Identify and discuss the steps for "critical success factors" approach?
HAPPY NEW YEAR!
So many important matters can compete for your attention in business that it's often difficult to see the "wood for the trees". What's more, it can be extremely difficult to get everyone in the team pulling in the same direction and focusing on the true essentials.
That's where Critical Success Factors (CSFs) can help. CSFs are the essential areas of activity that must be performed well if you are to achieve the mission, objectives or goals for your business or project.
By identifying your Critical Success Factors, you can create a common point of reference to help you direct and measure the success of your business or project.
As a common point of reference, CSFs help everyone in the team to know exactly what's most important. And this helps people perform their own work in the right context and so pull together towards the same overall aims.
What is s Critical Success Factor(CSF)?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 your business. 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.
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”.
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!
History/Background
The idea of identifying critical success factors as a basis for determining the information needs of managers was proposed by Daniel (1961) but popularized by Rockart (1979). 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. Rockart (1979: 85), by referring to Daniel (1961), gives the following as an example of the CSFs: new product development, good distribution, and effective advertising for the food processing industry - factors that remain relevant today for many firms.
As we start to discuss the Critical Success Factors, it is important to realize that the specific factors relevant for you will vary from business to business and industry to industry. The key to using Critical Success Factors 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 Critical Success Factors for your organization is to determine what is central to its future and achievement of that future.
Industry CSFs:
Every organization inherits a particular set of operating conditions and challenges that are inherent to the industry (or segment of the industry) in which it chose to do business. This results in a unique set of CSFs that organizations in a particular industry must achieve to maintain or increase their competitive positions, achieve their goals, and accomplish their missions. For example, consider an organization in the airline industry. As a member of this industry, the organization inherits CSFs such as “deliver on-time service” or “move away from the hub-and-spoke system.” Failure to achieve these CSFs may render the organization unable to stay competitive in its industry and may ultimately result in its exit.
Strategic CSFs:
these factors result from the specific competitive strategy chosen by the organization. The way in which the company chooses to position themselves, market themselves, whether they are high volume low cost or low volume high cost producers, etc.
Environmental CSFs:
To be successful, an organization must be mindful of the macro environment in which it op-erates. A closed organization—one that does not fully interact with its external environ-ment—cannot survive in the long term. As a result, an organization must acknowledge the18 CMU/SEI-2004-TR-010environmental factors that can affect its ability to accomplish its mission. Environmental CSFs reflect the environmental factors over which the organization has very little control or ability to actively manage. By making these factors explicit, the organization can at least be mindful of them and actively monitor their performance relative to them.Environmental CSFs describe such conditions as current socio-political issues, the industry’s regulatory environment, and factors such as seasonality. For example, the airline industry has been dramatically affected by terrorist activities, which have forced changes in airport opera-tions and scheduling and have brought about new regulations with which airlines must com-ply. Unfortunately, airlines have very little control over this problem
Temporal CSFs
CSFs are tied to the long-term planning horizon of an organization. Over the strategic plan-ning period the organization’s CSFs may remain fairly constant, adjusted only when the or-ganization makes major changes, such as changing its mission or the industry in which it competes. However, at one time or another, every organization encounters temporary condi-tions or situations that must be managed for a specific period of time, while continuing to maintain its performance in all other areas. These temporary conditions or situations can re-sult in temporal CSFs—areas in which the organization must temporarily perform satisfacto-CMU/SEI-2004-TR-010 19 rily in order to ensure that its ability to accomplish its mission is not impeded.
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.
four steps of CSFs:
Industry CSF's follows from specific industry characteristics.
Different industries have different CSFs. Even within same industry CSFs are not identical from company to company. For example:
Objective: Achieve market share locally of 15%.
CSF: Increasing of customers quantity, increasing of competitiveness versus other local shops.
Strategy CSF's follows from the selected competitive strategy of the business.
It depends on how company positions itself on market, what is the strategy of business and development. Objective: Decrease time of client servicing to 50%. CSF: Install PC-based customer service system.
Environmental CSF's follows from economic or technological changes.
These factors represent environment in which company operates. They include things like the business climate, the economy, competitors, sociopolitical issues, technological improving and so on. Objective: Expand assortment of goods to attract more consumers. CSF: Discovery of new required local suppliers, arrangement of win-win relationship with them.
Temporal CSF's follows from internal organizational needs and changes.
These are temporary conditions or situations in which the organization must achieve success in order to ensure safety of successful accomplishment companies main goals.
A plan should be implemented that considers a platform for growth and profits as well as takes into consideration the following critical success factors:
• Money: positive cash flow, revenue growth, and profit margins.
• Your future: Acquiring new customers and/or distributors.
• Customer satisfaction: How happy they are.
• Quality: How good is your product and service?
• Product or service development: What's new that will increase business with existing customers and attract new ones?
• Intellectual capital: Increasing what you know is profitable.
• Strategic relationships: New sources of business, products and outside revenue.
• Employee attraction and retention: Your ability to extend your reach.
• Sustainability: Your personal ability to keep it all going.
CSFs are used by organisations to give focus on a number of factors that help define its success. They help the organisation and its
personnel to understand the key areas in which to invest their resources and time. Ideally, these CSFs are observable in terms of the impact on the organisation to allow it to have guidance and indications on its achievement of them.
CSFs can be utilised in both the organisation and the individual levels. Their identification is largely qualitative and can result in differing opinions in pinpointing them. Nevertheless, it is an approach that should be pursued as it provides value in giving due focus to a limited set of factors, which are deemed to be the most critical for an organisation or individual.
Thecompany should have a critical success factors in order to know the improvement made by the company from the past up to the present generation. This is possible to every organization even to a smaller unit of business to maintain its progress and limits its capacity. This would show that critical success factors indeed contribute a big help to individuals not only for a certain corporation but also to a person.
REFERENCES:
http://rapidbi.com/created/criticalsuccessfactors.html
http://www.mindtools.com/pages/article/newLDR_80.htm
http://en.wikipedia.org/wiki/Critical_success_factor
http://www.providersedge.com/docs/km_articles/Critical_Success_Factors_of_KM.pdf
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