When it comes to the actions that are critical to business success, organizations want to know which effects are the most important, along with how to measure these effects and successes. If you’ve ever heard references to CSFs or KPIs, these are a kind of shorthand to how those two questions are answered.
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Sometimes the terms Critical Success Factors (CSF) and Key Performance Indicator (KPI) are used incorrectly; this can lead to ambiguity and confusion, but these concepts are crucial for those studying for an ITIL certification and those already in the IT field.
Let’s differentiate these terms, and explore how they can be used to inform an organization about its performance.
Critical Success Factors (CSFs)
The concept of critical success factors was developed sometime between 1979 and 1981; it’s been refined by many notable researchers over time. Critical Success Factors are the areas in which steps are taken where high performance or success is important—the areas that determine the success of a business.
CSFs are elements that are vital for a strategy to be successful or for an objective to be achieved. These are often used to denote a mission statement, the vision of an organization, or simply for a business strategy. CSFs represent something that has to be in place for an objective/project to succeed—achieving CSFs drives your strategy forward.
These CSFs may be different for every business; however, many are related to finances. Subjects like cash flow and profits, an increase in customers or a decrease in complaints are just a few examples of CSFs a business can use to learn how they can improve productivity, meet market demand, and more.
Key Performance Indicators (KPIs)
Key performance indicators, on the other hand, are measures used to quantify management objectives. They’re accompanied by a target or threshold and enable performance measurement. Interestingly, KPIs are derived from CSFs.
Simply put, a key performance indicator is an indicator of performance. For example, an ITIL KPI indicates whether performance is good or needs improvement, which is basically determined by measuring against a specific KPI’s threshold. KPIs indicate a defined performance level required to achieve a factor or set of factors critical to the success of an objective.
If, for example, the critical success factor for an IT department is the restoration of normal service, the KPIs that can flow from the CSF may include:
- Average Handle Time (AHT)
- First Call Resolution (FCR)
- Average Wait Time (AWT)
Similarly, if the critical success factor for the collections department is to ensure high debt recovery, then the KPIs they would focus on might include percent collection against total outstanding, percent collection in various aging buckets, etc.
Threshold indicates acceptable performance on a KPI and adds definitive value to key performance indicator (KPI). For example, an “indicator” of the size of a table would be that it could fit a small pool table on it or that it’s large enough to seat six people. It is indicative of its size but doesn’t measure whether or not it meets the requirements.That’s denoted by quantifying the size; for example, a 3 feet by 6 feet table, which becomes the threshold for acceptance.
The whole purpose of using KPIs is to identify certain metrics and define thresholds for those metrics that indicate levels of performance. These levels of performance are then used to indicate achievement of CSFs, which are also measurable, but typically only have binary values—yes and no. The whole point of a CSF is to be able to say, “Yes, that factor has been realized.”
KPI = customer satisfaction (quantifiable, follows an approach to measure) + Threshold = > 70%
KPI = resolution score (quantifiable, follows an approach to measure) + Threshold = > 80%
KPI = net customers added (new customers less disconnections) + Threshold = 1,000 in 30 days
It’s important to note here that the definition of measurement unit may be different and adapted by the organization / department / industry differently, as well as include many dynamics.
Comparing CSFs with KPIs
In the examples above, customer satisfaction for a sample can be measured as a result of a number rating the customer attaches to a particular question(s) on a survey form, calculated by averaging the rating customer attaches to each question, or measured on a qualitative scale and then converted to numbers.
Similarly, definition of case resolved may include measuring repeat contacts by the customer over a period of time post the first contact, 24 hours, 72 hours, 7 days, (and so on); exclusion of certain categories of customers, or simply measured differently using contacts by an individual customer’s telephone number rather than by cases logged by the service department.
Objective = I wish to drive from place A to place B in 5 hours
CSF = access to transportation, driving skills, affordability, availability of fuel, driving conditions
KPI = was the trip made in 5 hours
Threshold = 5 hours
Objective = Higher customer retention
CSF = efficient after sales service, quick turnaround time, less waiting time, transparency in bills, etc.
