McKinsey’s 7-S Model

McKinsey Quarterly has a series of short, interactive, presentations entitled "Enduring Ideas" one of them is on the 7-S framework .introduced in the late 1970s. They describe it as a "watershed in thinking about organizational effectiveness" stating that previously the focus was on organization as structure – essentially a series of spans and layers – organized in a hierarchy.

Although the McKinsey view is that co-ordination became a critical factor in organization effectiveness (rather than structure) it is notable that 40 years later managers are still equating organization effectiveness with structure. Any design or re-design of an organization or business unit seems to start (in the manager's mind) with a rearrangement of the names in the boxes that feature on the organization chart.

Despite the 7-S framework showing linkages between the 7 elements (strategy, style, shared values, systems, skills, structure, staff) and the point being made that the elements are like "the knights of the round table" – all of equal importance. It seems that for those who are fixed on the notion that design = structure it is hard to grasp the simple point that adjusting the structure (or the people in it) will have considerable impact on the other six elements.

Other systems models are based in similar thinking – that organizations are complex and dynamic, and comprise a number of interrelated elements that are not independent levers to pull to solve a presenting problem. There are several to choose from and the major consulting companies all have variations on the theme.

The flaw in the McKinsey model is that it does not have an "S" for "surroundings" or external/operating environment, and it is this aspect that has at least as much of an impact on organization effectiveness as the others, and is much harder to predict and work with.

Strategic planning

How should strategic planning be done? Unfortunately there is no right answer on this. Some commentators think any strategic planning is virtually impossible in a constantly changing and unpredictable environment – there's an interesting article on this called Strategic Planning in a Turbulent Environment: Evidence from the Oil Majors, by Robert M. Grant, in Strategic Management Journal, Vol. 24, No. 6 (Jun., 2003).

Generally speaking, organizations do feel they 'should' do strategic plans and it is the prevailing culture of the organization that both dictates the approach and is also influenced by the approach. Considerations around the strategic planning process and its effectiveness include:

• How formal/informal is the strategic planning process?
• Who should be involved in it?
• How is consensus achieved in the strategic planning process, and by whom, without sacrificing the goals and objectives of the organization?
• What level (if any) of employee or other stakeholder involvement is sought in the strategic planning process?
• What should the focus of ongoing strategic planning be?
• Who has responsibility for reviewing, evaluating, and 'signing off' on the strategic plan?
• How does the strategic plan gets disseminated and to whom?
• How will the plan be kept up to date, adaptive, and dynamic?

Since most systems models of organization design include reference to strategy it presupposes that a strategic plan to deliver the strategy is there – but before starting on an organization design or re-design that's something to check.

Is there an over-arching business culture

Is there such a thing as an over-arching business culture that transcends national cultures? Yongmaan Park, chairman of Doosan Infracore, a South Korean conglomerate observes, in a McKinsey Quarterly article, that

Culture represents country, race, language, history, and such. But when you add "corporate" and make "corporate culture," that's almost identical in most of the successful conglomerates globally.

The key processes of those companies – evaluation and control, strategic planning, HR – are all based on a performance-driven culture, meritocracy, transparency. We come from a different national culture, but successful corporations share a very similar corporate culture.

This suggests that business organizations are more alike than not alike. At the process level this may be true. Many companies use the same technologies to run their business processes – supplied, for example, by Microsoft, SAP, IBM or Cisco. It makes sense that that using similar technology architectures will result in at least similar process operations which supports an argument that there is an over-arching business culture which potentially transcends national boundaries. But given the subtleties of culture it is doubtful that this could ever be proved.

What is observable however is that national cultures interact with corporate cultures in a way that can limit business success. WalMart, for example, pulled out of Germany – the reason cited: The company's culture does not travel, and Wal-Mart does not understand the German customer Similarly IKEA pulled out of Japan in 1986 because of poor sales. However, when it returned in 2006 sales went well. The reason given is that the Japanese are finally, after an economic crisis that follows almost two decades of growing hardship, turning thrifty. These are two, among many other, examples of a national culture 'expelling' a business culture that had found success in other geographies.

The question to answer is how far can an organization's design contribute to minimizing the risk of a difficult or failed entry into a new geography? And what adaptations have to be made to the 'home' organization to make the new one work?

Designing for customer satisfaction

Customer satisfaction is the almost unreachable goal of every organization. Designing in processes, systems, policies, and practices that are customer centric is a challenge as it is not always clear who the customer is i.e. who the design is 'for'.

However, making an assumption that "the customer" is an individual either using a product or service of the organization, or representing the person/group/organization that does then it becomes easier to design in customer centric-ness.

A company called Get Satisfaction offers a service that connects people (customers) and companies in a way that fosters problem-solving, promotes sharing, and builds up relationships.

