Bernard Szlachta at 01:36, 17 November 2012

2012-11-17T01:36:32Z

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Source: http://www.12manage.com/methods_rockart_csfs_kpis.html

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;title: CSF and KPI
;author: Bernard Szlachta (NobleProg Ltd)
</slideshow>

== CFS and KPI ⌘==
* Critical Success Factor
* Key Performance Indicator
* Can be used for defining and measuring business objectives

== History ⌘==
* The concept of "success factors" was developed by D. Ronald Daniel of McKinsey and Company in the 60s
* Refined and popularized by Jack F. Rockart of the Sloan School of Management in late 80s
* Kaplan/Norton Balanced Scorecard method was based on this idea.

== CSF ⌘==
* some feature of the internal or external environment of an organization
* has a major influence on achieving the organization's aims
* "critical" originally referred to a catastrophic failure (if the linked goals were not realized)
* TODO: put some examples here

== Rockart's basic types of CSF ⌘==
# Industry
# Strategy
# Environmental
# Temporal

== CSF and levels of organizations ⌘ ==

* Business Strategy and Strategic Goals (original idea)
Later extanded to almost any level, e.g.
* Organization's departments
* Individuals

== KPI ⌘==
* quantifiable gauge that an organization uses to measure its performance in terms of meeting its CSFs
* A KPI can be financial or non-financial
* There can be more than 1 KPI per CSF

== Levels of the '''aims''' of any organization ⌘==
# Vision/Mission
#* basic reason why the organization was established and exists
#* "Oxfam was established to relieve poverty and suffering in the world"
# Strategic Goals
#* what should be the focus of the organization so that it can achieve its Vision
#* high level expressions, big ideas
#* can be identified by SWOT, PEST, Core Competence, Value Chain, etc...
#* A Goal of Oxfam is to seek to provide secure livelihoods for farmers in order to relieve poverty.
# Objectives
#* Goals are broken down into more concrete objectives
#* SMART
#* "Tactical plans can be devised (budgets), responsibilities assigned and measurements made"
#* Strategic Goals are analyzed to determine the Factors that affect their achievement
#* These Factors are the CSFs.
#* CSF + KPI + Target = Objective
#* Example: funding, training and education programs create secure livelihoods. Therefore funding, training and education are CSFs for this Goal.

== HOW MANY CSFs AND KPIs? ⌘==
* Vision: 3-5 strategic goals for 3-5 year
* Balanced Scorecard technique suggests 3-5 goals per focus area
* Each Goal should be broken down into 3-5 Factors that affect the Goal
* This gives between 9 and 25 Factors in the organization

* For each CSF there must be at least one Measurement (KPI) and a '''Target''' for the current or forthcoming budget exercise.
* Objective (tactical aim) is composed of a CSF plus a KPI plus a Target.

== Conflicts of Objectives ⌘==
* Cost cutting vs customer satisfaction
* There should be a balance between the objectives set for each CSF/KPI combination so the business plan for the organization as a whole is viable
* This principle is called '''Satisficing''' (Herbert Simon) as opposed to '''Optimizing'''.

== CSF/KPI and IT ⌘==
* Often implemented through Business Intelligence software
* May use some form of scorecard, dashboard, traffic light system, etc..
* Organization need to decide:
** ''How often'' and ''How'' the performance will be measured
** assignment of organizational responsibilities that enable the Objectives to be actively managed

== Pitfalls ⌘==
* Targets are good servants but very bad masters, eg:
** "A Transportation Company didn't pick up passengers on a certain route, because then the buses would come too late!"

== STEPS IN THE CSFS AND KPIS PROCESS ⌘==
# Establish the Vision
# Determine Strategic Goals
# Analyze each Goal - what Factors (CSF) influence the Goal
# Assign at least 1 Measure for each Factor (KPI)
# Assign a Target for the current budget exercise

== DISADVANTAGES ⌘==
* CSF/KPI must be reviewed frequently
* The emphasis on measurement can result in forgetting or undervaluing major 'soft' elements (not measurable)

CSF and KPI - Revision history

Bernard Szlachta at 01:36, 17 November 2012