I would say that the lack of awareness about such factors is limiting their business monitoring system. In another scenario, someone may understand about those factors but unable to evaluate in a proper way.
If you asked any of the business people around you about their business/project performance then they will tell you about their profit/loss, sales, revenue, etc. Maybe someone will tell you about their percentage of growth in comparison with the previous years. And you may wonder why most of them aren’t considering other factors of business/project which are crucial to their business success. I would say that the lack of awareness about such factors is limiting their business monitoring system. In another scenario, someone may understand about those factors but unable to evaluate in a proper way.
If you are aware or not there are critical factors for all businesses which are driving your business/project strategy, we call it as “Critical Success Factors” in management terms. And there are some pre-settled and specific indicators to evaluate the success of the business with different factors which we call as “Key Performance Indicators”.
How to find out your critical success factors?
Firstly you understand that critical success factors are the answers to the question “why would customers choose us?” And these are a combination of all activates of your business including the managerial activity. Moreover, this includes factors about the current business operation and future success.
Initially, you have to set your “Business Model” which includes 9 building blocks from Customer Segmentation, Value Proposition, Channels, Customer Relationship, Key Activities, Key Resources, Key Partnerships, Revenue Model and Cost Structure. When you have finished with your Business Model you have to list out what all is really required to deliver your value at its best level.
For E.g. If you are in real estate development business then your critical success factors may be completed the building on time, reduce the construction cost, faster sale of property, proper management, better branding & marketing, best in class customer experience, etc. now businesses have to measure whether we could achieve these objectives or not. Here we use KPIs.
Evaluate with KPIs
The basic difference between KPI and CSF is that critical success factors are the factors which take strategy forward while KPI measures how far we could achieve our strategies or it succeeded in the business. And KPI is measuring the after effects of strategies implemented with CSF not the direct evaluation of the strategies.
If we take the same example of real estate development business we may set the KPI of time taken to complete each floor/unit in building against the CSF of completion of building on time, cost per square feet against the CSF of reduce cost, sales call and sale in the a month against CSF of faster sale of property, etc.
Remember!
CSFs and KPIs will change across Industries, business, departments, process/activity, etc. since it all depends on the nature of the business, resources available, promoter of the businesses and moreover, we do all of these valuations against the pre-settled missions by us, not by the industry.
The problem is that there are 100s of KPIs to choose from and companies often struggle to select the right ones for their business. The wrong KPIs bring the danger of pointing people in the wrong direction and even encouraging them to deliver the wrong things. So it is advisable to accept a professional help on this and understanding about your business objectives of success factors are vital.
