critical factors in business planning

Understanding Critical Success Factors (CSFs) in Strategic Planning

Every business needs a roadmap for success. Without one, distinguishing victories from setbacks becomes a daunting task, casting uncertainty over the attainment of goals. Delving into the realm of Critical Success Factors (CSFs) unveils their pivotal role in steering the course of businesses and projects toward triumph.These factors serve as the guiding lights, ensuring teams and departments are synchronized, and efforts are channeled towards common objectives.

What Are Critical Success Factors?

Critical Success Factors (CSFs) are the essential elements that must be achieved to ensure success for a company or project. Understanding these factors is crucial as they help focus efforts on the most impactful areas. CSFs are not just about identifying what to do but also clarifying what not to waste resources on. They are tailored to specific industries and business models, making them unique and vital for strategic alignment.

These factors are crucial for the success of a project, initiative, or business strategy. CSFs vary depending on the industry, organization, and specific objectives, but they generally encompass the following characteristics:

Key Goals and Objectives: CSFs are directly linked to the primary goals and objectives of an organization or project. They represent the most critical aspects that must be achieved to consider the endeavor successful.

Measurability: CSFs should be measurable so that progress can be tracked effectively. They often have associated key performance indicators (KPIs) or metrics that indicate whether the factors are being met.

Strategic Alignment: CSFs align with the overall strategy and vision of the organization. They reflect the areas where the organization must excel to fulfill its strategic objectives.

Criticality : CSFs are essential for success. Failure to achieve these factors significantly increases the risk of failure for the project or organization as a whole.

Focus: CSFs help prioritize resources and efforts by highlighting the most critical areas that require attention and investment.

The Role of CSFs in Strategic Success

CSFs play a pivotal role in strategic planning by providing a clear roadmap for success. They help organizations prioritize their goals and allocate resources effectively. By defining critical success factors, companies can:

• Ensure that all team members are aligned with the strategic objectives.
• Measure progress quantitatively, as each CSF can be associated with specific performance metrics.
• Adapt to changing market dynamics by regularly reviewing and updating the CSFs.

For instance, in a technology company, a CSF might be the development of a new patentable technology, whereas, in a retail business, a CSF could be customer satisfaction ratings. This specificity ensures that strategic efforts are concentrated on the most critical areas.

Moreover, tools like Visual Strategic Planning Tools can significantly enhance the ability to visualize and manage these critical success factors, ensuring that they are not just defined but actively monitored and achieved.

Types of Critical Success Factors:

In his seminal work, Rockart outlined four distinct categories of Critical Success Factors (CSFs), each serving as a cornerstone in the foundation of organizational triumph

Industry Factors: These stem from the unique dynamics of your industry, dictating the essential actions required to maintain competitiveness. For instance, in the realm of technology startups, innovation emerges as a pivotal CSF, driving evolution and differentiation amidst fierce competition.

Environmental Factors: Arising from broader macro-environmental forces, these factors encompass elements such as the business climate, economic fluctuations, competitor landscapes, and technological advancements. Conducting a thorough PEST Analysis unveils the intricacies of these factors, empowering organizations to navigate uncertainties with foresight and adaptability.

Strategic Factors : Tailored to the specific competitive strategy adopted by your organization, these factors delineate the strategic choices guiding positioning and marketing endeavors. Whether pursuing a strategy of high-volume, low-cost production or opting for a niche, high-value approach, strategic CSFs illuminate the pathway to sustained relevance and profitability.

Temporal Factors: Reflecting the internal flux and evolution within your organization, temporal CSFs are transient in nature, responding to short-lived barriers, challenges, and opportunities. For instance, amidst rapid expansion, a critical imperative might revolve around scaling international sales operations, highlighting the dynamic interplay between internal growth trajectories and external market demands.

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

Understanding the distinction between Critical Success Factors (CSFs) and Key Performance Indicators (KPIs) is crucial for effective strategic planning. While both are essential metrics in business strategy, they serve different purposes and are used in different contexts.

Critical Success Factors are the essential areas of activity that must be performed well to achieve the strategic goals of an organization. These are the elements that are critical for success in achieving the strategic objectives. On the other hand, Key Performance Indicators are quantifiable measurements that reflect the critical success factors of an organization. They are used to gauge the performance and success of an initiative, often linked directly to strategic objectives.

For instance, if a critical success factor for a tech company is ‘innovation,’ a corresponding KPI might be the number of new patents filed per year or the percentage of revenue from new products.

