Organization:

Overview of Core Frameworks

Local Training Module For First-year Associates

Associate Handbook
FOREWORD AND OBJECTIVE

This Organization Practice(OP) document provides an overview for use in local training
sessions for first-year associates. It is part of a “series on functional areas.” The objective of
the series is to introduce McKinsey practitioners to the basics in each of our functional areas
of expertise. All the documents in the series are comprehensive in nature and describe the
current tools and frameworks in that functional area

At the end of this document, you can find a section describing a selection of the core
documents and handbooks that can give you further details on some of the frameworks
descried here. All of these documents are now on PDNet; and hard copies of them can be
requested from PDNet Express, which will deliver them in 24 hours

The contents of this document have been adapted for local training sessions through
“Switching Tracks” — OP’s first-year module videotape, which communicates the basic
concepts in a concise and visual way using an actual client — The Scandinavian Railroad
Company. It is 40 minutes long and should be presented in 3 short segments. Between these
segments, the faculty member runs the attached exercises, adds any commentary he/she
considers necessary to clarify the concepts, and provides personal experience on selected
topics. A copy of the videotape and moderator’s guide with exercises can be requested from
the Firm
This document seeks to answer 4 questions

SECTION 1 Why do associates need to consider organizational issues in every engagement?

SECTION 2 What frameworks do we use to help our clients improve organizational performance?
SECTION 3 What role does an associate play in organization work?
SECTION 4 Where can an associate find out more?
McKinsey’s mission is to have lasting and substantial impact on our clients.

To succeed, we need to work all three of the critical elements: choose the best strategy,
develop world-class operations, align the organization.

These three elements both reinforce and constrain each other. The best strategy is only
relevant if it is operationally and organizationally feasible. The optimal organizational design
depends upon the strategic requirement and the operational methods of the client.

This document focuses on one vertex of this triangular relationship. It would be wrong,
however, to believe that you can achieve the impact we seek by focusing on one vertex. We
need to consider all three in every study.
CRITICAL ELEMENTS FOR IMPACT

Successful
strategy

Efficient Effective
operations organization
We only achieve impact when the organizations we serve are successful in implementing the
strategies and operational methods we propose.

However, a recent survey of engagements in which clients failed to implement proposed

strategies found, in three cases out of four, that the client organization was not change-ready or
even capable of implementing the strategy we proposed.

To ensure that we have impact, we need to consider organizational issues as we devise

strategies. We must choose strategies the clients are ready and able to implement or
complement our strategy work with investment in building the organization’s skills so that the
organization can step up to the challenge the superior strategy poses..
3 OUT OF 4 STRATEGIES THAT FAIL DO SO BECAUSE OF THE
ORGANIZATION’S INABILITY TO EXECUTE
Percent

100%=340 responses

Other
McKinsey
recommendations
8
flawed Organization lacked
the capabilities to
17 execute strategy
40

35
Client not
change-ready or
committed
The demand for organizational work is increasing.

Trends in the marketplace and the evolving nature of our clients largely explain this increase
in demand.

The pace of change in the marketplace is accelerating . A strategic choice or an operational

innovation evokes a rapid reaction from competitor. Rarely can a durable competitive
advantage be found in these choices. Rather it is the development of a unique organizational
capability with the inherent flexibility and commitment to sustain world-class performance
that provides durable competitive advantage in these times of rapid change.

The clients we serve are changing as well. They have increasingly hired in-house strategic
capabilities. Most have built strategy shops close to the CEO. Few, however, have the in-house
capability and objectivity to do the organizational work required to make change happen.
ORGANIZATIONAL WORK GROWING IN IMPORTANCE

McKinsey’s engagement mix

Percent of time

Evolving marketplace
• Quickening pace of
strategic adaptation Increasing
• Durable competitive Crafting the
45 demand for
advantage often rooted in answer help with
77
unique organizational organization
capabilities
issues and
Evolving players
change
55 management
• Many businesses acquiring Helping
in-house strategic capability implement 23
• Making change happen change
remains the “neglected art”
10 years Today
ago
Source: Survey of 23 MGMs across the Firm
The recent evolution in our clients has not been missed by our competitors. Each of our
competitors has recently introduced a branded organizational element to their portfolio. Their
organizational expertise figures prominently in their marketing campaigns.
COMPETITORS HAVE BRANDED ORGANIZATION TOOLS

Consulting firm Product Client example

BCG Time –based competition GE

General Systems Process redesign UPRR

Booz Allen Continuous improvement Exxon

United Research Process redesign and facilitation Mobil

Delta Point Transformational change SmithKline Beecham

McKinsey’s consulting approach must evolve as our clients evolve. These changes provoke a
shift in the nature of our work and an evolution of the role of the associate on engagements.

The increased demand for organizational work impacts associates directly. Associates are
drawn into leadership roles on larger teams at an earlier point in their careers. This places
greater emphasis on the need for associates to develop quite soon after joining McKinsey-
superb team leadership skills.
EVOLUTION IN McKINSEY’S APPROACH

From… To…
• “The answer” • Solving for the “answer” and the change
process
• Managing client teams • Building client capabilities

• Small, analytically focused teams • Multiple, highly leveraged McKinsey/client

––average client team of 3* teams
—Average client team of 10*

• CEO counseling by senior people • Coaching and feedback at all levels

*Survey of 23 MGMs across the Firm