What is a Critical Success Factor?
Critical Success Factors (CSF’s) are the critical factors or activities required for ensuring the success your business. The term was initially used in the world of data analysis, and business analysis.
Most smaller and more pragmatic businesses can still use CSF’s but we need to take a different, more pragmatic approach.
Critical Success Factors have been used significantly to present or identify a few key factors that organizations should focus on to be successful.
As a definition, critical success factors refer to “the limited number of areas in which satisfactory results will ensure successful competitive performance for the individual, department, or organization”.
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Being Practical
As you read this and many other resources on the internet you will discover that there are potentially a confusing variety of definitions and uses of Critical Success Factors.
Before you start the journey looking at CSFs it is important to realise that the specific factors relevant for you will vary from business to business and industry to industry. The key to using CSFs effectively is to ensure that your definition of a factor of your organizations activity which is central to its future will always apply.
Therefore success in determining the CSFs for your organization is to determine what is central to its future and achievement of that future.
This page is primarily written for students of management and business, to keep things simple for application in smaller organizations remember to only have 5-7 critical factors for YOUR organization, and I am sure one of those will be cashflow!
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How are they important to your business?
Identifying CSF’s is important as it allows firms to focus their efforts on building their capabilities to meet the CSF’s, or even allow firms to decide if they have the capability to build the requirements necessary to meet Critical Success Factors (CSF’s).
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Academic Background/ History
The principle of identifying critical success factors as a basis for determining the information needs of managers was proposed by RH Daniel (1961 Harvard Business Review – HBR) as an interdisciplinary approach with a potential usefulness in the practice of evaluation within
library and information units but popularized by F Rockart (1979 Harvard Business Review – HBR). In time many academics have applied the methodology increasingly outside the educational establishment.
The idea is very simple:
in any organization certain factors will be critical to the success of that organization, in the sense that, if objectives associated with the factors are not achieved, the organization will fail – perhaps catastrophically so.
The following as an example of generic CSF’s:
- New product development,
- Good distribution, and
- Effective advertising
Factors that remain relevant today for many organizations.
The actual development or history of the approach
With a phrase like Critical Success Factors having ‘common usage’ within technical environments it is difficult to identify its true history in the context of business, management and human resources. One test for originality is the use of the TLA (Three Letter Acronym) of CSF. And one of the earliest uses of this is by
Chief executives define their own data needs. By: Rockart, John F.. Harvard Business Review, Mar/Apr79, Vol. 57 Issue 2, p81-93, 13p
In this earlier work:
MANAGEMENT INFORMATION CRISIS. By: Daniel, D. Ronald. Harvard Business Review, Sep/Oct61, Vol. 39 Issue 5, p111-121, 11p
Ronald does not use the term CSF or even the phrase Critical Success factors, but does discuss critical elements and non critical elements of a business leading to “controlling competitive success” Daniel also uses the term “success factors” in the context that we would understand today.
Predating these pieces is a short entry:
THE CASE STUDY METHOD AND THE ESTABLISHMENT OF STANDARDS OF EFFICIENCY.By: Lebreton, Preston P.. Academy of Management Proceedings, 1957, p103-103, 1p
In which students looking into the efficiency of businesses for case studies are recommended to look at “the factors which
seem to be paramount in determining success in this industry” this is bay far the earliest mention of what we today know as “Critical Success factors”
To our mind the first published work of this approach is by Rockart. This pages reproduced from RapidBI.com
Other sources of research:
Management Control Systems: Text, Cases and Readings
By Robert Newton Anthony, John Dearden, Richard F. Vancil
Published by R. D. Irwin, 1972 p151
This publication seems to be one of the earliest and widest cited books in the early days of CSFs.
10 problems that worry presidents. By: Spencer, Lyle M.. Harvard Business Review, Nov/Dec55, Vol. 33 Issue 6, p75-83, 9p
In this article Spencer asks the question: “What are the essential factors that
produce success in my company?” which for 1955 is getting close to the beginnings of CSFs – so for those interested in the early beginings worth a look.
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Types of Critical Success Factor
There are four basic types of CSF’s
They are:
- Industry CSF’s resulting from specific industry characteristics;
- Strategy CSF’s resulting from the chosen competitive strategy of the business;
- Environmental CSF’s resulting from economic or technological changes; and
- Temporal CSF’s 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).
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Definitions
Critical Success Factor
an element of organizational activity which is central to its future success. Critical success factors may change over time, and may include items such as product quality, employee attitudes, manufacturing flexibility, and brand awareness. This can enable analysis.
Critical Success Factor
any of the aspects of a business that are identified as vital for successful targets to be reached and maintained. Critical success factors are normally identified in such areas as production processes, employee and organization skills, functions, techniques, and technologies. The identification and strengthening of such factors may be similar. ..
