Key Success Factors
A management term that refers to the critical aspects a business must do well in to succeed.
How Key Success Factors Work
Key success factors (KSF) are also commonly referred to as critical success factors (CSF) and are crucial to consider when running or starting a business. They outline what your business needs to be successful and are often included within a business plan. If things do not go right in these critical areas, then the company will fail.
Depending on the type of business you have and what projects you're launching, there can be a variable amount of key success factors. However, you will often hear conversations around the five key success factors for business, with each factor having sub-elements. The five key success factors are:
- Strategic Focus
- Marketing, and
It would be best to personalize each key success factor to the business, department, or project where you apply it. Each factor must also associate with your business goals and be measurable.
Real-World Example Of Key Success Factors
The Texas Education Agency (TEA) and Texas Center for District School Support (TCDSS) developed the Texas Accountability Intervention System that incorporates key success factors within its framework. The system's critical success factors' goal is to be the focus area in school improvement planning. The seven key success factors for the Texas Accountability Intervention System are:
- Improve Academic Performace
- Increase the Use of Quality Data to Drive Instruction
- Increase Leadership Effectiveness
- Increased Learning Time
- Increase Family and Community Engagement
- Improve School Climate, and
- Increase Teacher Quality
TEA and TCDSS identified the elements above for implementing improvement efforts and developed them using evidence-based research. The schools must also be able to monitor each factor using measurable performance indicators. Examples of the supporting components to measure the "Improve School Climate" key success factor are:
- Increase attendance
- Decreased discipline referrals, and
- Increased involvement in extra or co-curricular activities
Significance Of Key Success Factors
To better understand what to consider when you're creating key success factors for your business or project, it can help to understand what to incorporate for each of the five key success factors. For example, the strategic focus key success factor ensures that all activities move towards a targeted goal and can include competitive strategy, management, leadership, and planning. Element examples include establishing core values that align with customers and ensuring that leaders are committed to upholding the core values.
For the people key success factor, you can incorporate elements such as making sure you hire qualified people, giving employees a chance to provide meaningful input, and having professional development opportunities available to increase retention rates. In operations, examples of elements to consider are documenting operation efforts and making continuous evaluations of procedure effectiveness.
The marketing key success factor relates to attracting customers and can include defining a target market and evaluating customer satisfaction. Finance refers to all of the organization's assets, and elements to consider are keeping track of finances and ensuring products and services are appropriately priced.
Types Of Key Success Factors
While the five key success factors are commonly used, there are different types of categories that can be utilized depending on your business, industry, or project. Some sources will categorize the key success factors this way:
- Contingency Strategy
Another type of categorization is Industry, Strategy, Temporal, and Environment. Industry key success factors concern your business' specific industry or market, and the strategy key success factor refers to your competitive strategy. A temporal key success factor considers your organizational requirements and changes, while the environment key success factor refers to economic or technology changes that affect your business.
Regardless of how you define your key success factors and how many you identify, remember to make sure they're relevant and personalized to your business or project goals.
History Of The Key Success Factors
The concept of "success factors" was first introduced by D. Ronald of McKinsey & Company in 1961. However, it wasn't until 1986 that Jack F. Robert made the idea well known by refining it into "critical success factors."
The term was used initially for data analysis and business analysis. It wasn't until 1995 that James A. Johnson and Michael Friesen applied the concept to other various sector settings such as healthcare and education.
In 2011, E.W. "Buck" Lawrimore published a book on "The 5 Key Success Factors: A Powerful System For Total Business Success." His findings were based on a 25-year study testing small and large businesses and their most effective success factors. The conclusion of the study derived the five key elements commonly attributed to key success factors today. Although Buck Lawrimore's factors are widely quoted, many sources list various success factor categories, mainly depending on the business and project type.
Key Success Factors vs. Key Performance Indicators
Although used hand-in-hand to support business success, key success factors (KSF) and key performance indicators (KPIs) are two separate concepts. The KSF identifies the elements necessary for a business or project to accomplish its mission and be successful. KSFs must consider how the factors will be performed and measured. Measuring the success of a company's achievement or a project's outcome is done using KPIs.
KPIs are the specific and most critical indicators to measure success. They quantify a KSF, which is a more broad goal or concept. For example, if a finance KSF for your company is to increase revenue produced from your website, then you could have the following KPIs for this success factor:
- Increase in user registrations.
- Increase in purchases.
- Decrease in abandoned shopping carts.
Key success factors are a crucial part of a business plan and determine whether a business or project succeeds. Making sure you achieve all elements indicated as key success factors through measurable outcomes will prevent failure. Although the concept started in business analysis, it's widely used in varying sectors today, including healthcare and education.