help you: y y y y 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; or Determine how best to implement a proposed strategy. The McKinsey 7S model can be applied to elements of a team or a project as well. The alignment issues apply, regardless of how you decide to define the scope of the areas you study. How to Use the Model Now you know what the model covers, but how can you use it? 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. 10 Whatever the type of change - restructuring, new processes, organizational merger, new systems, change of leadership, and so on - the model can be used to understand how the organizational elements are interrelated, and so ensure that the wider impact of changes made in one area is taken into consideration. You can use the 7S model to help analyze the current situation, a proposed future situation and to identify gaps and inconsiste ncies between them. It's then a question of adjusting and tuning the elements of the 7S model to ensure that your organization works effectively and well once you reach the desired endpoint. Sounds simple? Well, of course not: Changing your organization p robably will not be simple at all! Whole books and methodologies are dedicated to analyzing organizational strategy, improving performance and managing change. The 7S model is a good framework to help you ask the right questions - but it won't give you all the answers. For that you'll need to bring together the right knowledge, skills and experience. When it comes to asking the right questions, we've developed a Mind Tools checklist and a matrix to keep track of how the seven elements align with each other. Supplement these with your own questions, based on your organization's specific circumstances and accumulated wisdom. ‚ 7S Checklist Questions:- Here are some of the questions that you'll need to explore to help you understand your situation in terms of the 7S framework. Use them to analyze your current situation first, and then repeat the exercise for your proposed situation. Strategy: y y What is our strategy? How to we intend to achieve our objectives? 11 How do we deal with competitive pressure? How are changes in customer demands dealt with? How is strategy adjusted for environmental issues? y y y Structure: y y y y y How is the company/team divided? What is the hierarchy? How do the various departments coordinate activities? How do the team members organize and align themselves? Is decision making and controlling centralized or decentralized? Is this as it should be, given what we're doing? y Where are the lines of communication? Explicit and implicit? Systems: y What are the main systems that run the organization? Consider financial and HR systems as well as communications and document storage. y y Where are the controls and how are they monitored and evaluated? What internal rules and processes does the team use to keep on track? Shared Values: y y y y What are the core values? What is the corporate/team culture? How strong are the values? What are the fundamental values that the company/team was built on? Style: y y y y How participative is the management/leadership style? How effective is that leadership? Do employees/team members tend to be competitive or cooperative? Are there real teams functioning within the organization or are they just nominal groups? 12 Staff: y y y What positions or specializations are represented within the team? What positions need to be filled? Are there gaps in required competencies? Skills: y y y y y What are the strongest skills represented within the company/team? Are there any skills gaps? What is the company/team known for doing well? Do the current employees/team members have the ability to do the job? How are skills monitored and assessed? ‚ 7S Matrix Questions: Using the information you have gathered, now examine where there are gaps and inconsistencies between elements. Remember you can use this to look at either your current or your desired organization. y Start with your Shared Values: Are they consistent with your structure, strategy, and systems? If not, what needs to change? y Then look at the hard elements. How well does each one support the others? Identify where changes need to be made. y Next look at the other soft elements. Do they support the desired hard elements? Do they support one another? If not, what needs to change? y As you adjust and align the elements, you'll need to use an iterative (and often time consuming) process of making adjustments, and then re analyzing how that impacts other elements and their alignment. The end result of better performance will be worth it. 13 ***A recent (2008) update on the Mckinsey 7S model is a short podcast on the creation of Mckinsey 7S model by Lowell Bryan, a director in McKinsey's New York office, involved in creating and applying the 7 -S framework. He describes how it was introduced in the late 1970s to address the critical role of coordination, rather than structure, i n organizational effectiveness. McKinsey 7S model referenced in the E-consultancy, Managing an E-commerce team report : Element model 1>Strategy of 7S Application to digital Key issues from practice and literature of digital Gaining appropriate budgets and marketing team The significance marketing in influencing and demonstrating / delivering value and ROI supporting organisations' strategy from budgets. Annual planning approach. Techniques for using digital marketing to impact organisation strategy. Techniques for aligning digital strategy with organisational