What are critical success factors

critical factors of success

If you want to evaluate the performance of your department or organization, for example, you first need to determine what really matters. With the help of the critical success factors, you can draw your attention to the points that not only enable you to make a meaningful assessment, but also to make subsequent improvements.

With the method of critical success factors, from the multitude of possible influencing factors, those are identified that have the strongest influence on success. Focusing on these factors can increase the likelihood of trading successfully.

Critical success factors at the industry level

Critical success factors in an industry influence the competitive strength of the companies operating in it. In the food industry, for example. New product development, effective distribution, and effective marketing have the greatest impact on manufacturers' success. In the automotive industry, on the other hand, design, a dealer network and strict cost control in production play a decisive role.

Critical success factors at company level

Critical success factors can also be determined at company level. They are then specific to each individual company within the industry and depend on the competitive strategy and position in the industry as well as on the geographic region in which the company operates. The innovation process is much more decisive for a technology leader than for a company with a cost-oriented strategy.

Critical success factors at department level

Similarly, critical success factors can also be determined at the level of an individual department. They then support the department in optimally performing its services and in separating the essential from the insignificant.

Identification and evaluation of the critical success factors

Basically, it makes sense to list all possible factors as a first step and then have them assessed by experts (e.g. management, industry experts) with regard to their relevance for success. The most highly rated are the so-called critical success factors. Usually there are three to six factors.

Critical success factors can internally or external be and influence the success positively or negatively. In any case, they require a high level of attention and, if possible, an early warning system in order to avoid unpleasant surprises or missed opportunities. They typically fall into the following categories:

  • Possible (unpredictable) events with a significant probability of occurrence
  • Achievement in certain areas or the achievement of certain goals that particularly influence success
  • A condition which, if not corrected or changed, seriously interferes with the ability to achieve set goals
  • A condition or a performance achieved that enables the goals set to be achieved and requires special monitoring or protection
  • A critical process, production step or asset that has a strong influence on success and for which there is an increased risk of missing the performance targets

Using the example of the competition analysis, those factors that can be influenced by the company and competitors would have to be selected from among all factors in competition. From these, those with the highest relevance to success are to be selected. The result are the critical success factors. They form the criteria for comparing your own company with the competition (see benchmarking). In a technology-driven environment, factors such as research and development, production processes, production facilities or purchasing come into consideration. In an information-driven environment, IT infrastructure, knowledge management or qualifications and personnel development can be decisive. If the quality of the employees is decisive, then recruiting, the incentive system, qualifications and personnel development or personnel management are conceivable critical success factors.

Once the critical success factors have been determined, it is necessary to operationalize them. It must be determined which parameters are to be measured for the respective success factors in order to analyze the development of the factors. Furthermore, it should also be determined or at least thought through which decisions are to be made if certain developments occur in the critical success factors.

Strategic downsizing: critical success factors

The article, which is a guide on how to successfully implement staff cuts, makes it clear what critical success factors can be practical.

Author: Achim Sztuka

Picture above © Willi Heidelbach / PIXELIO '