Every businessman should ask herself/himself the question whether their business is growing or not? But that would be a very broad question. If you want a more detailed answer, you will need to know how your business is doing in parts or in terms of specific objectives in different functions and processes. And here measurement is critical to determine whether your business or business activities are on the right track or not.
Reading Time: 4-5 minutes
If you have ever heard of words like CSF and KPI then you have come across two powerful indicators that allow you to know whether your business or any part thereof is moving in the right direction or not. Irrespective of the size and scale of business, CSFs and KPIs are for every enterprise whether they do it on their own or through excellence auditing and business consultants providing business excellence consultancy services.
In this post, we shall delve into the essence of CSF and KPI and see how these two can help businesses achieve excellence from top to bottom.
What are Critical Success Factors? Or what is a CSF?
The essence of CSF lies in the answer to this question:
What must be done to be successful at something?
Let us understand this with an example. Let us say that a successful restaurant wants to identify its CSF. Say, it has a flagship food item as its USP because of which it gets a strong footfall and consistently achieves its revenue targets. Thus, the restaurant will have to preserve this USP. However, there are many ways in which the restaurant can lose this USP.
Poaching of chefs/kitchen staff by competitors is a common cause. If the core kitchen team is gone, the flagship food is also gone. What can the restaurant do to continue to be successful? The restaurant can maintain a well-paid and motivated workforce. That will be one of its CSFs for remaining successful. It is ideal to keep the number of CSFs below five.
The process of identifying CSFs is called critical success factor analysis. Critical success factors in business may even boil down to the operational levels where broad or organization-wide CSFs are eventually broken down to operational objectives.
CSF can bring business process excellence because it brings to the fore what a business entity must do or achieve to accomplish a goal or an objective and gives strategic meaning to business processes and operations. This goal or objective can be that of the enterprise or any of its departments or functions. CSF can be applied to any area of business from macro to micro level. It can be applied within and beyond the organization.
CSFs can also help businesses in risk management. It entails identifying the activities that must be done to mitigate the risk exposure.
What are Key Performance Indicators? Or what is a KPI?
The essence of KPI lies in the answer to this question:
What will indicate success at something?
A red light in the traffic signal indicates that vehicles must stop. Winning a Nobel Prize indicates subject matter excellence. A lower attrition rate indicates a satisfied workforce. In business, KPIs are defined precisely in advance to determine in the future the on-going success of on-going business activities. KPI (Key Performance Indicators) are metrics that help in measuring the performance of a company at multiple levels. KPIs should be such that there is no ambiguity in establishing the performance status. For example, clouds might be a good indication that it might rain but there is ambiguity in it.
A good KPI should be SMART:
S-SPECIFIC
M-MEASURABLE
A-ATTAINABLE
R-RELEVANT
T-TIME BOUND
KPIs can help measure the effectiveness of a business process. For example, in a customer support process, customer feedback (in definite terms like Yes or No) at the end of the process would tell if the process was successful or not. In this case, CSF could be achieving a specific percentage of successful customer query/grievance resolution.
Once you know that a certain process is not being conducted in an ideal manner, you can then take steps to mitigate the damage. KPIs act as leading indicators, meaning that they identify whether the process is going in the right direction or not. KPIs help you in taking proactive measures to ensure that you can rectify the process before any damage is done.
The business KPIs should be clear enough so that all employees can easily understand and follow them. Understand that although you can have certain common KPIs, it is perfectly normal for you and your competitor to have different KPIs. For example, one company could focus on acquiring local market share and prepare its KPIs accordingly, while another company can focus on improving its international market share and hence design different KPIs. Finally, you should keep a KPI scorecard which will help you in keeping track of various KPIs that you have designed for your processes.
Both CSF and KPI are extremely useful tools for measuring business excellence. While designing your CSFs and KPIs make sure that you do not overdo it. Remember that if you place everything as important then nothing is less important. Hence, it would be wise to be selective and focus only on those CSFs and KPIs that are absolutely essential for the success of your business or a process.
IT System Integration: Track KPIs & build efficient business systems
In this digital age, keeping track of your KPIs has become very easy. All you have to do is integrate your CSFs and KPIs with your business-IT system. With the availability of real-time statuses of business processes and activities, it becomes easier to track whether KPIs are being achieved or not. If not, corrective measures can be initiated on time. For example, if your customer support team sees a significant rise (KPI-based) in the negative chatter on social media regarding your brand or a high percentage of negative product ratings on eCommerce platforms then they can work on the problem and try to resolve it or escalate it. We can see here that by keeping a track of the CRM KPIs businesses can make their CRM process more effective and efficient. The same concept applies to all other business functions and processes.
News From
YourRetailCoach