Using KPIs to Measure CSFs

Effectively measuring CSFs through KPIs requires a clear understanding of the strategic goals and the critical factors that drive them. Here are some ways KPIs can be used to measure the effectiveness of CSFs:

• Alignment of KPIs with strategic goals to ensure they reflect the critical success factors.
• Regular review and adjustment of KPIs to adapt to changing circumstances and ensure they remain relevant to the CSFs.
• Utilization of tools like Balanced Scorecard Templates to visualize and track these indicators effectively.
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It’s important to avoid the pitfall of confusing CSFs with KPIs. While KPIs are indicators of performance, CSFs are the areas that determine whether the organization will achieve its strategic goals. Understanding this distinction helps organizations focus on what truly matters and allocate resources accordingly.

Building an Organizational Strategy Around Critical Success Factors

Integrating critical success factors (CSFs) into your business planning isn’t just about identifying what’s important; it’s about embedding these factors into the very fabric of your organizational strategy. This integration ensures that every decision and action aligns with your overarching goals, propelling your business towards success.

Integrating CSFs into Business Planning

Leadership plays a pivotal role in fostering a culture that prioritizes CSFs. It starts with a clear communication of what these factors are and how they tie into the daily operations and long-term objectives of the company. Here are some steps to effectively integrate CSFs into your business planning:

• Define and Align: Clearly define your CSFs and ensure they are in harmony with your organizational values and strategic goals. This alignment is crucial for maintaining focus and direction.
• Communicate: Use every opportunity to communicate the defined CSFs across all levels of the organization. This ensures everyone is on the same page and pulling in the same direction.
• Embed: Integrate CSFs into all planning documents and tools. Use frameworks like Impact Mapping Templates to visualize how individual actions and strategies connect back to these critical factors.
• Review: Regularly review and adjust CSFs to respond to changing market conditions or internal company shifts. This agility allows your business to remain relevant and competitive.

Identifying and Setting Critical Success Factors for Your Business

Identifying and setting the right critical success factors (CSFs) is pivotal for any business aiming to achieve its strategic goals. This process requires a structured approach and keen insight into both the market and internal capabilities. Here, we outline a five-step process to effectively pinpoint and refine CSFs that align with your business objectives.

• Step 1: Gather Stakeholder Input - Engage with key stakeholders from various departments to get a comprehensive view of the strategic needs and expectations. This collaborative approach ensures that the CSFs developed are inclusive and representative of the entire organization.
• Step 2: Conduct Market Analysis - Utilize resources like Scenario Planning Guide to understand market trends and competitor strategies. This analysis helps in setting CSFs that are not only relevant but also competitive.
• Step 3: Define CSFs - Based on the insights gathered, define clear and measurable CSFs. Ensure they are specific, achievable, and directly tied to strategic objectives.
• Step 4: Refine and Adjust - CSFs should not be static. Regularly review and refine them based on ongoing feedback and changing market conditions to keep them relevant and impactful.
• Step 5: Implement and Monitor - Implement the CSFs across the organization and monitor their progress. Use visual project management tools to track these factors and make adjustments as necessary.

By following these steps, businesses can ensure that their CSFs are not only defined but are also aligned with the overall strategic vision, thereby enhancing the likelihood of achieving desired outcomes. Remember, the key to successful strategic planning is not just identifying CSFs but continuously adapting them to fit the evolving business landscape.

Practical Tips for Creating Effective Critical Success Factors

Creating effective critical success factors (CSFs) is pivotal for any organization aiming to achieve its strategic objectives. Here are some practical tips to ensure your CSFs are clear, specific, and aligned with your business goals.

• Clarity and Specificity: Each CSF should be distinctly defined to avoid ambiguity. This clarity helps team members understand exactly what is expected and how it contributes to the organization’s success.
• Alignment with Strategic Objectives: CSFs should directly support the strategic goals of your organization. This alignment ensures that every effort contributes towards the overarching objectives.

Avoiding Common Pitfalls: One common mistake is setting too many CSFs, which can dilute focus and resources. Prioritize CSFs that have the most significant impact on your strategic goals.

Involving Cross-Functional Teams: CSFs should be developed with input from various departments to ensure they are comprehensive and inclusive. Engage teams through platforms that foster collaboration, such as Retrospective Meetings for Cross-Functional Teams to gather diverse insights and drive collective commitment.

Regular reviews and updates to CSFs are crucial. The business landscape is dynamic, and your CSFs should evolve to reflect changes in the market and internal business processes. Leveraging a centralized platform like Creately can facilitate the continuous monitoring and updating of CSFs, ensuring they remain relevant and impactful.