and marketing strategy 14 2>Structure The modification of Integration of team marketing with other organizational structure to support management, digital marketing. (corporate communications, brand marketing, direct marketing) and IT staff Use of cross-functional teams and steering groups. Insourcing vs. outsourcing 3>Systems The development of specific processes, Campaign planning approachprocedures or information systems to integration support digital marketing Managing/sharing customer information Managing content quality Unified reporting of digital marketing effectiveness In-house vs. external best-of-breed vs. external integrated technology solutions 4>Staff The breakdown of staff in terms of Insourcing vs. outsourcing their background and characteristics such as IT vs. Marketing, use of Achieving senior management buyin/involvement marketing Staff recruitment and retention. with digital contractors/consultants, age and sex. Virtual working Staff development and training 5>Style Includes both the way in which key managers behave in achieving Relates to role of digital marketing the team in influencing strategy ± organizations' goals and the cultural style 15 of the organization as a whole. it is dynamic and influential or conservative and looking for a voice 6>Skills DDistinctive capabilities of key staff, but Staff skills in specific areas: supplier cacan be interpreted as specific skill-sets selection, of team members. Content marketing affiliate project management, approaches marketing, management, specific e(SEO,PPC, e-mail marketing, online advertising) 7>Superordinate The guiding concepts of the digital goals Improving the perception of the marketing organisation which are also importance and effectiveness of the part of shared values and culture. The digital marketing team amongst internal and external perception of these senior managers and staff it works goals may vary with (marketing generalists and IT) According to him McKinsey 7S model is referenced in the E-consultancy Managing an E-commerce team report as a method of reviewing the internal capabilities of an organisation to manage digital channels. Some of the key issues that require management are shown in the table above . {The original refererence is: Waterman, R.H., Peters, T.J. and Phillips, J.R. (1980) Structure is not organisation. McKinsey Quarterly in-house journal. McKinsey & Co., New York.} 16 Analy i of Strat gi Fit in INFOSYS roug Kin y S o l ‚ Leadership Style: Infosys believes that leadership is one of the most essential ingredients of organizational success which is provided by its Chairman, N R Narayanmurthy. Leadership is based on high business vision and predominantly supportive styles. There is emphasis on developing leadership qualities among employees. For this purpose, it has established ³Infosys Leadership Institute´. Top management emphasizes on open door policy, continuous sharing of information, takes inputs from employees in decision making, and builds personal rapport with employees. As we have seen over last few years, we have seen smooth transition from N R Narayanmurthy to Nandan Nilakeni and from Nandan Nilakeni to Kris Gopalkrishnan without any adverse effects on the company outlook and each one has proved to be an able leader taking company forward. ‚ Staff (Human Resources): Since Infosys is in knowledge-based industry, it focuses on the quality of the human resources. Out of total personnel, about 90 per cent are engineers. At 17 the entry level, it emphasizes on selecting candidates who find the company s meritocratic culture satisfying, superior academic records, technical skill s, and high level of learn ability. The company emphasizes on training and development of its employees on continuous basis and spends about 2.65 per cent of its revenues on up gradation of employees skills, and around 50% as employee costs. In spite of t housands of people joining every month, Infosys has been able to maintain its training standard mostly due to its highly matured processes capabilities and investment in infrastructure. 18 ‚ Strategy: Infosys has adopted a client-focused strategy to achieve growth. Rather than focusing on numerous small organizations, it focuses on limited number of large organizations throughout world. In order to cater its clients, the company emphasizes on custom-built softwares. Another differentiating factor for Infosys is that it commands premium margins. Company does not negotiate over margins beyond a certain limit and some time prefers to walk -out rather than compromise on quality for low -cost contracts. This has helped in building an image for quality driven model rather than cost -differentiating model. Increase business from existing and new clients : Infosys has focused on expanding the nature and scope of engagements for the existing clients by increasing the size and number of projects and extending the breadth of its service offerings. For new clients, it provides value added solutions by leveraging its in-depth industry expertise. It increases its recurring business with clients by providing software re-engineering, maintenance, infrastructure management and business process management services which are long -term in nature and require frequent client contact. 