You are on page 1of 4

Introduction This article focuses on the key aspects of critical success factors (CSFs).

It presents the concept of CSFs and gives suggestions on how to write good critical success factors (CSFs). The article discusses the method for identifying good CSFs, and also gives organisational examples to provide good illustrations of ut ilising information for Critical Success Factors (CSFs). Critical success factors (CSFs) have been used significantly to present or ident ify a few key factors that organisations should focus on to be successful. As a definition, critical success factors refer to "the limited number of areas in w hich satisfactory results will ensure successful competitive performance for the individual, department, or organisationâ (Rockart and Bullen, 1981). Identifying C SFs is important as it allows firms to focus their efforts on building their cap abilities to meet the CSFs, or even allow firms to decide if they have the capab ility to build the requirements necessary to meet critical success factors (CSFs ). Success factors were already being used as a term in management when Rockart and Bullen reintroduced the concept to provide greater understanding of the concept and, at the same time, give greater clarity of how CSFs can be identified. MAIN ASPECTS OF CSFs CSFs are tailored to a firm's or manager's particular situation as different sit uations (e.g. industry, division, individual) lead to different critical success factors. Rockart and Bullen presented five key sources of CSFs: the industry, competitive strategy and industry position, environmental factors, temporal fact ors, and managerial position (if considered from an individual's point of view). Each of these factors is explained in greater detail below. The Industry An industry's set of characteristics define its own CSFs. Different industries will thus have different CSFs, for example research into the CSFs for the busine ss services, health care and education sectors showed each to be different after starting with a hypothesis of all sectors having their CSFs as market orientati on, learning orientation, entrepreneurial management style and organisational fl exibility (Barrett, Balloun and Weinstein, 2005). An example of industry and company CSFs was presented by Rockart and Bullen (198 1) in their research paper and is included here to illustrate their ideas (see f igure 1). Further details on company CSFs are discussed in the next point. Figure 1: Industry and company CSFs (source: Rockart and Bullen, 1981) Figure 1 The example presented by Rockart and Bullen was meant to illustrate that compani es would have different CSFs and would not be completely similar. It can be seen though that many aspects of the CSFs could end up being similar for organisatio ns in an industry. Competitive Strategy and Industry Position Not all firms in an industry will have the same CSFs in a particular industry. A firm's current position in the industry (where it is relative to o ther competitors in the industry and also the market leader), its strategy, and its resources and capabilities will define its CSFs. For example, in 2005 Cater pillar defined a new strategy to aggressively grow revenues over the long term. As part of that new strategy, Caterpillar defined several CSFs specific to the firm which were (Gordon, 2005): Organisational culture: "creating a culture that engaged employees, while fo cusing on safety and diversity"

Quality control: "accelerating the pace of quality improvement for its produ cts, while focusing on improving new product introduction and continuous product improvement processes" Cost focus: "implementing processes to become the highest-quality, lowest co st producer of our high-volume products in each hemispheric currency zone" Other firms in Caterpillar's industry may or may not have the same CSFs, and are unlikely to have the same complete set. Environmental Factors These relate to environmental factors that are not in the control of the organis ation but which an organisation must consider in developing CSFs. Examples for these are the industry regulation, political development and economic performanc e of a country, and population trends. For example, Ladbrokes, a UK bookmaker, will be establishing an international business in Italy where it has just acquir ed a business license, a requirement for foreign sports betting firms prior to e stablishing a business in the country (Citywire, 2007). Another example of environmental factors affecting an organisation was the de-me rger of Mondi, a paper and packaging firm, from its parent Anglo-American, a glo bal mining firm. As Mondi had substantial assets in South Africa, it had to pur sue a dual listing in order to meet the requirements of South African regulation , particularly in relation to its South African investors (Waples, 2007). Envir onmental CSFs for Mondi then in the short term include enhancing relations with the South African regulator and ensuring that requirements of South African inve stors are met. Temporal Factors Temporal factors are temporary or one-off CSFs resulting from a specific event n ecessitating their inclusion. Rockart and Bullen (1981) state that typically, a temporal CSF would not exist and they give as an example of a firm which "lost executives as a result of a plane crash requiring a critical success factor of r ebuilding the executive group". However, with the evolution and integration of markets globally, one could argue that temporal factors are not temporal anymore as they could exist regularly in organisations. For example, a firm aggressive ly building its business internationally would have a need for a core group of e xecutives in its new markets. Thus, it would have the CSF of "building the exec utive group in a specific market" and it could have this every year for differen t markets. For example, Bear Stearns has stated an aggressive expansion plan in Asia to gro w existing and new business lines (Financialwire, 2007). As Bear Stearns grows its business over the next few years, a CSF in each year is to build its managem ent teams for the business and the financial products that it seeks to expand. Managerial Position A final primary source of CSF is managerial position. This is important if CSFs are considered from an individual's point of view. Rockart and Bullen (1981) g ive an example of manufacturing managers who would typically have the following CSFs: product quality, inventory control and cash control. As examples, possibl e firms whose managers would have the stated CSFs mentioned by the authors inclu de Heidelberg Cement (large global cement firm) and Tata Steel (Indian firm whic h now owns Corus Group, a UK steel manufacturing firm) (Satish, 2007). In organ isations with departments focused on customer relationships, a CSF for managers in these departments is customer relationship management (Mendoza et al., 2007). An example of CSFs for the five primary sources is shown from a work on enterpri se security management (see figure 2) which utilised the CSFs method to develop and deploy an effective approach to their business (Caralli, 2004).