How Creately Supports Setting and Achieving Organizational Goals through CSFs

Setting and achieving organizational goals hinge significantly on identifying and leveraging critical success factors (CSFs). Creately, with its advanced visual collaboration platform, provides an array of tools designed to enhance strategic planning and execution. Here’s how Creately’s features align with the needs of organizations aiming to master their strategic objectives through effective use of CSFs.

Creately’s Tools for Strategic Planning

• Visual Canvas: Creately’s visual canvas offers a dynamic space for teams to brainstorm, map out strategies, and visualize the relationships between different CSFs. This is crucial for understanding how various factors interlink and influence overall strategic success.
• Multiple Visual Frameworks: With access to various frameworks such as Business Model Canvas Template and Strategic Planning Tools , teams can effectively define and align their organizational goals with the identified CSFs, ensuring that every action taken is strategically oriented.

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

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Chiraag George is a communication specialist here at Creately. He is a marketing junkie that is fascinated by how brands occupy consumer mind space. A lover of all things tech, he writes a lot about the intersection of technology, branding and culture at large.

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• How to use critical success factors (CS ...

How to use critical success factors (CSFs) to support your strategic plan

Goal-setting is a lot like building a pyramid: It all relies on a strong base. You can’t set the very top pieces without a steady foundation—but building that foundation from scratch can be tough.

If you’ve never set critical success factors before, or if you aren’t even sure where to start when it comes to strategic planning, here’s everything you need to know to get started. 

What are critical success factors (CSFs)?

Critical success factors (CSFs) are high-level goals that your organization must meet in order to achieve your strategic objectives. You can implement CSFs at the project, program, or organizational level, though they’re most frequently used by entire departments or organizations because of their close connection to an organization’s business strategy. Hitting your critical success factors usually results in meaningful value and positive income for your organization.

Notably, CSFs are high-level strategic goals—they don’t necessarily include execution details. For example, imagine you set a critical success factor to increase brand awareness. This is a lofty goal—and one that drives significant value and market share for your organization. To actually achieve this CSF, dedicated projects and teams work on a variety of initiatives and set quantitative key performance indicators (KPIs) to get a clear picture of exactly what your teams want to achieve by when.

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Critical success factors (CSFs) examples

A critical success factor can be anything. These lofty goals help you orient your team towards where you need to go. Then, project managers use CSFs to guide their own initiatives and ensure they’re ready for success.

The critical success factors you set depend on your organization’s overall strategic goals. Here are a few CSFs you might create, depending on the plans your organization has for the next three- to five-years of growth:

Updated marketing playbook

New product features 

Performance management reviews

Building a robust sales team to acquire new customers

The history of critical success factors

The concept of a success factor was first developed in 1961 by D. Ronald Daniel, a consultant for McKinsey & Company. Later, John F. Rockart published an article in the Harvard Business Review codifying and naming the critical success factor method. In that 1979 article, Rockart defines CSFs as:

[Critical success factors are] the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization. They are the few key areas where ‘things must go right’ for the business to flourish. If results in these areas are not adequate, the organization’s efforts for the period will be less than desired.”

The relationship between strategic goals, CSFs, KPIs, and more

When it comes to goal-setting, there are a lot of acronyms to juggle and keep track of. Each goal-setting methodology is slightly different—but don’t let the acronyms overwhelm you. To understand what each acronym stands for, and how they stack up, let’s take a look at a typical strategic planning process. 

1. Start with your strategic plan

Strategic planning is the parent of any goal-setting process. Before you set goals, you first need to establish your strategy. A strategic plan helps you define where your organization wants to go and what actions you need to take to achieve those goals. 

2. Identify your KPAs and KRAs

KPAs, otherwise known as key performance areas, are the areas of your business that are critical to your success. For example, if you work at a software company, one key performance area might be your software being online and bug-free. Alternatively, if you work at a manufacturing company, a relevant KPA might be your facilities being up and fully functional. 

It’s important to understand your key performance areas in order to identify areas that you want to home in on when you begin setting goals. To go back to our example of a software company, if your software is frequently experiencing bugs or downtime, a good goal is to improve or reduce that downtime. 

KRAs stand for key result areas—these are focus areas you identified in your strategic plan. KRAs are broader than goals. For example, a key result area for your business might be “profitability” or “efficiency.” Then, when you set goals, describe exactly what you need to improve in those areas. 

3. Choose your goal-setting methodology

Once you have your strategic plan, it’s time to implement a goal-setting methodology. The two main goal-setting methodologies are OKR and CSFs (in combination with KPIs ). In practice, only plan to use one of the two goal-setting methodologies, since they’re very similar. 

