When talking about critical success factor approach, it was discussed by my classmates during our reporting in management information system II last December 15. According to the reporters, they said Critical Success Factor Methodology (CSF) in the context of
SISP are used for interpreting more clearly the objectives, tactics, and operational activities in terms of key information needs of an organization and its managers and strengths and weaknesses of the organization’s existing systems. Rockart (1979) defines critical success factors as being ‘for any business the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization.’
CSFs can exist at a number of levels. They represent the few key areas where things must go right for the business to flourish. Consequently, critical success factors are areas of activity that should receive constant and careful attention from management. Rockart originally developed the CSF approach as a means to understanding the information needs of CEOs. The approach has subsequently been applied to the enterprise as a whole and has been extended into a broader planning methodology. It has been made the basis of many consulting practices and has achieved major results where it has been used well. There are four basic types of CSFs according to Rockart. They are: Industry CSFs resulting from specific industry characteristics; Strategy CSFs resulting from the chosen competitive strategy of the business; Environmental CSFs resulting from economic or technological changes; and Temporal CSFs resulting from internal organizational needs and changes. CSFs at a lower level are derived from those at the preceding higher level. The CSF approach introduces information technology into the initial stages of the planning process and helps provide a realistic assessment of the IT’s contribution to the organization.
For me, critical success factor means what factors that contributes to the success of a person, an organization or a company. In addition, CSF for me defines what and how a person did to become successful. I totally agree with the definition given above that CSF defines clearly the objectives and the target goal. In relating CSF in real life, I have read from the myGoals.com, there are CSF’s there that will help people in achieving success regardless of how we do it or define it. Let me share it then:
The 1st critical success factor. Clearly Identify Your Goals. The first step before reaching success is we should first define our goals. When we define our goals, let’s make it sure that it is specific, measurable, attainable, realistic and timely goals. And when our plan is too complex or complicated, we can break down our plan into small and manageable parts. With this, we can make sure that we can evaluate easily if we are on track with our plans or not.
Second, Identify the Obstacles. As we all know that move we make in our lives, there will always be obstacles or hindrances. This step will help us in preparing solutions to the problems that may arise during our journey to reach our goals. In addition, we’ll be able to know how to react when such situations will occur.
Third, Know the Tasks Necessary to Overcome Each Obstacle. The quote “taking one step at a time” will come into this place. It is the same with handling all the problems; we can not solve our problems all at once. We should take each problem at a time, and with this we can think on what are the possible solutions to solve these problems.
Fourth, Assign Deadlines. Based on this article, it says there that assign a start and completion date to each task in the plan. It’s ok to be working on several different tasks at the same time, but don’t over do it. Be realistic.
And the last one, Follow the Plan. We must stick to what we have planned, the plan would serve as the guide on our way to success. An additional suggestion given by the myGoals.com is that we should be flexible. Plans as we all know may change before we can complete it. Expect the unexpected events and the plan should be updated to adapt to changes.
But what are the steps in Critical Success Factor Approach?
These steps are taken from http://www.paullemberg.com/criticalfactors.html
Step 1: Identify your critical success factors
Step 2: Establishing the measurements
Step 3: Setting the baseline
Step 4: Set new goals
Step 5: Closing the gap
Step 6: The Ben Franklin Rotation Program
The first step is to identify your special set of critical success factors. You may have thought this through in the past; you may think you know them intuitively. When asked "What matters?", many executives reflexively say things like sales, customers, people, or product development. These are all good answers, and they may be correct answers, but you will want to think deeper and broader.
Below is a list to start you thinking. It is set in no particular order and contains only the most obvious factors. Review the list and circle areas you believe are critical to your enterprise. You may have to add other, more specific or subtle factors to the list to describe the critical influences on your business' success.
• Distribution - this could be direct sales, telesales, third- party sales, etc.
• Lead generation
• Customer satisfaction
• Referrals
• Research
• Product development
• Production, including quality, costing, run-rates, etc.
