Who doesn’t want to know where to focus his attention and action so as to hit his targets? The Critical Success Factors, CSFs, is one great methodology to achieve that. But though most managers are enamored with the term, many admit having only a cursory experience with it and feel uncertain whether what they list as their CSFs are the right ones or even meaningful.
Some fine points from a recognized HBR article on CSFs to help readers grasp what CSFs are, are quoted below:
- CSFs are the limited number of areas in which satisfactory results will ensure successful competitive performance for the individual, department, or organization. CSFs are the few key areas where “things must go right” for the business to flourish and for the manger’s goals to be attained.
- CSFs are the areas in which good performance is necessary to ensure attainment of goals.
- In most industries there are usually three to six factors that determine success; these key jobs must be done exceedingly well for a company to be successful.
(From John F. Rockart’s HBR article March-April 1979 entitled “The Chief Executives Define Their Own Data Needs”
Note: CSFs were first discussed in the management literature in 1961 by D. Ronald Daniel, Managing Director of McKinsey & Company).
In other words, CSFs are what a manager must selectively do each day in working to accomplish his goals. Thus, Goals very much influence CSFs. Having identified a manager’s goals, the CSFs underlying the goals will next be derived and discussed. Goals and CSFs are interrelated and can be thought together when working to determine them.
But from where should managers draw content to identify goals and CSFs? Of course, company strategy and objectives and strategy goals are very important to consider. But deviating a little from the Balanced Scorecard (BSC) that considers strategy as the only source of objectives and goals, the CSF methodology advises the manager to also look outside the company to assess the prevailing industry important factors as well as issues in the company’s external environment. Furthermore, it recognizes that some of the goals may be specific to the role-position of the manager or that sometimes some issues may gain currency because of specific problems and challenges a company, or its managers are facing. The above translate into three groups of sources for CSFs, categorized for clarity as below:
a) Internally planned critical factors:
Company strategy, objectives, and strategy goals as well as higher-up CSFs
b) Externally determined critical factors which lie outside the company and its control:
Industry concerns and priorities, and environmental currencies that may arise from issues like the national economy, politics, population, or the Environment
c) Specific to the manager critical factors pertaining to:
Position-role duties, and temporal problems
To help guide a manager’s thoughts and actions and ensure that as far as possible all the critical issues have been considered in the search for CSFs, a framework incorporating the above is proposed. This CSF framework has two parts: Part (a) indicates the sources from which to draw content to identify CSFs, and Part (b) shows the process of how the CSFs can be realized.
CSF framework – part (a), below, on the sources from which to draw content to identify CSFs
Having determined the CSFs, the next step is to decide the actions required to achieve them. The way to accomplish CSFs is through focusing on selected initiatives and work activities and projects, following the path: from Goals to CSFs, to Measures and Targets, to Reports and to Initiatives (more or less like the BSC).
CSF framework – part (b), below, shows the process of how the CSFs can be realized
Some worth-noting points about the CSF methodology:
- It is understandable, from what was presented, that CSFs are company as well as manager specific.
- How the manager understands and evaluates the critical factors within and outside the company is a deciding factor in the success of the method. In weighing the factors and deciding the goals and their CSFs, a manager’s experience is critical.
- Interviews by expert consultants are often used to bring to the fore managers’ CSFs.
- Who has CSFs? Every manager who has goals (beyond functional ones) has CSFs.
- They cascade from top downwards, each higher level affecting the lower level.
- At the lower management levels, the manager has almost no internal requirements for strategy or objectives; temporal and role factors specific to the manager together with positional strategic goals prevail.
- CSFs goals may well be considered as the drivers for the leading indicators of the BSC, thus filling that void in the BSC methodology.
- Here, in this post, the CSFs are considered from the aspect of a management planning and control system. It must, however, be remembered that CSFs started as a tool to define management critical information needs.
The proposed CSFs framework guides managers to think over all the sources that may give rise to CSFs, and then offers a path for the steps toward their fulfilment. The manager’s real work, however, lies in the hard thinking of deriving from these sources the CSFs and their measures. When successfully figured out, CSFs reward managers with focus of work and results that count.