The name of the model can be explained by the fact that the model was developed by Tom Peters & Robert Waterman, consultants at the McKinsey & Company consulting firm.
The model proposes 7 interdependent factors – 3 hard ‘S’ i.e. strategy, structure, systems; and 4 soft ‘S’ i.e. shared values, skills, style and staff.
The hard ‘S’ are more tangible, easily to define and easy to influence than the soft ‘S’.
Strategy – It refers to the intended sequence of actions taken by a company to achieve its goals and objectives. It deals with resource allocation and includes competition, customers and the environment.
Structure – It refers to how the various business units are structured and how they communicate with each other. A company’s structure may be centralized or decentralized or may take many other forms depending on the company’s culture and values.
Systems – This includes a host of systems within an organization that define its processes and routines. It includes performance appraisal system, financial systems, IT systems etc.
Shared values – These are the core values of the company that connect all the other 6 factors. These are the fundamental ideas or guiding principles that lay the foundation of businesses.
Skills – These define the core competencies of the employees.
Style – This spans the core beliefs, norms and management style in the organization.
Staff – It refers to the number and type of employees in the organization. It is very important for an organization to manage its human capital to create competitive advantage.