• Sufficient investment capital, sufficient working capital
• Customer support / technical support
• Quality assurance
• Sales process / sales life cycle
• Market research
• Customer education
• Sales compensation
• Recruiting
• Personnel retention programs
• Expense management
• Intellectual capital development
• Training
• Marketing communications
• Logistics
• Employee equity
• Executive leadership
• Training and development
• Corporate goals / strategic objectives
• Values and beliefs
• Mission/purpose
• Individual accountability
• Productivity & effectiveness metrics
• Internal communications
• Strategic and tactical planning
• Executive team
• Board of directors/advisors
Be specific when you identify your factors. Don't say "people" when the issue is recruiting, employee satisfaction, training or compensation. Don't say "marketing" or "sales" when the issue is lead generation.
Test your assumptions by imagining a decline in a particular factor. How would that impact your business? Now imagine an improvement in that factor. How would that impact your business?
In selecting factors, limit your list to no more than seven. Why seven? Cognitive theory suggests that human minds are efficient at juggling from five to nine separate trains of thought - the average and oft- quoted number is seven. Our plan is for you to keep your eye on the ball, you want to limit the balls to those you can keep your eye on.
Step 2: Establishing the measurements
Your next step is to establish a measurement scale for each critical factor. Some of these measures will be quantitative; some qualitative. Sales is an easy one: dollars of revenue measured against budget. Leads generated is also easy - how many? You can further break down sales by product and leads by sources, or you can stick to the consolidated numbers. Choose the measure which best reflects your understanding of how the issue affects your business.
Everything is measurable, you just need the right system. How can you measure your effectiveness in sales compensation? You could establish a compound metric which includes total compensation as a percentage of sales revenue, juxtaposed against goal attainment.
Marketing communications is also difficult. One way to measure this is to subjectively assess the quality of your marcom pieces; you could also measure whether you have the total complement of marcom pieces you require. Or, measure whether prospects respond to your marcom efforts. Most likely you will combine all three to get one measure.
A final example is measuring your efforts in the area of your Board of Directors / Board of Advisors. Measures include: do you have one? Are all the board seats filled? Is the board effective for your intended purpose? Measuring the Board factor would likely blend each of these.
Step 3: Setting the baseline
Once you've established a measurement structure for a factor, the next step is setting a baseline.
Each factor should be set against a normalizing scale ranging from 1 to 10. Subjectively this can translate into non-performing(1), poor (2-3) , mediocre (4-5), good (6-7), great (8-9), and outstanding (10).
If your sales run-rate is $10 million, determine whether that is a 1, a 5, or a 10. Your answer depends of course on whether you consider performance against budget, performance against stretch goals, or performance against "home-run-out-of-the-park" goals.
If your baseline for Board of Directors is two unfilled board seats - is that a 5 (mediocre) or a poor (2-3)? Only you can decide. Although this ultimately is a subjective process, you want to make it as objective as possible.
Step 4: Set new goals
Next, create a "gap" between where you are - your baseline - and your target for that factor. You already have a sales plan, so your gap exists between your current revenue and your budgeted revenue.
You may consider your baseline a 5, and your target an 8. Implicit in this 1- 10 scale are judgements about your intentions: will reaching your budgeted revenue put you at 8 (almost great) or 10 (outstanding)?
Where do you want to peg your efforts? If you've assessed your employee training at a 4 (mediocre), are you shooting for a 7 (good) or a 9 (great)? You can see from this how your measurement structure and goal system will impact how you allocate your company's resources and energy.
Step 5: Closing the gap
You now have a baseline and a target for each factor. Between them they define a factor gap - your challenge is to close it. Each gap becomes the focus of a meditation which asks the question: What will close the gap between our current level of this factor and our desired level? What possible actions will raise that measurement?
You may have intuitive responses to these questions, and when appropriate, trust your gut. If need be, back that gut response with research - but only when cost effective.
(Sometimes the most cost effective research is implementation, particularly in simple matters.)
Use any idea generation process you are comfortable with. Develop several possible initiatives to raise the level of that factor. With luck your ideas will work together and harmonize in terms of impact or implementation requirements.