Critical Success Factor (CSF) or Critical Success Factors
is a business term for an element which is necessary for an organization or project to achieve its mission. For example, a CSF for a successful Information Technology (IT) project is user involvement.
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Five key sources of Critical Success Factors
MAIN ASPECTS OF Critical Success Factors and their use in analysis
CSF’s are tailored to a firm’s or manager’s particular situation as different situations (e.g. industry, division, individual) lead to different critical success factors. Rockart and Bullen presented five key sources of CSF’s:
- The industry,
- Competitive strategy and industry position,
- Environmental factors,
- Temporal factors, and
- Managerial position (if considered from an individual’s point of view). Each of these factors is explained in greater detail below.
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The Industry
Critical success factor
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Industry: There are some CSF’s common to all companies operating within the same industry. Different industries will have unique, industry-specific CSF’s
An industry’s set of characteristics define its own CSF’s Different industries will thus have different CSF’s, for example research into the CSF’s for the Call centre, manufacturing, retail, business services, health care and education sectors showed each to be different after starting with a hypothesis of all sectors having their CSF’s as market orientation, learning orientation, entrepreneurial management style and organizational flexibility.
In reality each organization has its own unique goals so while thee may be some industry standard – not all firms in one industry will have identical CSF’s.
Some trade associations offer benchmarking across possible common CSF’s.
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Competitive strategy and industry position
Critical success factor
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Competitive position or strategy: The nature of position in the marketplace or the adopted strategy to gain market share gives rise to CSF’s Differing strategies and positions have different CSF’s
Not all firms in an industry will have the same CSF’s in a particular industry. A firm’s current position in the industry (where it is relative to other competitors in the industry and also the market leader), its strategy, and its resources and capabilities will define its CSF’s
The values of an organization, its target market etc will all impact the CSF’s that are appropriate for it at a given point in time.
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Environmental Factors
Critical success factor
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Environmental changes: Economic, regulatory, political, and demographic changes create CSF’s for an organization.
These relate to environmental factors that are not in the control of the organization but which an organization must consider in developing CSF’s Examples for these are the industry regulation, political development and economic performance of a country, and population trends.
An example of environmental factors affecting an organization could be a de-merger.
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Temporal Factors
Critical success factor
Critical success factor
Critical success factor
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Temporal factors: These relate to short-term situations, often crises. These CSF’s may be important, but are usually short-lived.
Temporal factors are temporary or one-off CSF’s resulting from a specific event necessitating their inclusion.
Theoretically these would include a firm which “lost executives as a result of a plane crash requiring a critical success factor of rebuilding the executive group”.
Practically, with the evolution and integration of markets globally, one could argue that temporal factors are not temporal anymore as they could exist regularly in organizations.
For example, a firm aggressively building its business internationally would have a need for a core group of executives in its new markets. Thus, it would have the CSF of “building the executive group in a specific market” and it could have this every year for different markets.
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Managerial Position
Critical success factor
Critical success factor
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Managerial role: An individual role may generate CSF’s as performance in a specific manager’s area of responsibility may be deemed critical to the success of an organization.
Managerial position. This is important if CSF’s are considered from an individual’s point of view.
For example, manufacturing managers who would typically have the following CSF’s: product quality, inventory control and cash control.
In organizations with departments focused on customer relationships, a CSF for managers in these departments may be customer relationship management.
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How to write a good Critical Success Factor – CSF’s
In an attempt to write good CSF’s, a number of principles could help to guide writers. These principles are:
- Ensure a good understanding of the environment, the industry and the company – It has been shown that CSF’s have five primary sources, and it is important to have a good understanding of the environment, the industry and the company in order to be able to write them well. These factors are customized for companies and individuals and the customization results from the uniqueness of the organization.
- Build knowledge of competitors in the industry – While this principle can be encompassed in the previous one, it is worth highlighting separately as it is critical to have a good understanding of competitors as well in identifying an organization’s CSF’s Knowing where competitors are positioned, what their resources and capabilities are, and what strategies they will pursue can have an impact on an organization’s strategy and also resulting CSF’s
- Develop CSF’s which result in observable differences – A key impetus for the development of CSF’s was the notion that factors which get measured are more likely to be achieved versus factors which are not measured. Thus, it is important to write CSF’s which are observable or possibly measurable in certain respects such that it would be easier to focus on these factors. These don’t have to be factors that are measured quantitatively as this would mimic key performance indicators; however, writing CSF’s in observable terms would be helpful.