Figure 2: Example of CSFs across primary sources (source: Caralli, 2004) Figure 2 HOW TO WRITE GOOD CSFs In an attempt to write good CSFs, a number of principles could help guide writer s. These principles are: Ensure a good understanding of the environment, the industry and the company â It was shown that CSFs have five primary sources, and it is important to have a g ood understanding of the environment, the industry and the company in order to b e able to write them well. These factors are customised for companies and indiv iduals and the customisation results from the peculiarity of the organisation. This peculiarity stems from an organisation's strategy, current position, and re sources and capabilities. Build knowledge of competitors in the industry â While this principle can be enc ompassed in the previous one, it is worth highlighting separately as it is criti cal to have a good understanding of competitors as well in identifying an organi sation's CSFs. Knowing where competitors are positioned, what their resources a nd capabilities are, and what strategies they will pursue can have an impact on an organisation's strategy and also resulting CSFs. Develop CSFs which result in observable differences â A key impetus for the deve lopment of CSFs was the notion that factors which get measured are more likely t o be achieved versus factors which are not measured. Thus, it is important to w rite CSFs which are observable or possibly measurable in certain respects such t hat it would be easier to focus on these factors. These don't have to be factor s that are measured quantitatively as this would mimic key performance indicator s; however, writing CSFs in observable terms would be helpful. Develop CSFs that have a large impact on an organisation's performance â By defi nition, CSFs are the "most critical" factors for organisations or individuals. However, due care should be exercised in identifying them due to the largely qua litative approach to identification, leaving many possible options for the facto rs and potentially results in discussions and debate. In order to truly have th e impact as envisioned when CSFs were developed, it is important to thus identif y the actual CSFs, i.e. the ones which would have the largest impact on an organ isation's (or individual's) performance. FINDING INFORMATION FOR WRITING CSFs For the organisation pursuing the CSF method, the foundation for writing good CS Fs is a good understanding of the environment, the industry and the organisation . In order to do so, this requires the use of information that is readily avail able in the public domain. Externally, industry information can be sourced from industry associations, news articles, trade associations, prospectuses of compe titors, and equity/analyst reports to name some sources. These would all be hel pful in building knowledge of the environment, the industry and competitors. In ternally, there should be enough sources available to management from which to b uild on their knowledge of the organisation. In most cases, these won't even ha ve to be anything published as managers are expected to have a good understandin g of their organisation. Together, the external and internal information alread y provides the basis from which discussion on CSFs could begin. The information mentioned above can largely be accessed through the internet. O ther sources which would be helpful, and not necessarily accessible through the internet, are interviews with buyers and suppliers, industry experts and indepen dent observers. At the individual level, there is a slight difference. The use of the CSFs meth od at the individual level is discussed by Munro and Wheeler (1980) and involves a number of interviews in which the manager's goals and the CSFs that form the basis of the goals are discussed. The interviewer and the manager discuss the r elationships between the goals and the CSFs and agree on which ones to continue

with. While Rockart and Bullen define the structured interview as the key method for i dentifying CSFs at the individual level, there are other methods that have been used and have been found to be effective in identifying them. These other metho ds have been identified as action research, case studies, Delphi technique, grou p interviewing, literature review, multivariate analysis and scenario analysis ( Esteves, 2004, cited in Amberg, Fischl and Wiener, 2005). Limitations A key limitation of the CSFs method is the qualitative aspect to identifying the m. As they are developed from the industry to the company and possibly to the in dividual level, there is a significant degree of variability that could result f rom the qualitative input required. Thus, there could be significant differences in what various people consider CSFs in industries and organisations to be, nec essitating considerable effort and discussion in determining them. CONCLUSION CSFs are used by organisations to give focus on a number of factors that help de fine its success. They help the organisation and its personnel to understand th e key areas in which to invest their resources and time. Ideally, these CSFs ar e observable in terms of the impact on the organisation to allow it to have guid ance 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 pi npointing them. Nevertheless, it is an approach that should be pursued as it pr ovides value in giving due focus to a limited set of factors, which are deemed t o be the most critical for an organisation or individual. If you found this article useful please have a look at the other articles we hav e written: Ansoff analysis, Porter's 5 Forces analysis, SWOT analysis, BCG Growt h-Share Matrix, Porter's Generic Strategies, Scenario Planning, Value chain anal ysis, Pest Analysis, Balanced Scorecard, Competitor Analysis, Industry Lifecycle , Marketing Mix, McKinsey 7S Framework and Product Life Cycle.