Importance of Critical Success Factors

Critical success factors (CSFs) are core elements of a business' operations that it views as most important to its long-term success. As part of strategic development and corporate planning, companies often develop a list of CSFs that corresponds with their mission statement and primary objectives.

In his July 2004 Carnegie Mellon Software Engineering Institute article, "The Critical Success Factor Method: Establishing a Foundation for Enterprise Security Management," Richard A. Caralli explained the importance of CSFs in developing a broad company vision that includes the business strategies, goals and activities of an organization. Once a company has a mission, it sets objectives, and then it needs to identify the most critical factors that will contribute to the success or failure of its mission and goals.

A mission statement is a company's statement of purpose. Typically going beyond making money, a company's mission gives its primary motivation for conducting business. With a purpose, companies establish short- and long-term objectives. Common goals include increasing market share, improving customer satisfaction or improving production efficiency. For each goal, a company typically sets a numerical standard for achievement, for instance, a growth of 5 percent market share within 12 months.

Once goals are established in each core business area, the next step in strategic development and planning is to consider CSFs that align with each goal. In considering a goal of increasing local market share, the Mind Tools website suggests "Increase competitiveness versus other local stores to attract new customers" as a potential critical success factor. A goal of improving profits in a foreign market might have a CSF of establishing more strategic alliances with local suppliers.

To fully consider the best CSFs to align with your strategic goals, you should explore four common types of success factors noted by John Rockart, who is widely credited with helping the concept of CSF evolve in business in the early 1980s. Industry, environmental, strategic and temporal are the four success factor areas. Industry factors relate to specific traits within your industry. Environmental factors relate to external factors, such as the economy, competition and technology. Strategic factors are directly tied to your corporate strategy. Temporal factors relate to internal factors, such as success barriers, company challenges and internal business influences.