Critical Success Factors

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This section is about critical success factors. Critical success factors (CSFs) are those things which must go right for the organization to achieve its mission.

The advantages of identifying CSFs are that they are simple to understand; they help focus attention on major concerns; they are easy to communicate to coworkers; they are easy to monitor; and they can be used in concert with strategic planning methodologies. Using critical success factors as an isolated event does not represent critical strategic thinking. But when used in conjunction with a planning process, identifying CSFs is extremely important because it keeps people focused. Clarifying the priority order of CSFs, measuring results, and rewarding superior performance will improve the odds for long-term success as well.

The concept of "success factors" was developed by D. Ronald Daniel of McKinsey and Company, "Management Information Crisis," Harvard Business Review, Sept.-Oct., 1961. The process was refined by Jack F. Rockart in, "A Primer on Critical Success Factors" published in, The Rise of Managerial Computing: The Best of the Center for Information Systems Research, edited with Christine V. Bullen, Homewood, IL: Dow Jones-Irwin, 1986.

There are four basic types of CSFs according to Rockart. They are:

• Industry CSFs resulting from specific industry characteristics;
• Strategy CSFs resulting from the chosen competitive strategy of the business;
• Environmental CSFs resulting from economic or technological changes; and
• Temporal CSFs resulting from internal organizational needs and changes.

Things that are measured get done more often than things that are not measured. Each CSF should be measurable and associated with a target goal. You don't need exact measures to manage. Primary measures that should be listed include critical success levels (such as number of transactions per month) or, in cases where specific measurements are more difficult, general goals should be specified (such as moving up in an industry customer service survey).

Example of Critical Success factors for Company XYZ:

Critical Success Factor	Source of CSF	Primary Measures & Targets
1. Increase # of customers	Industry	95% customer retention rate; 15% new customers per yr
2. Instal PC-based customer service  ...hot line	Strategy	90% of customer queries  answered in 1 hour
3. Increase # customer service reps	Strategy	3 reps per 100 customers
4. Restructure capital structure	Environmental	Lower cost of capital by 2%
5. Raise employee morale and  ...productivity	Temporal	Increase employee retention  rate to 95% / yr.

When setting standards, raising standards often raises results (and the reverse is also true).

For information on, and access to, the  Global Industry Dashboard ^TM,
please visit www.eCompetitors.com  which includes information
on over 9,600 Strategically Relevant Industries (SRIs) including
FREE Competitive Intelligence reports.

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Last modified:   Tuesday February 19, 2008