KPI = customer satisfaction score > 70%, resolution score > 70%, Average Handle time < 10 minutes
Threshold = > 70%, < 10 minutes
Objective = Increase profitability
CSF = Higher sales, lower outstanding debt, lower costs
KPI = debt outstanding < 5%, Increase in sales > 10%, Average revenue per user > $16
Threshold = < 5%, > 10%, > $16
CSF vs KPIS: Purposes
While using KPIs to assess performance, a firm employs CSFs to encourage or cause success. CSFs are frequently used to improve corporate operations' efficiency and boost profits. The goal of KPIs is to identify particular measurements and define thresholds to denote acceptable performance levels.
In general, department leaders assign KPIs to drive CSF or corporate objectives while upper management determines CSFs. Furthermore, individual performance is assessed using KPIs rather than CSF, which is not the case with CSF. Another distinction between CSF and KPI is that, whereas KPI varies from company to company and relies on the business circumstances, most CSFs are rather ubiquitous in the business sector.
One of the simplest methods to comprehend these ideas in comparison and separately is
knowing that KPIs are used to measure the outcomes of an organization's actions, while CSFs are the factors that contribute to its success.
The primary figures or metrics used to determine if the CSFs have been satisfied are known as KPIs. CSFs, on the other hand, could be goals or objectives that have a numerical or non-numerical aspect. The achievement of these CSFs is measurable and is indicated using performance levels, but solely with binary values of yes or no. These CSFs were generally chosen due to their importance in determining whether a project's services, processes, strategies, and other activities are successful.
CSFs can also typically be words or phrases that describe actions a company might take to fulfill its mission. For instance, a CSF might be "Good Management," as effective management is crucial for inspiring employees, raising customer happiness, and achieving other shared company objectives. A KPI, on the other hand, is often a series of numbers and sentences.
A KPI that measures the rate of employee retention for management roles, for instance, might reveal that, in a given year, 75% of management personnel remained with the organization. A business could use this metric to increase employee retention through improved pay and perks.
Positions in a Goal Structure
The way that CSFs and KPIs fit within a company's goal structure varies. A CSF may increase the specificity of a SMART objective, which is one that is specific, measurable, attainable, relevant, and time-based. A corporation might develop a CSF to offer additional staff training programs. For instance, if one of its goals is to increase employee productivity, a corporation may develop a KPI that tracks how many employees participate in training programs and the proportion of employees who are satisfied with them in order to make the same aim more measurable and time-based.
Reasons They May Change
While a corporation can alter its CSFs and KPIs as time goes on and it gathers more data, it might do so for various reasons. It might change its CSFs to better achieve its objectives or set brand-new objectives. For instance, a corporation may strive to adhere to an alternative CSF, such as higher quality marketing techniques, if it discovers that reducing production costs is not producing many more sales. The company's efforts may be better directed toward reaching its aim of increased revenue due to this shift in CSF.
In contrast, a business may alter its KPIs in response to its CSFs. A company's KPI might shift to a metric assessing employee interactions. KPIs can be used by businesses to monitor data that is in line with their CSFs and overarching strategic objectives.
1. What are CSF and KPI?
Goals that must be achieved in order for an organization to succeed are known as critical success factors. A CSF is a strategic component that a business must have in place to accomplish a particular goal or intended result. It can be used to track the development of a certain objective, vision, or mission statement.
Key performance indicators, also known as KPIs, are quantifiable numbers that businesses use to assess their progress in achieving their CSF goals.
2. What is CSF in ITIL?
CSFs in ITIL are often components that are absolutely necessary for a strategy to be successful or for a goal or target to be attained. CSFs are frequently used to indicate the IT organization's mission, vision, or business strategy. In order for an ITIL project or objective to be successful, certain CSFs must exist.
3. What is the difference between CFS and KPI?
The main distinction between CSF and KPI is that the former is what leads to success, whilst the latter is what success looks like. KPIs are typically used to monitor how effectively a company achieves certain objectives. Managers can experiment with several strategies until they find one that better enables them to fulfill their CSFs if they discover through their KPIs that some of their current ones are not producing the expected results or CSFs.
4. What are the KPIs and CSFs of incident management?
CSF: OIT commitment to the Incident Management procedure; adoption of the procedure by all departments
KPI: Support matrix for the quantity and percentage of services in production
KPI: Number of incidents per department in the ITSM tool
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