If you create competing ideas, select the best alternatives. Choose based on return on investment, required resources, scheduling conflicts, time to impact, total cost, and likelihood of success versus risk of failure.
Depending on the specific factor, and the size of the gap, you may plan to close it in stages or shoot the gap all at once. You can launch one initiative at a time, or implement several initiatives in parallel. Once you launch your gap-closing initiatives, continually measure your results. Report your progress to participants and stakeholders, and post it publicly.
Step 6: The Ben Franklin Rotation Program
As a young adult, Ben Franklin identified thirteen virtues he aspired to. In order to implement these virtues in his life he devised a "Plan for Self Examination", a program whereby he focused his attention, one virtue at a time, for one week at a time, rotating through the entire list four times a year.
He kept a detailed log of the actions he took to develop the virtues in himself, along with his personal results.
I've adapted Franklin's concept and called it the Ben Franklin Rotation Program. At any point in time, you will have in place a program for improving every one of your critical factors. But in any given week, your primary attention will be on only one factor.
Using Franklin's principles, at the beginning of each week, focus your mind - or collective mind of your management team - on improving that week's factor. What new actions can you take, what new attitudes can you adopt, what new or renewed approaches are available - which will enhance your performance in that one specific area? Do that "thing" wholeheartedly for the entire week.
Franklin also shows us how to track your progress in this venture. Create a score sheet detailing your Critical Success Factors. This sheet should detail each factor, its measurements, your current 1-10 rating and your target rating, along with your next action steps for improving that rating.
Each factor also gets a weight, which enables you to develop an overall score. Each week, re-rate all the factors on the score sheet, and graph your progress. You may also graph the overall score. Publish the score sheet and the graphs. You can establish a reward system based on individual progress, or, using the factor weights, you can develop a bonus structure which incentivizes total progress.
This simple system will focus your attention on improving each one of your critical success factors. With carefully selected factors, you insure both rapid performance increases and balance in your company.
Organizations may have different approaches in identifying their own critical success factors but what is most important is with the help of these factors, the organization can evaluate and improve their performance in delivering their service to the people
SISP are used for interpreting more clearly the objectives, tactics, and operational activities in terms of key information needs of an organization and its managers and strengths and weaknesses of the organization’s existing systems. Rockart (1979) defines critical success factors as being ‘for any business the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization.’
CSFs can exist at a number of levels. They represent the few key areas where things must go right for the business to flourish. Consequently, critical success factors are areas of activity that should receive constant and careful attention from management. Rockart originally developed the CSF approach as a means to understanding the information needs of CEOs. The approach has subsequently been applied to the enterprise as a whole and has been extended into a broader planning methodology. It has been made the basis of many consulting practices and has achieved major results where it has been used well. There are four basic types of CSFs according to Rockart. They are: Industry CSFs resulting from specific industry characteristics; Strategy CSFs resulting from the chosen competitive strategy of the business; Environmental CSFs resulting from economic or technological changes; and Temporal CSFs resulting from internal organizational needs and changes. CSFs at a lower level are derived from those at the preceding higher level. The CSF approach introduces information technology into the initial stages of the planning process and helps provide a realistic assessment of the IT’s contribution to the organization.
For me, critical success factor means what factors that contributes to the success of a person, an organization or a company. In addition, CSF for me defines what and how a person did to become successful. I totally agree with the definition given above that CSF defines clearly the objectives and the target goal. In relating CSF in real life, I have read from the myGoals.com, there are CSF’s there that will help people in achieving success regardless of how we do it or define it. Let me share it then:
The 1st critical success factor. Clearly Identify Your Goals. The first step before reaching success is we should first define our goals. When we define our goals, let’s make it sure that it is specific, measurable, attainable, realistic and timely goals. And when our plan is too complex or complicated, we can break down our plan into small and manageable parts. With this, we can make sure that we can evaluate easily if we are on track with our plans or not.