19 Expand geographically: Infosys plans to establish new sales and marketing offices, representative offices and global development centers to expand its geographical reach. It plans to increase presence in China through Infosys China, in the Czech Republic and Eastern Europe dir ectly and through Infosys BPO, in Australia through Infosys Australia and in Latin America, through Infosys Mexico. Enhance solution set: Infosys focuses on emerging trends, new technologies, specific industries and pervasive business issues that confron t our clients. In recent years, it has added new service offerings, such as consulting, business process management, systems integration and infrastructure management, which are major contributors to its growth. Develop deep industry knowledge: Infosys has specialized industry expertise in the financial services, manufacturing, telecommunications, retail,transportation and logistics industries. Enhance brand visibility: Infosys invests in the development of its premium brand identity in the marketplace by participating in media and industry analyst events, sponsorship of and participation in targeted industry conferences, trade shows, recruiting efforts, community outreach programs and investor relations. Pursue alliances and strategic acquisitions : Infosys is known for its organic growth (risk averse) strategy though it has strategic alliance with leading 20 technology providers take advantage of emerging technologies in a mutually beneficial and cost-competitive manner. ‚ Shared Values: Values are important part of Infosys s organizational culture. In fact its tagline depicts how much emphasis it lays on core values. The core values are: ‡ Customer Delight: A commitment to surpassing customer expectations. ‡ Leadership by Example: A commitment to set standards in business and transactions and be an exemplar for the industry and teams. ‡ Integrity and Transparency: A commitment to be ethical, sincere and open in our dealings. ‡ Fairness: A commitment to be objective and transaction -oriented, thereby earning trust and respect. ‡ Pursuit of Excellence: A commitment to strive relentlessly, to constantly improve ourselves, our teams, our services and products so as to become the best. ‚ Organizational Structure: The company has adopted a free form organization devoid of hierarchies. Everyone is known as associates irrespective of his position in the company. Software development is undertaken through teams and the 21 constitution of teams is based on the principle of flexibility. A member, who might have been team leader in one project, may be replaced by another member of the same team for another project. This system not only helps in creating the feeling of equality but also helps in developing project leaders. ‚ Skills: From last year, Infosys has made it mandatory for every employee 7uto clear a predefined certifications, domain as well as technical, in order to be eligible for appraisal. This is just one of the initiatives taken by Infosys which signifies the efforts taken for building competencies. Apart from internal initiatives like knowledge management, Infosys has been CMMLevel 5 certified for its process capabilities. Infosys has entered the Balanced Scorecard Hall of Fame for Executing Strategy for achi eving breakthrough performance results using the Balanced Scorecard (BSC). 22 Conclusion ³The 7-S framework of McKinsey is a Value Based Management (VBM) model that describes how one can holistically and effectively organize a company.´ The Seven S Factors are:‚ Strategy A set of actions that you start with and must maintain ‚ Structure How people and tasks / work are organised ‚ Systems All the processes and information flows that link the organisation together ‚ Style How managers behave ‚ Staff How you develop managers (current and future) ‚ Shared Values Longer-term vision, and all that values stuff, that shapes the destiny of the organisation ‚ Skills Dominant attributes or capabilities that exist in the organisation Together these factors determine the way in which a corporation operates . Managers need to take account of all seven of the factors to be sure of successful implementation of a strategy - large or small. They're all interdependent, so if you fail to pay proper attention to one o f them, it can bring the others crashing 23 down around you. Oh, and the relative importance of each factor will vary over time, and you can't always tell how that's changing. Like a lot of these models, there's a good dose of common sense in here, but the 7S Framework is useful way of checking that you've covered all the bases. Effective organizations achieve a fit between these seven elements. This criterion is the origin of the other name of the model: Diagnostic Model for Organizational Effectiveness. The McKinsey 7Ss model is one that can be applied to almost any organizational or team effectiveness issue. If something within your organization or team isn't working, chances are there is inconsistency between some of the elements identified by this classic model. Once these inconsistencies are revealed, you can work to align the internal elements to make sure they are all contributing to the shared goals and values. The process of analyzing where you are right now in terms of these elements is worthwhile in and of itself. But by taking this analysis to the next level and determining the ultimate state for each of the factors, you can really move your organization or team forward. Analysing 7Ss in Infosys indicate that it is an effective organization having good fit among structure,system,strategies,shared values,style skills & staff and this will push the organization forward for long term. 24 THANKING YOU RAM GOPAL M.B.A. LUMBA <DEPTT. OF BUSINESS ADMINISTRATION,UNIVERSITY OF LUCKNOW>