Critical success factor

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Critical success factor (CSF) 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.[1]

"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." [2]

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[edit]

The concept of "success factors" was developed by D. Ronald Daniel of McKinsey & Company in 1961.[3] The process was refined into critical success factors by John F. Rockart between 1979[4] and 1981.[5] In 1995, James A. Johnson and Michael Friesen applied it to many sector settings, including healthcare.[6]

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[edit]

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, 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).

References[edit]

  1. ^ Rockart, John F., "Chief executives define their own data needs", Harvard Business Review 1979 (2), pages 81-93.
  2. ^ Boynlon, A.C., and Zmud, R.W. 1984. "An Assessment of Critical Success Factors," Sloan Management Review (25:4), pp. 17-27.
  3. ^ Daniel, D. Ronald, "Management Information Crisis," Harvard Business Review, Sept.-Oct., 1961.
  4. ^ Rockart, John F. "Chief Executives Define their Own Data Needs" published in "Harvard Business Review" March 1979
  5. ^ Rockart, John F. "A Primer on Critical Success Factors" published in The Rise of Managerial Computing: The Best of the Center for Information Systems Research, edited with Christine V. Bullen. (Homewood, IL: Dow Jones-Irwin), 1981, OR, McGraw-Hill School Education Group (1986)
  6. ^ Johnson, James A. and Michael Friesen (1995). The Success Paradigm: Creating Organizational Effectiveness Through Quality and Strategy New York: Quorum Books. ISBN 978-0-89930-836-4