Understanding Critical Success Factors
Estimated reading time: 4 minutes
Whether you are managing a restaurant, boutique, or insurance agency, it is essential to know that you are focusing on those things that help the organization achieve its mission.
Anyone who manages internal processes understands that balancing daily responsibilities with monitoring the organization’s performance can be challenging.
It has been said that what gets measured gets done.
However, evaluating the organization’s performance can be difficult without the right tools.
A quality improvement tool that many organizations use is called Critical Success Factors (CSF).
What Is A Critical Success Factor (CSF)
CSF indicators measure how well an organization achieves its strategic plan and objectives.
CSF are customized to each organization and help provide the needed focus for fulfilling strategic objectives.
These indicators of success are used to identify those things that, if done well, lead to breakthrough results.
Most organizations have between eight and twelve CSF and adjust them as strategy and strategic plans change.
Too many measures can make it difficult to target those things that would achieve the most significant results.
Too few limits the organization’s ability to move to the next level.
SMART Goals should support the CSF measures, so there is a strategy and timeline for achieving targets.
As a general rule of thumb, CSF should target those things that affect quality, cost, customer satisfaction, market share, and increased revenues.
Monitoring these indicators monthly provides a quick visual for how well the organization is achieving its goals and is the best way to ensure they are completed.
Common CSF
Customer Satisfaction – Begin with collecting a baseline for customer satisfaction, then develop a plan to improve the customer experience.
Market Share – Consider your biggest competitors and create a plan to improve the market share of your products and services.
Employee Satisfaction – Employees are your most valuable asset. Talk to employees, find out what keeps employees engaged, and create plans to improve the employee experience.
Compliance With Regulations – Understand the laws that govern your business. Inadvertently breaking the law can create financial and public relations challenges. Strive to maintain legal compliance with all regulations.
Efficiency in Processes – Work is performed through internal processes. Use quality tools to help understand how work is done and strive to improve how you do what you do.
Financial Performance – A business is only as successful as its bottom line. Determine how your business should perform and create plans to improve your financials.
Risk Management – Managing a business comes with many risks. Know what those risks are and put systems in place to manage those risks.
Innovation – Innovative businesses lead. Find ways to spark innovation in your employees and use those creative ideas to set your business apart from the competitors.
Adoption of Technology – Technology is changing rapidly. Take the time to learn about changing technologies and how they can help your business operate more effectively and efficiently.
Community Involvement – We all operate our business within a community. Get involved and work to help improve your community by giving back.
4 Examples of Industry-Specific CSF
Car Dealer
| Critical Success Factor | Target |
|---|---|
| Sales Volume | 150 Units Per Month |
| Diagnostic Accuracy | 3% Error Rate |
| Customer Satisfaction | 95% Extremely Satisfied |
| Market Share | 15% Within 10 Mile Radius |
Church or Ministry
| Critical Success Factor | Target |
|---|---|
| Weekly Attendance | 1000 Per Week |
| Volunteers | 200 Active Volunteers |
| Sunday School Attendance | 350 Per Week |
| Weekly Contributions | $20,000 Per Week |
| Visitors | 25 Per Month |
| Employee/Volunteer Satisfaction | 88% Extremely Satisfied |
Nonprofit Organization
| Critical Success Factor | Target |
|---|---|
| Number of Donors | 15,000 Monthly Donors |
| People Served | 2000 Per Month |
| Volunteers | 350 Active Volunteers |
| Client Satisfaction | 92% Extremely Satisfied |
Restaurant
| Critical Success Factor | Target |
|---|---|
| Customer Satisfaction | 83% Extremely Satisfied |
| Market Share | 20% of 10-mile Radius |
| Employee Turnover | 25% Per Year |
| Food Quality | 5% Returned Meals |
These are merely examples of indicators that can be targeted and measured for success.
Like any other business goal, CSF are only as good as they are measured and monitored.
Create reporting processes where these indicators are reviewed every month by senior leaders.
Successful organizations have learned how to tie their CSF to their strategic plans and use business goals to accomplish them. This is all part of a performance management system.
Does your organization know what its indicators of success are?
If you would like to learn more, this is a great book you might be interested in. Understanding and Creating Critical Success Factors (The Painless Strategic Planning Process)
