By David Parmenter
It is concerning that many organizations run their enterprise without shared and communicated CSFs. For this to happen there has to be a serious misunderstanding. I have set out in Exhibit 1 some common misunderstandings.
Exhibit 1 Common misunderstanding regarding critical success factors (extract from the CSFs toolkit)
|Better practice solution
|Thinking that “We already know our CSFs”
|It is common for the executive team to believe they and everybody else knows the CSFs. I often joke that I could ask a CEO on consecutive days “What are your CSFs?” and I would get slightly different answers each day.
Most organizations know their success factors; however, few have:
|Mixing critical success factors and external outcomes
|We need both CSFs and external outcomes, albeit in two separate lists. The problem is that in most exercises I have observed the of list success factors includes, in error, some external outcomes. It is important that the KPI team read the section on “Distinguishing between critical success factors and external outcomes” a number of times, so they are clear about the difference.
|Too many CSFs
|Limit to eight to ten Critical Success Factors
After twenty years using this approach I have found the magic number is between eight to ten, regardless of the organization’s size. However, for a conglomerate in the private sector, (the CSFs will largely be industry-specific (e.g., the CSFs for an airline are different from the CSFs for a retail store). So, each company would have some specific CSFs and some group-worded CSFs, adding up to a number within the 8-10 recommended limit.
|A set for each division
|Only One Set of Critical Success Factors for The Organization
To create alignment between teams in an organisation, there must be only one set of between five and eight critical success factors (CSFs) for the entity. You will have chaos if you allow teams, departments, or divisions to create their own operational CSFs.
|Calling them KRAs
|Critical Success Factors Are Not Key Result Areas
In job descriptions, you can often find the words “key result areas” (KRAs), often mistaken for CSFs. I believe that job descriptions should have a new section pointing out the organisation’s CSFs and how the incumbent should maximize alignment of their duties with them.
This would help to clarify the difference between KRAs and CSFs. The KRAs are those duties and tasks that the incumbent must be able to perform, and the organisational CSFs are the guiding force ensuring that all staff, every day, treat activities that align well with the CSFs as a priority.
|Thinking that you can be at peak performance without having a common understanding of your CSFs
|Performance management cannot function optimally without a common understanding of your CSFs.
Without CSFs, performance measurement, monitoring, and reporting will be a series of random processes, creating a small army of measurers producing numerous numbing reports. Very few, if any, of the measures in these reports contain the characteristics of “winning KPIs.”
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