Critical success factor
Encyclopedia
Critical success factor is the term for an element that is necessary for an organization or project to achieve its mission
. It is a critical factor or activity required for ensuring the success of a company or an organization. The term was initially used in the world of data analysis
, and business analysis
. For example, a CSF for a successful Information Technology
(IT) project is user involvement.
"Critical success factors are those few things that must go well to ensure success for a manager or an organization, and, therefore, they represent those managerial or enterprise area, that must be given special and continual attention to bring about high performance. CSFs include issues vital to an organization's current operating activities and to its future success."
Critical success factors should not be confused with success criteria; those are outcomes of a project or achievements of an organization that are needed to consider the project a success or to esteem the organization successful. Success criteria are defined with the objectives and may be quantified by KPIs.
of McKinsey & Company
in 1961. The process was refined by John F. Rockart in 1981. In 1995, James A. Johnson and Michael Friesen applied it to many sector settings, including health care
.
Many argue that the success of a business is based on identifying a niche market that will ultimately result in growth, development and profitability.
Critical success factors are elements that are vital for a strategy to be successful.
A critical success factor drives the strategy forward, it makes or breaks the success of the strategy, (hence “critical”).
Strategists should ask themselves 'Why would customers choose us?'. The answer is typically a critical success factor.
KPIs, on the other hand, are measures that quantify management objectives
, along with a target or threshold, and enable the measurement of strategic performance.
An example:
Mission statement
A mission statement is a statement of the purpose of a company or organization. The mission statement should guide the actions of the organization, spell out its overall goal, provide a path, and guide decision-making...
. It is a critical factor or activity required for ensuring the success of a company or an organization. The term was initially used in the world of data analysis
Data analysis
Analysis of data is a process of inspecting, cleaning, transforming, and modeling data with the goal of highlighting useful information, suggesting conclusions, and supporting decision making...
, and business analysis
Business Analysis
Business analysis is the discipline of identifying business needs and determining solutions to business problems. Solutions often include a systems development component, but may also consist of process improvement, organizational change or strategic planning and policy development...
. For example, a CSF for a successful Information Technology
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...
(IT) project is user involvement.
"Critical success factors are those few things that must go well to ensure success for a manager or an organization, and, therefore, they represent those managerial or enterprise area, that must be given special and continual attention to bring about high performance. CSFs include issues vital to an organization's current operating activities and to its future success."
Critical success factors should not be confused with success criteria; those are outcomes of a project or achievements of an organization that are needed to consider the project a success or to esteem the organization successful. Success criteria are defined with the objectives and may be quantified by KPIs.
Concept history
The concept of "success factors" was developed by D. Ronald DanielRon Daniel (businessman)
D. Ronald "Ron" Daniel was a longtime top senior partner and director at management consultancy McKinsey & Company, serving as managing director from 1976 to 1988. He graduated from Wesleyan University with a B.A. in mathematics and received an M.B.A. from Harvard Business School.-Career:Daniel...
of McKinsey & Company
McKinsey & Company
McKinsey & Company, Inc. is a global management consulting firm that focuses on solving issues of concern to senior management. McKinsey serves as an adviser to many businesses, governments, and institutions...
in 1961. The process was refined by John F. Rockart in 1981. In 1995, James A. Johnson and Michael Friesen applied it to many sector settings, including health care
Health care
Health care is the diagnosis, treatment, and prevention of disease, illness, injury, and other physical and mental impairments in humans. Health care is delivered by practitioners in medicine, chiropractic, dentistry, nursing, pharmacy, allied health, and other care providers...
.
Many argue that the success of a business is based on identifying a niche market that will ultimately result in growth, development and profitability.
Relation to Key Performance Indicator
Critical Success Factor vs. key performance indicator (KPI):Critical success factors are elements that are vital for a strategy to be successful.
A critical success factor drives the strategy forward, it makes or breaks the success of the strategy, (hence “critical”).
Strategists should ask themselves 'Why would customers choose us?'. The answer is typically a critical success factor.
KPIs, on the other hand, are measures that quantify management objectives
Management by objectives
Management by Objectives is a process of defining objectives within an organization so that management and employees agree to the objectives and understand what they need to do in the organization....
, along with a target or threshold, and enable the measurement of strategic performance.
An example:
- KPI = Number of new customers. (Measurable, quantifiable) + Threshold = 10 per week [KPI reached if 10 or more new customers, failed if <10]
- CSF = Installation of a call centre for providing superior customer service (and indirectly, influencing acquiring new customers through customer satisfaction).