The six common misunderstandings regarding critical success factors

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 12.3 some common misunderstandings.

 

 

 

Exhibit 12.3 Common misunderstanding regarding critical success factors

Common Misunderstandings 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 organizations have:

  • Worded their success factors appropriately.
  • Segregated the success factors from their outcome statements.
  • Prioritized their success factors to find their critical ones—their operational CSFs.
  • Communicated the operational CSFs to staff to achieve full understanding and engagement.

 

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). Accordingly, there would be a collection of CSFs in the conglomerate greater than the suggested eight to ten.

A set for each division Only One Set of Critical Success Factors for The Organization

To create alignment between teams in an organization, it is important that there is only one set of between five and eight critical success factors (CSFs) for the organization. If you allow teams, departments, or divisions to create their own operational CSFs, you will have chaos.

Calling them KRAs Critical Success Factors Are Not Key Result Areas

In job descriptions you can often find the words “key result areas” (KRAs) which are often mistaken for CSFs. I believe that job descriptions should have a new section pointing out the organization’s CSFs and how the incumbent should maximize alignment of his or her 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 organizational CSFs are the guiding force ensuring that all staff, every day, treat, as a priority, activities that align well with the CSFs.

You can be at peak performance without having a common understanding of your CSFs Performance management cannot possibly function optimally without a common understanding of your CSFs.

 

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