- Develop CSF’s that have a large impact on an organization’s performance – By definition, CSF’s are the “most critical” factors for organizations or individuals. However, due care should be exercised in identifying them due to the largely qualitative approach to identification, leaving many possible options for the factors and potentially results in discussions and debate. In order to truly have the impact as envisioned when CSF’s were developed, it is important to thus identify the actual CSF’s, i.e. the ones which would have the largest impact on an organization’s (or individual’s) performance.
Finding information for writing Critical Success Factors (CSF’s)
For the organization following the CSF method, the foundation for writing good CSF’s is a good understanding of the environment, the industry and the organization In order to do so, this requires the use of information that is readily available in the public domain. Externally, industry information can be sourced from industry associations, news articles, trade associations, prospectuses of competitors, and equity/analyst reports to name some sources. These would all be helpful in building knowledge of the environment, the industry and competitors. Internally, there should be enough sources available to management from which to build on their knowledge of the organization. In most cases, these won’t even have to be anything published as managers are expected to have a good understanding of their organization Together, the external and internal information already provides the basis from which discussion on CSF’s could begin.
The information mentioned above can largely be accessed through the internet. Other sources which would be helpful, and not necessarily accessible through the internet, are interviews with buyers and suppliers, industry experts and independent observers.
CSF as an activity statement:
A “good” CSF begins with an action verb and clearly and concisely conveys what is important
and should attended to. Verbs that characterize actions: attract, perform, expand, monitor,
manage, deploy, etc. (“poor CSFs” start with: enhance, correct, up-grade, …)
Examples: “monitor customer needs and future trends”
CSF as a requirement:
After having developed a hierarchy of goals and their success factors, further analysis will lead
to concrete requirements at the lowest level of detail
CSF as a key influence factor:
Some CSFs might influence other CSFs or factors such as markets, technologies, etc.
Such CSFs could be rephrased into “key influence factors” For example: “physical size” or “trained staff”
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Key Performance Indicators (KPI’s) and Critical Success factors
A critical success factor is not a key Performance Indicator (KPI). Critical success factors are elements that are vital for a strategy to be successful. KPI’s are measures that quantify objectives and enable the measurement of strategic performance.
For example:
- KPI = number of new customers/ response time
- CSF = installation of a call centre for providing quotations
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A Critical Success Factor Method
Start with a vision:
- Mission statement
- Develop 5-6 high level goals
- Develop hierarchy of goals and their success factors
- Lists of requirements, problems, and assumptions
- Leads to concrete requirements at the lowest level of decomposition (a single, implementable idea) Along the way, identify the problems being solved and the assumptions being made
Cross-reference usage scenarios and problems with requirements
- Analysis matrices
- Problems vs. Requirements matrix
- Usage scenarios vs. Requirements matrix
- Solid usage scenarios
- Relationship to Usage Scenarios
- Usage scenarios or “use cases”; provide a means of determining:
- Are the requirements aligned and self-consistent?
- Are the needs of the user being met as well as those of the enterprise?
- Are the requirements complete
- Results of the Analysis
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Using Critical Success Factors for Strategic and Business Planning
For other strategic business planning models please see our management models page
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Examples of Critical Success factors
Statistical research into CSF’s on organizations has shown there to be seven key areas. These CSF’s are:
- Training and education
- Quality data and reporting
- Management commitment,
customer satisfaction
- Staff Orientation
- Role of the quality department
- Communication to
improve quality, and
- Continuous improvement
These were identified when Total Quality was at its peak, so as you can see have a bias towards quality matters. You may or may not feel that these are right or indeed critical for your organization.
The Critical Success Factors we have identified and us in the BIR process are captured in the mnemonic PRIMO-F
- People – availability, skills and attitude
- Resources – People, equipment, etc
- Innovation – ideas and development
- Marketing – supplier relation, customer satisfaction, etc
- Operations – continuous improvement, quality,
- Finance- cash flow, available investment etc
Following is a sample list of the more common success factors.
This list should serve only as a guide to get you started. Some of these factors will be irrelevant in a particular industry or competitive situation; others may need to be added, as appropriate.
The factors are grouped into three categories of organizational competency, you will use your own differentiators.