For an organization designer the site also provides a five point Company-Customer Pact which is the basis of a useful test of a customer centric design. If companies are clear that they have the systems, processes, and people in place to do demonstrate the following:

  1. Being human. Using a respectful, conversational voice, avoiding scripts and never using corporate doublespeak.
  2. Encouraging employees to use their real names and using a personal touch.
  3. Anticipating that problems will occur, and setting clear, public expectations in advance for how they will address (and redress) issues.
  4. Cultivating a public dialogue with customers so they feel they are being heard and to demonstrating the organization's accountability.
  5. Demonstrating their good intentions by speaking plainly, earnestly, and candidly with customers about problems that arise.

Then they are well on the way to opening the possibilities of customer satisfaction. Always assuming that the customers are willing to:

  1. Recognize that problems will occur, and give companies the information and time required to competently address issues.
  2. Share issues directly, or through a forum where the company has an opportunity to respond, so it can work with the customer to solve problems.
  3. Give companies the benefit of the doubt, and be open to what they have to say.
  4. Use their real identity, and foster their long-term reputation with the company.
  5. Be understanding. Show the respect and kindness to company reps that they'd like shown to them.

6 virtues and 24 strengths

Purpose and values are at the core of well designed organizations. Most organizations purport to have a set of values. Sometimes these are evident only on wall plaques, laminated credit-card listings, and websites – they are not 'lived' in the day to day workplace. Sometimes the values are clearly there, in action (though they may not be written down anywhere). Take an organization like Patagonia whose mission is to

Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.

In line with this the values "reflect those of a business started by a band of climbers and surfers, and the minimalist style they promoted". The company is committed to reducing environmental harm and gives "time, services, and least 1% of our sales to hundreds of grassroots environmental groups all over the world who work to help reverse the tide …The approach we take towards product design demonstrates a bias for simplicity and utility".

Although companies rarely mention virtues and strengths when they talk about 'values', in fact they are very similar. In their book Character Strengths and Virtues: A Handbook and Classification by C. Peterson and M. Seligman, 2004 twenty-four character strengths are discussed (grouped into six larger virtue categories):

(1) strengths of knowledge (creativity, curiosity, judgment, love of learning, wisdom)
(2) strengths of fortitude (bravery, honesty, perseverance, zest)
(3) strengths of humanity (kindness, love, social intelligence)
(4) strengths of justice and community (fairness, leadership, teamwork)
(5) strengths of temperance (forgiveness, modesty, prudence, self-regulation)
(6) strengths of transcendence (appreciation of beauty and excellence, gratitude, hope, humor and playfulness, religiousness and faith).

Designing these values and strengths into an organization (via things like selection processes, recognition, knowledge sharing forums, etc) would be a powerful way of supporting the values organizations say they want to exhibit but often have difficulty converting this talk into action.

Positivity

A book by Barbara Fredrickson, Positivity, was published in January this year. It suggests that developing the ability to experience positive emotions leads not only to better health but also to greater achievements.

The book is based in many years of scientific research. The author is Kenan Distinguished Professor of Psychology at the University of North Carolina and has written and co-written many academic papers on the topic of positivity and resilience.

In an op-ed piece in the Huffington Post hof November 16 2008 Fredrickson notes that

"positive emotions … fundamentally change our biochemistry and our world views. In time they can even change who we are – helping us become better versions of ourselves".

It's a whole interesting concept, and although the research is based on individual responses it may not be a stretch to think that many employees with positive attitudes can collectively change the culture of an organization into a creative, innovative, energized environment. To further this notion, perhaps prospective employees could be asked to take the positivity ratio test as one of the assessments of recruitment.

Social value

What company's product gives the greater value: a Ben & Jerry's ice cream that costs more than other ice creams but gives a 'pyschic benefit' because Ben & Jerry's ice cream is sold with the implicit message that it is a force for social value, and supports a foundation for social good. Or the Aravind Eye Hospital that for slightly less than the price of a scoop of ice cream restores sight to very poor people in southern India?

In an article published in Stanford Social Innovation Review, Spring 2009, Philip Auerswald, asks the question "Does social entrepreneurship matter?" drawing on both Ben & Jerry's and the Aravind Eye Hospital to make the case that

entrepreneurs of various types create both private and social value. Private value can be assessed in terms of conventionally defined consumer surplus and producer surplus, where producer surplus is comprised of financial, reputational, and ethical "residuals.

Ultimately he suggests that both are needed given the 'magnitude of 21st century challenges'. It seems easy to say but more difficult to apply in organizations. How do leaders design organizations that balance the challenge of meeting financial goals and also deliver social value? That question seems to be more and more coming the fore in discussions on new forms of organization and requires a significant level of reflection and dialogue to get to the 'right' answer for each organization. Useful preparation for the discussion is the book by Mihaly Csikszentmihalyi, called "Good Business".