Use OKRs for a simple but flexible framework

OKR stands for Objectives and Key Results. If you’ve never set goals before, OKRs are a good place to start because they follow a simple framework:

I will [objective] as measured by [key result].

The Objective is the goal you want to achieve—increase brand awareness, create the lowest carbon footprint in your industry, that sort of thing.

The Key Result is the metric by which you measure your progress towards your objective—drive one million web visitors, ensure one-quarter of your product’s material is compostable, and so on.

Use CSFs and KPIs to quantitatively measure how your organization is progressing

CSFs—critical success factors—function similarly to the O in OKRs. These are the main objectives your organization is working towards in order to hit your three- to five-year strategic plan. 

To make CSFs actionable, pair them with key performance indicators (KPIs). KPIs are quantitative metrics of how your team or organization is progressing towards important business objectives. A good KPI gives you a sense of whether you’re on track to achieve your critical success factors and, as a result, your strategic goals.

The different types of CSFs—and why they matter

Traditionally, critical success factors are broken out into five different types. Understanding the types of CSFs helps you make sure you aren’t missing any critical success factors as you plan for the coming goal period.

1. Industry-related critical success factors

Sometimes, there are certain critical success factors that your organization must keep up with in order to remain competitive. In order to track industry-related CSFs, your team needs to proactively track and predict industry trends. 

Examples of industry-related critical success factors: 

Innovation to stay ahead of competitor’s inventions

Sustainability in packaging or manufacturing to meet customer expectations

Customer service that goes above and beyond the industry average

2. Competitive critical success factors

These critical success factors are impacted by what your competitors are doing, and how their success or failure impact your organization. This isn’t a 1:1 comparison to what your competitors are doing—rather, these CSFs are influenced and impacted by how your customers see your business in relation to your competitors. 

Examples of competitive critical success factors: 

Being considered a “luxury” brand

Appealing to a certain customer demographic

3. Temporal critical success factors

As the name suggests, temporal factors aren’t going to permanently affect your company. Rather, these critical success factors are temporary, limited factors that favorably or unfavorably  impact your business. Identifying and overcoming these factors—if applicable—supports continued business growth. 

Examples of temporal critical success factors:

Unexpected but temporary changes to your business model

Reduced staffing capacity due to a specific, temporary issue

Hiring talent to support the opening of a new office or region

4. Environmental critical success factors

These critical success factors are things your organization has no direct control over—though that doesn’t make them any less valuable. Proactively labeling and tracking environmental factors is a great way to get ahead of any potential problems in the future and prevent unnecessary risk. 

Example environmental critical success factors: 

A downturn in the economy

A change in policy that impacts your business

Industry regulation

5. Management position critical success factors

Unlike the four main types of CSFs, management position critical success factors are unique to a specific person and position—rather than to an entire organization. If you are in a management position, consider setting a CSF to improve your management and leadership skills . 

Example management position critical success factors:

Conflict resolution training

Implementing team-wide project risk management processes

Workload management practices

5 steps to identify CSFs

Critical success factors are a great way to set and track success criteria. If you’re ready to get started, follow these five steps for success.

Create a strategic plan. CSFs build on your organization’s three- to five-year strategic plan , so start by creating that if you haven’t already. Because a strategic plan identifies your high-level objectives for multiple years, it’s a key building block for CSFs further down the road. 

Review the strategic plan with executive stakeholders. Once you’ve created your strategic plan, assemble your strategic management project team—the key stakeholders who create your critical success factors. Go through the strategic plan and identify business processes and key result areas (KRAs) that are critical, make-or-break-it areas for the organization. For example, imagine you identify customer satisfaction as a KRA for the coming goal period. 

Identify your critical success factors and share them with your broader organization. Once you’ve identified your KRA(s), attach related critical success factors to help you achieve your goals. For example, if your KRA is customer satisfaction, an associated CSF is to improve customer relationships through dedicated customer service teams. Once you identify CSFs, share them out with your broader team for feedback. 

Connect CSFs to KPIs to make them actionable. To transform your CSFs into action, connect them to quantifiable key performance indicators (KPIs). For example, if your CSF is to improve customer relationships through a dedicated customer service team, create a KPI to build a customer success team with at least 10 team members before the end of the quarter and a second KPI to hit a 12 hour customer service response time by the end of the fiscal year.

Monitor and measure. Once your CSFs and KPIs are created, all that’s left is to monitor them for success. If you haven’t already, set up a goal-tracking system to track and manage your organization’s top level goals—as well as the projects and initiatives that feed into those goals. 