Examples of Success Factors:
Understanding of Market:
- Sensitivity to changing market needs
- Understanding of how and why customers buy
- Innovative response to customer needs
- Consumer loyalty
- Linkage of technology to market demand
- Link marketing to production
- Investment in growth markets
- Knowing when to shift resources from old to new products
- Long-term view of market-development and resources
- Ability to target and reach segments of market
- Identify and exploit global market
- Product-line coverage
- Short time to market for new products
- Lack of product-line overlap
- Identification and positioning to fulfill customer needs
- Unique positioning advantage
- Strong brand image and awareness
- Understanding of competitors’ capabilities and decision rules
- Sensitivity to cues for co-operation
- Prevention of price wars
- Aggressive commitment when required
- Willingness to form inter company coalitions
- Maximizing payback from marketing response to resources
Marketing Variables:
- Distribution coverage, delivery speed, and prominence
- Co-operative trade relations
- Advertising budget and copy effectiveness
- Promotion magnitude and impact
- Sales force size and productivity
- Customer service and feedback
- High product quality
- Patent protection
- Low product cost
- Ability to deliver high value to user
- Large marketing resource budget
Decision making:
- Marketing research quality
- Information system power
- Analytic support capability
- Develop human resources
- Attract the best personnel
- Managerial ability and experience
- Quick decision and action capability
- Organizational effectiveness
- Learning systematically from past strategies
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Sample Critical Success Factor templates
Critical Success Factor analysis – Template 1
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Critical Success Factors for __________________ Dated ____________
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| Critical Success Factor |
Source of CSF |
Primary Measures& Targets
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Industry,
Strategy,
Environmental,
Temporal [delete as appropriate]
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Industry, Strategy, Environmental, Temporal [delete as appropriate] |
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Industry, Strategy, Environmental, Temporal [delete as appropriate] |
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Industry, Strategy, Environmental, Temporal [delete as appropriate] |
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Industry, Strategy, Environmental, Temporal [delete as appropriate] |
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Critical Success Factor analysis – Template 2
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Critical Success Factors for __________________ Dated ____________
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| Success Criteria |
Potential Benefit |
Approach |
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Critical Success Factor analysis – Template 3
| What do you want to be?Vision / Mission / Strategic Goals / Critical Success Factors |
| Vision / Mission / Profile |
| What do we want to become / what is our purpose: |
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Mission:
Vision:
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| Strategic Goals |
| What do we have to do to get there: |
| Strategic Goal #1: |
| Outcomes / Critical Success Factors |
| How we will get there: |
| 1.1 |
| 1.2 |
| 1.3 |
| 1.4 |
| Strategic Goal #2: |
| Outcomes / Critical Success Factors |
| How we will get there: |
| 2.1 |
| 2.2 |
| 2.3 |
| 2.4 |
| 2.5 |
| Strategic Goal #3: |
| Outcomes / Critical Success Factors |
| How we will get there: |
| 3.1 |
| 3.2 |
| 3.3 |
| 3.4 |
| 3.5 |
| Strategic Goal #4: |
| Outcomes / Critical Success Factors |
| How we will get there: |
| 4.1 |
| 4.2 |
| 4.3 |
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Critical Success Factor analysis – Template 4
What should you measure?
Measure Identification Worksheet
This worksheet is helpful in creating the list of measures to support each Critical Success Factor
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| Critical Success Factor |
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| Measures |
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| Supporting Measure Name |
Definition / Formula |
Is it a true indicator of this CSF?
What is it telling you?
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Owner(who’s accountable?)
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Is Data Available? |
If yes, Data Source?
If no, is it possible to collect?
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Quality of Data?High / Low
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Targets Available?Yes / no
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Discard?
Future?Keep?
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| Initiatives / Activities |
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| Supporting Initiative / Project |
Unit / Person Responsible |
Implementation Team Member Assigned |
Target Start Date |
Target Completion Date |
Budget/ Resources |
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Critical Success Factor & their analysis in projects
Research has shown that to complete a project successfully the following critical success factors apply:
- Match Changes to Vision
- Define Crisp Deliverables
- Business Need Linked to Vision
- Have a Formal Process to Define Vision
- Organizational Culture Supports Project Management
You can have all of the above elements, but if you lack an engaged and involved business sponsor, your chances for success are greatly lessened.
According to a recent Gartner Institute study, 50% of all projects were delivered above schedule and/or budget.
Many projects were delivered with significant functionality missing, often cancelled after requirements definition.
In 2001, the Gartner group updated their research to include lack of executive sponsorship as a major contributor to project failures.
According to a 2000 Standish Group Report, the top success factors for projects were as follows. The list is in decreasing order of percentage factors responsible for success.
% – Success Factors
- 18% Executive support
- 16% User involvement
- 14% Experienced project manager
- 12% Clear business objectives
- 10% Minimized scope
- 8% Standard software infrastructure
- 6% Firm basic requirements
- 6% Formal methodology
- 5% Reliable estimates
- 5% Other criteria
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Other useful pages on the RapidBI website include: BIR Creatrix Employee Engagement
See more articles on our articles micro site.
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Traditionally Organizational Development (OD) was mainly concerned with the three S’s of an organisation:
Posted by Mike Morrison 