Second, Identify the Obstacles. As we all know that move we make in our lives, there will always be obstacles or hindrances. This step will help us in preparing solutions to the problems that may arise during our journey to reach our goals. In addition, we’ll be able to know how to react when such situations will occur.
Third, Know the Tasks Necessary to Overcome Each Obstacle. The quote “taking one step at a time” will come into this place. It is the same with handling all the problems; we can not solve our problems all at once. We should take each problem at a time, and with this we can think on what are the possible solutions to solve these problems.
Fourth, Assign Deadlines. Based on this article, it says there that assign a start and completion date to each task in the plan. It’s ok to be working on several different tasks at the same time, but don’t over do it. Be realistic.
And the last one, Follow the Plan. We must stick to what we have planned, the plan would serve as the guide on our way to success. An additional suggestion given by the myGoals.com is that we should be flexible. Plans as we all know may change before we can complete it. Expect the unexpected events and the plan should be updated to adapt to changes.
But what are the steps in Critical Success Factor Approach?
These steps are taken from http://www.paullemberg.com/criticalfactors.html
Step 1: Identify your critical success factors
Step 2: Establishing the measurements
Step 3: Setting the baseline
Step 4: Set new goals
Step 5: Closing the gap
Step 6: The Ben Franklin Rotation Program
The first step is to identify your special set of critical success factors. You may have thought this through in the past; you may think you know them intuitively. When asked "What matters?", many executives reflexively say things like sales, customers, people, or product development. These are all good answers, and they may be correct answers, but you will want to think deeper and broader.
Below is a list to start you thinking. It is set in no particular order and contains only the most obvious factors. Review the list and circle areas you believe are critical to your enterprise. You may have to add other, more specific or subtle factors to the list to describe the critical influences on your business' success.
• Distribution - this could be direct sales, telesales, third- party sales, etc.
• Lead generation
• Customer satisfaction
• Referrals
• Research
• Product development
• Production, including quality, costing, run-rates, etc.
• Sufficient investment capital, sufficient working capital
• Customer support / technical support
• Quality assurance
• Sales process / sales life cycle
• Market research
• Customer education
• Sales compensation
• Recruiting
• Personnel retention programs
• Expense management
• Intellectual capital development
• Training
• Marketing communications
• Logistics
• Employee equity
• Executive leadership
• Training and development
• Corporate goals / strategic objectives
• Values and beliefs
• Mission/purpose
• Individual accountability
• Productivity & effectiveness metrics
• Internal communications
• Strategic and tactical planning
• Executive team
• Board of directors/advisors
Be specific when you identify your factors. Don't say "people" when the issue is recruiting, employee satisfaction, training or compensation. Don't say "marketing" or "sales" when the issue is lead generation.
Test your assumptions by imagining a decline in a particular factor. How would that impact your business? Now imagine an improvement in that factor. How would that impact your business?
In selecting factors, limit your list to no more than seven. Why seven? Cognitive theory suggests that human minds are efficient at juggling from five to nine separate trains of thought - the average and oft- quoted number is seven. Our plan is for you to keep your eye on the ball, you want to limit the balls to those you can keep your eye on.
Step 2: Establishing the measurements
Your next step is to establish a measurement scale for each critical factor. Some of these measures will be quantitative; some qualitative. Sales is an easy one: dollars of revenue measured against budget. Leads generated is also easy - how many? You can further break down sales by product and leads by sources, or you can stick to the consolidated numbers. Choose the measure which best reflects your understanding of how the issue affects your business.
Everything is measurable, you just need the right system. How can you measure your effectiveness in sales compensation? You could establish a compound metric which includes total compensation as a percentage of sales revenue, juxtaposed against goal attainment.
Marketing communications is also difficult. One way to measure this is to subjectively assess the quality of your marcom pieces; you could also measure whether you have the total complement of marcom pieces you require. Or, measure whether prospects respond to your marcom efforts. Most likely you will combine all three to get one measure.
A final example is measuring your efforts in the area of your Board of Directors / Board of Advisors. Measures include: do you have one? Are all the board seats filled? Is the board effective for your intended purpose? Measuring the Board factor would likely blend each of these.
