Pay attention to key success factors in strategic planning

Pay attention to key success factors in strategic planning

FOR a business to succeed, it needs to focus on its critical success factors. Critical success factors (CSF), sometimes referred to as key success factors, are defined as “the essential areas of activity that must be performed well if you are to achieve the mission, objectives or goals for your business or project”. They are the few key areas where things must go right for the business to flourish.

It is imperative that management and staff pay very close and careful attention to such activities because they enable the organisation achieve its mission and objectives. Identifying critical success factors helps employees to concentrate on those things that matter for the success of the business. These are the things that matter to your customers.

In order to identify the CSFs, we need to look first at the organisation’s mission and objectives to see which areas need attention for the organisation to achieve its mission and objectives. To have maximum impact it’s usually advisable to keep the CSFs to no more than five.

Each industry has its own unique CSFs but companies might not have identical CSFs. You therefore need to identify what will give you competitive advantage and what it is that is central to the future of the organisation and to the achievement of that future.
Businesses need to identify their CSFs because they allow firms to focus their efforts on building their capabilities to meet the CSF’s and eventually their mission and objectives.

Each CSF should be linked to a goal and be measurable or observable for it to be effective. It is important to have a good grasp of the business environment, your industry, your company and your competition as you develop your organisation’s CSFs.
Paying attention to the CSFs will ensure that your organisation achieves its mission and competes or performs better than the competition.

It’s therefore very important to note that critical success factors have a very significant effect on the overall outcome of an organization’s strategy. An organisation should therefore perform above average with regards to its CSFs if it has to outperform its competition. CSFs can be internal and external and can refer to current operations or to its future operations.
Since CSFs are crucial for a corporate strategy to be successful, it is important to address issues related to CSFs right at the point of strategy formulation, as critical success factors can make or break the achievement of the strategy.

During the process of carrying out a situational analysis or SWOT analysis, determining the strengths, weaknesses, opportunities and threats, it is important to be asking a number of questions on: why customers would choose your organisation over any other similar organization, what would make investors invest in your organisation, what are the critical activities or CSFs for the organisation, the industry sector currently and what are they likely to be in the future?

The answers to these questions will highlight the areas that need close attention because they will determine the success or failure of your organisation.

These CSFs can vary each time an organisation makes significant changes to the strategic plan, therefore there is need to constantly review and update your business’ CSFs so that they are relevant.
To identify CSFs it’s recommended that, during the SWOT analysis, you critically go through the value chain of your business, which shows the processes that create value for your immediate customers. This will highlight those activities that are very critical in making sure you perform better than your competitors. This will highlight the internal CSFs. After this you would need to look at the industry value chain which shows how the entire industry creates value for the final customer from the start of the supply chain to the end. This will highlight the current CSFs that are particular to your industry.

CSFs don’t stay constant. You therefore should carry out some scenario forecasting to ascertain if there will be changes in the future CSFs because of changes in the environment. Factors that are likely to alter the CSFs of a company or an industry could be changes from the impact of IT on processes, which are usually rapid and can change the way business is done and hence the CSFs.
CSFs can change as the product goes through its life cycle. In the early stages of a product life, product design and marketing might be vital but as the market matures, the emphasis will be on ensuring low cost and efficient operations.

Changes in customer needs, wants and priorities may change what customers considered as important and this will be reflected in the way customers purchase products. Product innovation or process innovation has an impact on what customer’s value as important.
Changes in environmental issues,whether technological, societal or legal can impact on the CSFs.

A well-crafted strategic plan should therefore bring to the fore the industry critical success factors as they currently are and as you expect them to develop in the future and the particular critical success factors for your organisation that need to be addressed in creating that unique customer value that will give the required competitive advantage.

Every critical success factor needs to be backed up with key performance indicators to track performance. KPIs are usually quantitative either in the form of a ratio or percentage whereas CSFs are more of qualitative nature and therefore can’t be measured. A CSF would ask ‘what makes customers satisfied?’ whereas a KPI would be asking “how do I measure customer satisfaction?” For a KPI to be useful in analysing the performance of an organisation, it has to be compared with other data by a competitor or industry average or against a trend.

For instance, one can measure the quality of a product or a service by using KPIs to measure the number of rejects, products returns, complaints or customers lost in a period. Each CSF will therefore have a number of KPIs to track performance of the organisation in achieving the CSF.

Stewart Jakarasi is a business and financial strategist and a lecturer in business strategy, advanced performance management and entrepreneurship. He is the Managing Consultant of Shekina Consulting (Pty) Ltd and provides advisory and guidance on leadership, strategy and execution, corporate governance, preparation of business plans, tender documents and on how to build and sustain high-performing organisations. For assistance in implementing some of the concepts discussed in these articles please contact him on the following contacts: sjakarasi@gmail.com, call on +266 58881062 or WhatsApp +266 62110062 .

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