In today’s competitive environment knowing and understanding your organization’s CSFs is key to survival and success. Critical success factors (CSFs) and their performance measures play an important role of linking daily operational activities to the organization’s strategies. Without thorough and complete knowledge of its CSFs, the organization’s performance management system will not produce the expected results.
Although most organizations are aware of their success factors, few of them have identified and defined their critical success factors appropriately; separated success factors from their strategic objectives and communicated the CSFs to all employees. Identifying and understanding CSFs will help the organization to focus and allocate resources on those activities that create and add long lasting value.
On the contrary, a lack of comprehending the CSFs will result in performance measurement, monitoring and reporting becoming just another random process that produces a long list of measures and reports not aligned to the overall business strategy.
When selecting the critical success factors of the business, it is important to have senior management commitment to ensure the effectiveness and usefulness of the chosen CSFs. In other words, active leadership by senior management is not an option but mandatory.
Knowing, communicating and evaluating the progress of the organization’s CSFs has the following advantages:
- It helps the organization to discover the most important KPIs that are aligned to the organization’s strategies.
- It helps eliminate performance measures that are unrelated to the organization’s CSFs or those measures that do not positively impact the CSFs.
- CSFs help senior management and their employees to prioritize their actions and resource allocations which in turn help align performance management and strategy.
- By focusing on the critical success factors, performance measurement; monitoring and reporting will become more focused on what matters most. This therefore means senior management will not be bombarded with numerous or irrelevant reports.
- It encourages clearer summary reports to the board and those charged with governance based on progress in the CSFs.
Although the selection of the CSFs is very subjective exercise, the effectiveness and usefulness of the chosen CSFs are highly dependent on the analytical skill of the team involved. It is important to ensure that the wording of the CSFs is clear and easily understandable to all employees. Avoid using broad statements whose meaning is not clear to employees.
Watch out for my next post on identifying organization-wide critical success factors.
I welcome your thoughts and comments.