Using Critical Success Factors and KPI's
There is sometimes an element of confusion when talking to managers about the difference between metrics that matter and metrics that make the biggest difference.
This leads into a discussion and need to clarify the difference between Key Performance Indicators (KPI) and Critical Success Factors (CSF).
I understand the reason why some confusion exists between KPI and CSF’s as this if often business leadership culture driven. A leader that has the opinion that everything should be measured is sometimes quick to not understand what part of the business matters the most.
For instance, critical success factors is a term often bounced around project and middle management teams. Before you know it, everything has become a critical success factor and thus its meaning is lost as another term and “office speak”. This is a shame as the need to define your critical success factor is integral to the medium and long term success of your business. You will also identify this in normal life outside the business environment.
Critical success factor example :
- Ensuring the correct suppliers of machined widgets will produce the correct quality, quantity, price level and ship on time for your business. If you select an inappropriate supplier then your own brand is at risk and leave to disappointed customer experiences ultimately reducing your market share and profit.
Key performance Indicator example:
- The suppliers of a manufacturing process company will ship the correct number of ordered widgets with an on-time delivery performance of at least 98%.
Making the difference through analytics.
The improvement of predictive analytics and data visualization techniques is helping companies identify the true CSF for a business to thrive in its given market. These insights are not exclusive to large multinational companies, simple but thorough accurate analysis can be performed by many small and SME companies using common online tools and information.
Making the difference of performance through skills and resources.
Now you have the CSF areas of your business identified it is important to understand and create the appropriate support structure. The knowledge of your CSF is important but meaningless unless supported with the relevant resources and skills to fulfill the mission. Through leveraging the appropriate skills sets, higher performance can be improved over competitors with similar business models and cost structures.
Managers for success.
The difference between key performance indicators and critical success factors helps a manager focus on the most positive productive areas of a business. Teamwork is often required to balance skills and thus the need for close discussion and collaboration between the operations manager, category management and customer service manager functions.
Do you have any challenges to identify your business CSF or KPI's? Let me know in the comments below.
Now pop over to our dedicated Metrics page.
JAMSO supports companies through identification of business critical success factors to help improve strategic management and performance. Please sign up for our free weekly publications below and share this article with anyone who can benefit. Our goal is to help over 250,000 people and companies each year so I also ask you to share this article through your social media platforms.