critical-success-factors

Critical Success Factors In A Nutshell

Critical success factors (CSFs) are elements that must be met for an organization to achieve its goals. A critical success factors analysis might help businesses identify the opportunities based on the goals and missions of the business both short and long term.

Understanding critical success factors

Critical success factors have a few non-negotiable characteristics.

They must:

  • Be synonymous with a high-level goal.
  • Directly be linked to the business strategy.
  • Be integral to organizational success.
  • Benefit the individual, department, or organization as a whole.

In terms of a precise definition, critical success factors are generally action phrases describing the desired result and the action itself. 

For example, a company might seek to be service-oriented when working with its customers. Another may opt to work toward a higher quality order fulfillment experience through process improvements.

Regardless of the particular CSF or industry concerned, it must be stressed that the preferred course of action is aligned with organizational goals and mission.

Determining critical success factors

Establishing a suite of critical success factors can be performed in five steps:

  1. Assemble a team from the top level of the organization. Seniority is important to guide proper strategy and ensures there is buy-in from those with the power to make decisions. Some businesses may choose to bring in consultants to facilitate the process.
  2. Incorporate employee feedback to create a list of around 10 to 15 critical success factors. Be sure to incorporate a broad swathe of employees, backgrounds, skills, departments, and expertise.
  3. Use multiple frameworks to understand the key elements of each goal. A business may choose to use an OAS (Objective, Advantage, Scope) statement to help them describe its strategy and strategy execution. A SWOT analysis can also be performed to optimize performance, maximize potential, manage competition, and minimize risk. Then, combine a strategic plan with a change agenda to outline what needs to change for goals to be met.
  4. Determine which factors are key to achieving long-term plans. Using key insights from the frameworks in step 3, determine the most salient critical success factors. These factors and their associated goals should then be grouped by category. As a general rule, the categories of finance, customer, process, and people are a good place to start.
  5. Strategic plan implementation – it is important to take action on a strategic plan to see the real benefits. Some organizations opt to use a balanced scorecard (BSC) which helps them understand if they are acting in such a way that their objectives will be met. What’s more, the balanced scorecard lists smaller action tasks that keep the team motivated to follow through on the strategic plan.

Different types of critical success factors

According to American organizational theorist and MIT lecturer John F. Rockart, there are five broad CSF types:

  1. Temporal factors – or factors critical to the success of managing short-term or temporary situations. A somewhat temporal factor was the introduction of COVID-19 hygiene protocols in many brick-and-mortar businesses.
  2. Management-position factors – these factors are identified by managers who have a unique perspective on continuous improvement, company culture, and employee engagement. Factors are specific to the individual role or expertise of each manager. For example, an operations manager may gauge success through production efficiency and cost control.
  3. Industry-related factors – or factors an organization must satisfy to remain industry competitive. For an airline company, a CSF may be an average delay time of no more than ten minutes.
  4. Peer-related factors – which factors relate to the relative position of a business with respect to its competitors? An industry leader will be more focused on maintaining a competitive advantage. On the other hand, a smaller player may consider success to be an increase in market share driven by higher brand loyalty.
  5. Environmental factors – describing any factor happening external to the organization over which it has no control. Examples include public or economic policy, competitor behavior, and technological innovation. Critical environmental success factors should always seek to mitigate, anticipate, and stay ahead of the curve wherever practicable. 

Key takeaways:

  • Critical success factors are objectives that must be satisfied for an organization to meet goals, objectives, or missions.
  • Critical success factors are created by assembling a team of senior managers and incorporating employee feedback. Frameworks such as the SWOT analysis and OAS statement then help the organization determine which CSFs are the most important for success.
  • Critical success factors are grouped into five general types: temporal, management-position, industry-related, peer-related, and environmental.

Other Tools

what-is-okr
Andy Grove, helped Intel become among the most valuable companies by 1997. In his years at Intel, he conceived a management and goal-setting system, called OKR, standing for “objectives and key results.” Venture capitalist and early investor in Google, John Doerr, systematized in the book “Measure What Matters.”
operational-planning
Operational planning defines how human, financial, and physical resources will be allocated to achieve strategic objectives. That should answer some key questions such as what are the strategies that need to be completed? Who has responsibility for each task? When should the task be completed? What is the timeline? How should progress be measured? How many resources have been allocated to task completion?
ogsm-framework
The OGSM framework is a means of creating a well-structured and actionable marketing strategy. Fundamentally, the OGSM framework allows businesses to first define what they want to achieve and then determine how they will get there. To provide direction for marketing teams, the acronym of OGSM (objectives, goals, strategies, measures) should be followed in sequential order. Here is a look at each in more detail.
gap-analysis
A gap analysis helps an organization assess its alignment with strategic objectives to determine whether the current execution is in line with the company’s mission and long-term vision. Gap analyses then help reach a target performance by assisting organizations to use their resources better. A good gap analysis is a powerful tool to improve execution.
vmost-analysis
The VMOST Analysis is a tool that allows a business to evaluate its core strategies in terms of whether the supporting activities of that strategy are being carried out. The VMOST analysis tries to answer that by looking at five core elements: vision, mission, objectives, strategies, and tactics.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"