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Good critical success factors help your team home in on the most important parts of your strategic plan in order to hit your goals. If you’ve never tracked CSFs before, make sure you’re doing so in a goal management tool, like Asana Goals . That way, every team member has clarity on your exact CSFs, the KPIs to help you get there, and the progress of each initiative. 

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What Is a Critical Success Factor? A Quick Guide

In order to succeed, one must have a specific idea of what that success looks like. When this isn’t the case, it’s impossible to discern wins from losses and be certain your goals have been achieved.

If asked to define success in terms of a specific project or business, many would struggle not to answer in broad terms. But to truly succeed (and learn from those successes) we must dive into the factors that constitute success. These are known as critical success factors.

What Is a Critical Success Factor?

A critical success factor is something an organization, business or project must accomplish in order to fulfill its goal. Critical success factors help a team or organization decide what they should focus on and compare progress to the goals that are set.

These goals are often called deliverables . Different deliverables will have different critical success factors, and these factors culminate to qualify the effort as either a success or a failure. Therefore, if a deliverable is the goal, a critical success factor is what is needed to fulfill this goal.

To clarify, critical success factors are not a measurement of success, but rather the systems through which a company succeeds. These systems work in the “background” of operations and projects at all times.

Why Do Critical Success Factors Matter?

Defining and monitoring critical success factors is the only way to keep an eye on whatever the deliverables demand. If a project or organization only knows the destination they want to reach, and not how they’re going to get there, it’s easy to get lost in the weeds. Critical success factors are the only way to know exactly what is needed in order to achieve all deliverables. Without this knowledge, deliverables are hypotheticals.

Be careful not to confuse critical success factors with metrics of success. These metrics already exist as KPIs (key performance indicators) and critical success factors serve another purpose.

A critical success factor should be directly related to a business strategy. Imagine the goal is to increase clientele by a certain percentage. Some might be reviews of customer service and increases in outreach efforts, papers, etc. Without a record of these items, areas of improvement can’t be identified, nor can areas the team excelled at.

When Should You Define Critical Success Factors?

Critical success factors should be defined during the planning phase of the venture, at the same time as deliverables. By defining these goals and critical success factors simultaneously, a clearer picture of what specific steps must be taken in order to accomplish the tasks appears.

The best practice is to define no more than five per deliverable, though there may be a few more depending on the size and scope of the project. If there are too many critical success factors, it becomes difficult to keep track of each of them. Things can quickly become convoluted.

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Critical Success Factor Examples

Determining critical success factors can be challenging. Deliverables vary from team to team and project to project, and examples of these will be just as unique. Here are a few critical success factor examples for different organizations, departments, stakeholders, etc.

A reminder: this is not a list of deliverables. These are examples of what various deliverables might require.

• Improved rates of social media engagement
• Improved email open and click-through rates
• Faster turnaround in creating content assets
• Maintaining a ‘no accidents’ status on a job site
• Increasing clientele each month

The list goes on. No matter the deliverable, a critical success factor is something that fuels the greater goal. Other general examples of critical success factors are new leadership strategies, improved company culture, new operations methods, improved customer service and better quality equipment. Each of these can be applied to a huge list of different deliverables.

Critical Success Factor: Key Terms

In order to understand what a critical success factor is, you must first understand what affects the system itself. Three examples of these are CSCs, KSAs and KRAs:

CSC: Critical Success Criteria

CSC stands for Critical Success Criteria . If a critical success factor is what a deliverable needs in order to be achieved, then a CSC is what exactly qualifies the deliverable as successful/achieved.

KSA: Key Success Area

KSA stands for Key Success Area. ‘Key Success Area’ is another common name for a critical success factor. Rest assured, this is the same concept as a CSF and should be treated as such.

KRA: Key Result Area

KRA stands for Key Result Area. A KRA refers to specific factors different employees and departments will concentrate on depending on their roles. As the name suggests, the results from these roles will vary. In order to accurately define key result areas, a manager or stakeholder must completely understand their role and responsibilities. Otherwise, the KRAs will not be aligned with their tasks. But, when defined accurately, KRAs show the exact targets the individual, department or organization needs to hit.

How ProjectManager Helps You Achieve Success

ProjectManager is online project management software that offers all the tools you need to plan, initiate, track and report on projects every step of the way. Since we’re a web-based software, you can track, manage and report on critical success factors on the go.

Effortlessly create schedules with our online Gantt charts. Assign tasks, monitor all project details and communicate with team members with a variety of tools to choose from. Decide which options are right for your project and customize how it’s managed.

