Critical Success Factors
Critical Success Factors is a phrase often used in business, but what are they and how do you develop them. This article describes what they are and takes you through the process of developing them to help you achieve your strategic vision.
What are Critical Success Factors?
When running a business, you may feel like you are drowning in matters that need your attention. How do you know where to focus your time, effort and most importantly, money? How do you ensure your team are all on the same page and understand the main areas they need to focus on? Critical Success Factors can help clarify thinking and communication and ensure that areas of the business that are critical to its success, are the ones that have time spent on them.
Critical Success Factors are the key activity areas in a business that must perform well for your business to achieve its mission and objectives.
The definition, developed by John F Rockart, is;-
The limited number of areas in which results if they are satisfactory, will ensure successful competitive performance for the organisation. They are the few key areas where things must go right for the business to flourish. If results in these areas are not adequate, the organisation’s efforts for the period will be less than desired.
How to Develop and Use Critical Success Factors
Develop the mission for your business and its strategic goals, so that you have an overview of what you want to achieve.
Then look at your strategic goals and consider what activities or areas of the business are essential to get right, to achieve that goal. This develops your list of possible critical success factors.
Review your possible factors to find those that are essential to achieving success. These are your Critical Success Factors. As you start this process, this may prompt you to think in other directions and develop more factors, or possibly further objectives. Keep going at this stage until you feel you have all factors.
Critical Success Factors need to be measurable and able to be monitored. You will need to consider what measures to include in the factors to show success.
You need to communicate your mission, strategic objectives and critical success factors to your team so that everyone is aware of them and their importance.
Don’t forget to review them periodically to ensure they remain relevant to your business and your mission.
An Example of Critical Success Factors
Let’s work through a case study on how to develop Critical Success Factors. Imagine a phone retail outlet, with an overall mission statement as follows:
‘PhonesFirst will be the number one phone retailer in Hopeville, through providing excellent customer service and high-quality phones to its customers.’
The overarching objectives of PhonesFirst are:
- Have customer satisfaction of 95%
- Customer complaints of less than ten a month
- Market share of 30%
- Deliver phones to online customers within 48 hours of order
- Expand product range with more phone accessories.
To develop possible Critical Success Factors we need to look at our mission and objectives to see which parts of PhonesFirst need to focus on to achieve them. First, we’ll come up with a possible list of success factors, then identify which are the critical ones.
|Have customer satisfaction of 95%||Ensure staff are knowledgable about all phones|
|Customer complaints of less than ten a month||Ensure systems work effectively and staff trained in them|
|Market share of 30%||Attract new customers in Hopeville
Ensure pricing is competitive
|Deliver phones to online customers within 48 hours of ordering||Process orders on time
Ensure courier service is reliable
|Expand product range with more phone accessories||Be aware of all possible accessory products|
Now we have our list of success factors; we need to identify those that the business absolutely needs to execute in order to achieve its mission.
There are no specific rules about how many Critical Success Factors a business needs, however, if you have too many it becomes hard to manage them, and you would have to wonder if they were all ‘critical’ to success. Around five or fewer is a usual number.
Given that the mission of PhonesFirst is all about customer service and high-quality products, and becoming the number one retailer, the likely Critical Success Factors for PhonesFirst would be:
- Ensure staff are knowledgeable about all phones
- Ensure systems work effectively and staff trained in them
- Attract new customers in Hopeville
- Ensure pricing is competitive
The process of developing your Critical Success Factors, and then implementing them within your business is a vital one to help you achieve your overall strategic mission.