Definition of Critical Success Factor (CSF)
Critical success factor (CSF) is refers to specific activities, procedures or areas that are necessary for an organization or project to achieve its mission and for its continued survival. Critical success factors are unique to each organization and these are required to ensure the success of a project, company or an organization. These key factors reflect the current business and future goals of an organization and can be identified by applying business analytics. For example, a CSFs for a successful information technology (IT) project is user involvement.
We can completely and clearly define Critical success factors as “those things or activities that must go well to ensure success for a project manager or an organization, and, therefore, CSFs represent those managerial or enterprise area, that must be given exceptional and continual consideration and attention to bring about high performance. CSFs include specific issues, procedures or areas vital to an organization's current operating activities and to its future success."
Background & importance of CSFs
As I already discussed above that the critical Success Factors are the essential areas or activities that must be performed well if a company wants to achieve the mission, objectives or goals for its business or project. By identifying CSFs, company can create a common point of reference that will help a company in directing and measuring the success of its business or project.
Critical Success Factors as a common point of reference help everyone in the business or project team to know exactly what's most important and hence people (Human resource) perform their own work in the right context and so finally pull together towards the same overall goal or objective.
The idea of Critical Success Factors was first presented by D. Ronald Daniel in the 1960s. Then a decade later it was built on and popularized by John F. Rockart of MIT's Sloan School of Management. Now this is used extensively to help businesses to implement on their strategies and projects.
Rockart stated CSFs as: "The limited number of areas (activities, procedures) in which if a particular company get satisfactory results, it will ensure successful and long-term competitive performance for the company.”
Rockart further added that there are always few key areas where things must go right for the particular business to flourish. If results in these key areas are not adequate, the company’s efforts for the period will be less than desired. He also concluded that Success Factors are "areas of activity that should receive careful and constant attention from the management of a company."
Difference between the CSFs & Mission (Strategic Goals)
Critical Success Factors although strongly relate with the mission and strategic goals of a company or project but both these have difference. Mission and goals of a company or project focus on the aims and what is to be achieved, whereas Critical Success Factors focus on the most important areas and these get to the very heart of both what is to be achieved? And how a company will achieve it?
Summarized Steps to identify & Use CSFs
In reality, identifying CSFs for a company project or business is a very iterative process. Company mission, strategic goals and Critical Success Factors are intrinsically linked and each will be refined as company develops them. Here are some summarized steps that, used iteratively, will help a company to identify the CSFs for its business or project:
- Establish business or project's mission and strategic goals which will direct and leads your company.
- For each selected strategic goal, management or expert should ask "what activities or procedures are essentially required to achieve the mission of the business or desired objectives of the project?" The outcome will be the candidate Critical Success Factors for the company mission or project.
- Now evaluate the list of candidate Critical Success Factors to find the absolute essential elements for achieving company mission or project success – these are project or business success factors.
- After identifying and evaluating candidate CSFs, a company may uncover some new strategic objectives or more detailed objectives. So company may need to define its mission, objectives and Critical Success Factors iteratively.
- Management of the company or manger should identify how to monitor and measure each of the CSFs for the purpose of successful accomplishment of project or company goal.
- Communicate your CSFs to all project team members or to all key company employees along with the other important elements of company business or project's strategy.
- Management of the company or project manager should keep monitoring and reevaluating project or company CSFs on regular basis to ensure that company employees or project team keep progressing towards desired aims. Critical Success Factors are sometimes less tangible than measurable goals or objectives of the project or company, so it is useful to identify as specifically as possible how management of the company or project manager can measure or monitor each one.
Rockart's Critical Success Factors Checklist
Rockart's Critical Success Factors checklist can be used to make sure that company or project manager considered all type of possible CSFs. Checklist include the following factors:
Industry Factors. Industry factors of a project or company mission result from specific industry characteristics. These factors are the things that company must do to remain competitive.
Environmental Factors. These environmental factors result from macro-environmental influences of a company. Things like the competitors, business climate, the economy, and technological advancements are included in environmental factors.
Strategic Factors. Strategic factors result from the specific competitive strategy chosen by a particular company. These include the way in which the company chooses to position itself or its products and market itself or its products.
Temporal Factors. Temporal factors stem from the company’s internal forces. These factors may CSFs include Specific barriers, directions, challenges, and influences.
Summing up all together we can say that business success factors are the areas of a company or project that are absolutely essential to its success. If a company or project manager will clearly identify and communicate these CSFs, this will ensure that company or project is well-focused and avoids wasting effort and resources on less important areas. By clearly identifying and communicating Critical Success Factors a company can keep the business and project on track towards desired goals and objectives.