Track Progress in Real Time

Find all the information you need using the online dashboard. Our software automatically takes updates to your project’s tasks and creates easily scannable charts and graphs. This makes it easy to give updates to your stakeholders at meetings to keep them in the loop.

In-Depth Analysis Without Leaving the Software

If your stakeholders are looking for more in-depth data, our software has one-click reporting that allows you to select only the data that is most important to it’s target demographic. Generated reports can include project variance, workload and more. Catch issues before they become problems!

Critical success factors vary from project to project, so you need a tool that can do it all. Good project management requires a strong project management tool to ensure that your project is a success. ProjectManager.com gives your team all the tools they need to collaborate on critical success factors and increase their efficiency. Try our award-winning software with this free 30-day trial.

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What are critical success factors? Examples, definition, overview

Many of the techniques, frameworks, processes, and tools in wide use today were invented during the golden era of project management in the late 1990s. With these new methodologies came a need for project stakeholders to identify key areas and actions that were required for a project to succeed.

This is where critical success factors — the key areas a product or a project need to execute or consider for a project/product to be successful — enter the picture.

What are critical success factors?

A critical success factor (CSF) is a specific element or activity that is deemed essential for an organization to achieve its mission or goal. In product management, critical success factors are the key actions a product team takes to deliver successful products that solve user problems.

Critical success factors are different from critical success criteria and key performance indicators (KPIs) . Critical success factors are action-based statements that can be assigned to an owner. Think of a CSF as a task that needs to be executed for the product to be successful.

The term critical success factors was coined in a 1961 Harvard Business Review article by Ronald Daniel titled “ Management Information Crisis .” CSFs evolved more during the late 90s to help project managers identify what needed to be done to achieve product and business goals on a bigger scale.

Who sets critical success factors?

Critical success factors are often established by product leaders, such as the VP of product or chief product officer (CPO), who own the product development process in the organization.

In product-centric organizations, CSFs are embedded into the product development process, sometimes without product managers even noticing it.

What is the outcomes hierarchy?

CSFs are the second layer of the outcomes hierarchy. The outcomes hierarchy flows as follows:

Deliverable

Critical success factors (csfs), critical success criteria (csc), key performance indicators (kpis).

A deliverable could be any product, feature, or enhancement you are building. For a product team to build an effective feature, there should be three more layers: critical success factors (CSFs), critical success criteria (CSC), and key performance indicators (KPIs).

The critical success factor, as mentioned before, is what needs to be done to build a successful product. But it doesn’t make sense to have action steps without understanding the baseline of what success looks like. This is where CSCs and KPIs come in.

Critical success criteria are the benchmarks by which you measure the success of the feature or initiative you are pursuing. Think of it as the ultimate outcome you want to reach.

Examples of critical success criteria are increasing the number of monthly registered users, decreasing the time from searching to placing order for an ecommerce product, etc.

KPIs are a way to track your CSC quantitatively. So what signals might tell us that we achieved our CSC?

Referring back to our previous example, can we say we achieved success if only one new customer registers? Of course not.

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Coupling your CSC with quantifiable business goals will generate a KPI — for example, increasing the number of monthly registered users by 30 percent or reducing the time from searching to placing an order by three minutes.

Benefits of using critical success factors

Setting CSFs can help you:

Promote cross-functional collaboration

Streamline product and project management processes, align stakeholders.

When the entire company — not only the product team — embraces CSFs, cross-functional teams are much better equipped to work together with minimal friction. The list of CSFs serves as a compass to help these disparate teams navigate the broader roadmap of activities required to achieve product objectives.

By embedding CSFs into the development process, the company can establish a template for success in any initiative — e.g., building features, introducing enhancements. CSFs derived from past experience will increase the likelihood of the product being successful and achieving the objective.

Having established steps to achieve success will significantly result in better stakeholder alignment. This will help the product team encounter less noise from the outside departments and will allow the outside departments and divisions to have more clarity around the holistic success process taken to maximize the feature success chances.

How to identify critical success factors

Identifying critical success factors isn’t a one-off task; it’s an ongoing initiative. While there’s no one-size-fits-all approach, the general process for establishing critical success factors is as follows:

• Start with the product strategy
• Analyze old projects
• Collaborate with product leaders

1. Start with the product strategy

Critical success factors differ from organization to organization and from product to product. Your product strategy will answer most of your questions.

The product strategy should outline your product aspirations and goals. It’s essential to keep your product strategy in mind while building your first CSFs. This will help you and your product team stay aligned.

2. Analyze old projects

Have you built a feature or product that positively impacted all your success metrics? If so, then start there.

