Keywords: Critical success factor
Definition
Critical success factor (CSF) is a management 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 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 areas 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. The latter are outcomes of a project or achievements of an organization necessary to consider the project a success or the organization successful. Success criteria are defined with the objectives and may be quantified by key performance indicators (KPIs).
Concept history
The concept of "success factors" was developed by D. Ronald Daniel of McKinsey & Company in 1961. The process was refined into critical success factors by John F. Rockart between 1979 and 1981. In 1995, James A. Johnson and Michael Friesen applied it to many sector settings, including healthcare.
Relation to key performance indicators
Critical success factor vs. key performance indicator:
- 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 which 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 li="">
- CSF = Installation of a call centre for providing superior customer service (and indirectly, influencing acquiring new customers through customer satisfaction).