Step 3: Setting the baseline
Once you've established a measurement structure for a factor, the next step is setting a baseline.
Each factor should be set against a normalizing scale ranging from 1 to 10. Subjectively this can translate into non-performing(1), poor (2-3) , mediocre (4-5), good (6-7), great (8-9), and outstanding (10).
If your sales run-rate is $10 million, determine whether that is a 1, a 5, or a 10. Your answer depends of course on whether you consider performance against budget, performance against stretch goals, or performance against "home-run-out-of-the-park" goals.
If your baseline for Board of Directors is two unfilled board seats - is that a 5 (mediocre) or a poor (2-3)? Only you can decide. Although this ultimately is a subjective process, you want to make it as objective as possible.
Step 4: Set new goals
Next, create a "gap" between where you are - your baseline - and your target for that factor. You already have a sales plan, so your gap exists between your current revenue and your budgeted revenue.
You may consider your baseline a 5, and your target an 8. Implicit in this 1- 10 scale are judgements about your intentions: will reaching your budgeted revenue put you at 8 (almost great) or 10 (outstanding)?
Where do you want to peg your efforts? If you've assessed your employee training at a 4 (mediocre), are you shooting for a 7 (good) or a 9 (great)? You can see from this how your measurement structure and goal system will impact how you allocate your company's resources and energy.
Step 5: Closing the gap
You now have a baseline and a target for each factor. Between them they define a factor gap - your challenge is to close it. Each gap becomes the focus of a meditation which asks the question: What will close the gap between our current level of this factor and our desired level? What possible actions will raise that measurement?
You may have intuitive responses to these questions, and when appropriate, trust your gut. If need be, back that gut response with research - but only when cost effective.
(Sometimes the most cost effective research is implementation, particularly in simple matters.)
Use any idea generation process you are comfortable with. Develop several possible initiatives to raise the level of that factor. With luck your ideas will work together and harmonize in terms of impact or implementation requirements.
If you create competing ideas, select the best alternatives. Choose based on return on investment, required resources, scheduling conflicts, time to impact, total cost, and likelihood of success versus risk of failure.
Depending on the specific factor, and the size of the gap, you may plan to close it in stages or shoot the gap all at once. You can launch one initiative at a time, or implement several initiatives in parallel. Once you launch your gap-closing initiatives, continually measure your results. Report your progress to participants and stakeholders, and post it publicly.
Step 6: The Ben Franklin Rotation Program
As a young adult, Ben Franklin identified thirteen virtues he aspired to. In order to implement these virtues in his life he devised a "Plan for Self Examination", a program whereby he focused his attention, one virtue at a time, for one week at a time, rotating through the entire list four times a year.
He kept a detailed log of the actions he took to develop the virtues in himself, along with his personal results.
I've adapted Franklin's concept and called it the Ben Franklin Rotation Program. At any point in time, you will have in place a program for improving every one of your critical factors. But in any given week, your primary attention will be on only one factor.
Using Franklin's principles, at the beginning of each week, focus your mind - or collective mind of your management team - on improving that week's factor. What new actions can you take, what new attitudes can you adopt, what new or renewed approaches are available - which will enhance your performance in that one specific area? Do that "thing" wholeheartedly for the entire week.
Franklin also shows us how to track your progress in this venture. Create a score sheet detailing your Critical Success Factors. This sheet should detail each factor, its measurements, your current 1-10 rating and your target rating, along with your next action steps for improving that rating.
Each factor also gets a weight, which enables you to develop an overall score. Each week, re-rate all the factors on the score sheet, and graph your progress. You may also graph the overall score. Publish the score sheet and the graphs. You can establish a reward system based on individual progress, or, using the factor weights, you can develop a bonus structure which incentivizes total progress.
This simple system will focus your attention on improving each one of your critical success factors. With carefully selected factors, you insure both rapid performance increases and balance in your company.
Organizations may have different approaches in identifying their own critical success factors but what is most important is with the help of these factors, the organization can evaluate and improve their performance in delivering their service to the people
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