In a workshop, identify with your stakeholders what has impacted success, what went right, and what went wrong. Also any additional insights and opinions you can collect from other stakeholders.

3. Collaborate with product leaders

Now that you have synthesized stakeholders’ insights, you can start collaborating with product leaders to develop a first draft of your critical success factors. The draft should include tailored steps or key focus areas for your product team to deliver the perfect feature or enhancement.

Start executing based on your process and your CSFs. Validate the effectiveness of those success factors and measure whether the features or enhancements delivered generate the expected results.

Based on the results, you should always tweak your CSFs to accommodate new insights and changing conditions. Treat your CSFs as an ongoing project that you will continuously refine and improve with your stakeholders and, most importantly, your product team.

Critical success factors: Examples

There are many product development process components that could serve as a critical success factor. Below are four success factors I commonly see across startups and product organizations:

Build a clear product strategy

Understand customer pain points, analyze product performance regularly, create value continuously.

A clear product strategy is the first step for any product. Your strategy will guide the product team and help them identify their customers, introduce enhancements and features, and, more importantly, prioritize them based on the strategic goals.

Building shiny new features that don’t solve customer problems is unprofitable for the business. All it does is burn resources with no real business return on investment (ROI).

However, understanding customer pain points through surveys, customer interviews, observations, contextual inquiry, and focus groups will increase your chances of delivering real value to the user and, thus, positively impacting metrics such as retention and activation.

Analyzing your performance using product analytics tools or through qualitative methods such as interviews will help you and your team create a top-notch product. Analyzing the product performance enables the product team to ease critical flows for the customer, helping them achieve their tasks and solve their problems efficiently.

Creating value in a continuous manner and delighting the user will help establish your product in the market. By solving more and more problems your users face, you increase the chances they’ll stick around.

Final thoughts

Critical success factors (CSFs) — also called key results areas (KRAs) — are crucial for any product team to achieve success. CSFs help the product team define the areas, actions, and steps that are absolutely necessary to achieve success.

CSFs also help product teams assess the areas in which they excel and areas that need improvement. By holistically detecting the faulty key success areas, they can introduce tweaks to the process and build better products during subsequent stages.

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Critical Success Factors

Daniel and Rockart's Guide to Achieving Strategic Success

By the Mind Tools Content Team

Critical Success Factors (CSFs) are every bit as important and straightforward as they sound! They are the areas of your business or project that are vital to its success.

They also give your people focus, and ensure that tasks and projects are aligned across teams and departments.

In this article, we explore how to identify your CSFs, how they should relate to your business objectives, and how they differ from Key Performance Indicators (KPIs).

What Are Critical Success Factors?

Essentially, critical success factors or CSFs are the elements of an organization or project that are vital to its success.

The concept of CSFs (also known as Key Results Areas or KRAs) was first developed by management consultant D. Ronald Daniel, in his article, "Management Information Crisis." [1]

John F. Rockart, of MIT's Sloan School of Management, built on and popularized the concept almost two decades later. He defined CSFs as: "The limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization. They are the few key areas where things must go right for the business to flourish. If results in these areas are not adequate, the organization's efforts for the period will be less than desired."

Rockart also concluded that CSFs are "areas of activity that should receive constant and careful attention from management." [2]

© Quotes reproduced with kind permission of Harvard Business Review.

The Four Main Types of Critical Success Factors

Rockart identified four main types of CSFs that businesses need to consider:

• Industry factors result from the specific characteristics of your industry. These are the things that you must do to remain competitive within your market. For example, a tech start-up might identify innovation as a CSF.
• Environmental factors result from macro-environmental influences on your organization. For example, the business climate, the economy, your competitors, and technological advancements. A PEST Analysis can help you to understand your environmental factors better.
• Strategic factors result from your organization's specific competitive strategy. They might include the way your organization chooses to position and market itself. For example, whether it's a high-volume, low-cost producer; or a low-volume, high-cost one.
• Temporal factors result from your organization's internal changes and development and are usually short-lived. Specific barriers, challenges and influences will determine these CSFs. For example, a rapidly expanding business might have a CSF of increasing its international sales.

Critical Success Factors Versus Key Performance Indicators

The term "Critical Success Factor" is often used interchangeably with the term "Key Performance Indicator." But they are actually very different.

Critical success factors are derived from your organization's mission and objectives. They set out what you need to do to be successful and tend to be universal across organizations. For example, they might include things like:

• Increasing profits.
• Improving employee engagement.
• Improving talent acquisition and retention.
• Becoming more environmentally friendly.

