Key Performance Indicators (KPIs) and Critical Success Factors (CSFs)

KPIs and CSFs

It is often said that if something is important it needs to be measured.

 

If you want success, measure it.

 

If you want continuous improvement, it must be measured.

 

As a manager it is important to show the completion and success of a task or project. One of the key ways we can show success is through measurement. Basically we have data at the start and at the finish of a project to show what results were accomplished. As a manager you utilize this data for performance reviews of your staff and departmental processes as well as this data demonstrates to leadership or upper management what was accomplished. We all know leadership relies and thrives on numbers and measurements.

 

Measurement comes in many forms and varying difficulties to get. No matter what it is or how you get it, as a manger we need to find ways to measure it. Some of the harder areas to measure, for example, might be how you could measure someone who works in a drive-up window or say someone who generates purchase orders. Each job has its own challenges because many times it is hard to quantify measurements and many times the factors that go into the measurements are not controlled by the employee (such as how many people come through the drive-up or how many people place orders that need a purchase order).

 

I am a proponent on continuous improvement processes, as highlighted in ITIL’s CSI, and the key ingredient of continuous improvement is measurement. Anything of value needs to be measured. In management we need to show where we were, where we are now, and where do we want to be.

 

Again, an important and integral part of being a successful manager is measurement. Such measurements should include a critical tool – key performance indicators (KPIs).

KPI

And in order for us to measure accurately, we need to determine and create the qualitative factors that are the foundation on how the measurements will be accomplished.  This is done via critical success factors (CSF).

To get you started with KPIs and CSFs, I will provide you a couple of nuggets to get you started in your deeper dive. KPIs and CSFs are critical tools for managers to analyze and reflect in order to make data-driven decisions. Decisions that can have far-reaching ripple effects. And having these decisions backed up by proven tools and data will only help with their success.

 

Key Performance Indicator (KPI) – from Wikipedia:
A key performance indicator (KPI) is a type of performance measurement. KPIs evaluate the success of an organization or of a particular activity (such as projects, programs, products and other initiatives) in which it engages.

 

Often success is simply the repeated, periodic achievement of some levels of operational goal (e.g. zero defects, 10/10 customer satisfaction, etc.), and sometimes success is defined in terms of making progress toward strategic goals.

 

Accordingly, choosing the right KPIs relies upon a good understanding of what is important to the organization. What is important often depends on the department measuring the performance – e.g. the KPIs useful to finance will differ from the KPIs assigned to sales.

 

Since there is a need to understand what is important, various techniques to assess the present state of the business, and its key activities, are associated with the selection of performance indicators. These assessments often lead to the identification of potential improvements, so performance indicators are routinely associated with ‘performance improvement’ initiatives. A very common way to choose KPIs is to apply a management framework such as the balanced scorecard (we will go deeper in another post).

 

Critical Success Factor – from Wikipedia:
A critical success factor (CSF) is a management term for an element that is necessary for an organization or project to achieve its mission.

 

A CSF is a critical factor or activity required for ensuring the success of a company or an organization. The term was initially used in the world of data analysis and business analysis. For example, a CSF for a successful Information Technology project is user involvement.

 

“Critical success factors are those few things that must go well to ensure success for a manager or an organization and, therefore, they represent those managerial or enterprise areas that must be given special and continual attention to bring about high performance. CSFs include issues vital to an organization’s current operating activities and to its future success.”

 

In Summary
Critical success factors (CSF) and Key Performance Indicators (KPI) are the useful tools applied to get a successful business. They collectively account for the business’ control and growth.

 

KPIs are defined as the tools to measure the performance of any organization and they only indicate what the success rate or level is.

 

You can find additional details at BSCDesigner:

 

The CSF is the cause of your success or what is required for the success. A CSF can be defined as ‘what should be done in order to get successful?’

KPIs are the effects of your action – they indicate what you are doing. KPI is defined as ‘are we successful?’

 

From BSC Designer:
CSFs are taken to be general for all kinds of business like profits, leadership, mature assessment, correctly distributed responsibilities and role of people, systematization of each process, definite goal or rightful implementation of improvement plan etc., but KPIs are not so much general, rather they are set according to the priorities of a particular organization like for a financial organization finances are concerned, in educational institutions indicators are related to the standard of studies or other things related to students.

 

KPIs are usually quantitative, i.e. in the form of a ratio or percentage values while CSFs are more of qualitative nature like ‘what makes customers satisfied?’ it can’t be measured, but it can only be discussed or analyzed.

KPIs are somewhat dependent, they alone are no use, but require some other data to be compared to in order to analyze the performance while CSFs clearly indicate what is to be done in order to succeed or what issues should be taken under the company’s effort.

 

There is a lot of great information on the pages noted above as well as the included PDFs.  For more information, please go to the individual sites.

 

18 Key Performance Indicator (KPI) Examples Defined

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