Once you've identified your CSFs, you can use them to develop more specific Key Performance Indicators (KPIs). These are the specific criteria that managers and organizations use to measure performance, and they often differ from organization to organization.

KPIs provide the data that enable a business to decide whether CSFs have been met, and if goals have been achieved. KPIs can also be used at different levels of a business – they can be used to clarify strategic, business-wide targets, or even to drill down into team and personal objectives.

KPIs are typically more detailed and quantitative than CSFs. For example, the CSF "Increase sales in Asian markets" could generate the KPI "Increase sales revenue in Asian markets by 12 percent year-on-year."

See our article, Performance Management and KPIs , for more on how to develop your Key Performance Indicators.

Five Steps to Identify and Develop Your CSFs

To identify and develop CSFs for your organization, follow these five steps:

1. Research Your Mission, Values and Strategy

First, take some time to look through your organization's mission , values and strategy. What are the challenges and key priorities that your organization needs to be focusing on right now?

If you're unsure or want to gain some background, do a PEST Analysis to gain a better understanding of the external market factors that are influencing your organization right now. Follow this up with a SWOT Analysis to identify how well-equipped you are at dealing with these market challenges, and to assess your organization's strengths and weaknesses. This all-round approach should help you to clarify what improvements need to be made and where.

2. Identify Your Strategic Objectives and Candidate CSFs

Identify your organization's key strategic goals – these are usually linked to your mission and values . Then, for each objective, ask yourself, "How will we get there?" There may be a number of things that need to happen for you to achieve each of your strategic objectives. These are your "candidate" CSFs.

For example, if one of your strategic goals is to "reduce waste over the next year," you will likely need a number of critical success factors to help you to achieve this, such as:

• Reducing carbon emissions.
• Investing more in renewable energy sources.
• Improving the efficiency of supply chains.
• Developing "green" offices and processes.

3. Evaluate and Prioritize Your CSFs

Now, work through your candidate CSFs and identify only those that are truly essential to your success.

As you work through each candidate CSF, you may see that some are linked or are interdependent. For example, if have two CSFs – "to increase your share of the market" and "to attract new customers," the latter would take priority, as it is only by attracting new customers that you will likely increase your market share.

Prioritizing your candidate CSFs in this way will enable you to really focus in on the areas that your business must succeed in. You may find that some candidate CSFs are not a priority at all, in which you case you can cross them off your list.

4. Communicate Your CSFs to Key Stakeholders

Once you've identified your key CSFs, you now need to think about who is best placed to help you to achieve them. What departments or people will need to be accountable for them? What activities or operations will be key in helping you to achieve your CSFs? Do any activities or roles need to be changed or developed to do this?

Once you've done this, communicate your key CSFs to the relevant people. Make sure that everyone is clear on what they are, why you need to achieve them and how you hope to succeed. Get feedback from these key stakeholders, too – they are often best placed to identify any roadblocks or issues that may need to be overcome to achieve success. They may also be able to offer some great ideas of their own about how to meet your CSFs.

5. Monitor and Measure Your Progress

Think about how you will monitor and measure each of your CSFs. This can be tricky as CSFs are often very broad and may require input from several different departments and stakeholders across the business.

One way to effectively monitor and measure your progress is by setting a number of different KPIs against each of your Critical Success Factors. For example, if one of your CSFs is to reduce your carbon emissions, you might create a KPI to fill in some detail, such as "Reduce carbon emissions by 30 percent by 2035."

It's also a good idea to put in place monitoring systems to keep track of your progress. This might mean assigning accountability for this task to a specific person or department. This person will be responsible for gathering data and regularly monitoring the organization's progress toward specific CSFs and KPIs.

So, you would need to think about how this person would gather data on your organization's carbon emissions going forward, where they should store that data, and how regularly they would need to update it.

Although there's no absolute rule, it's a good idea to limit the number of CSFs to five or fewer. This will help to ensure that each CSF has maximum impact and gives clear direction on priorities to other elements of your business.

Critical Success Factors Example

Let's look at the example of a theoretical company, Freshest Farm Produce. Their mission is "to become the No. 1 produce store in Main Street, by selling the highest quality, freshest farm produce to our customers."

The company's strategic objectives are to:

• Gain a local market share of 25 percent.
• Fulfill the "farm to customer in 24 hours for 75 percent of products" promise.
• Sustain a customer satisfaction rate of 98 percent.
• Expand the company's product range to attract more customers.
• Have enough space to house the range of products that customers want.

Using these objectives, Freshest Farm can begin to brainstorm some candidate CSFs, as shown in the table below.

Once Fresh Farms has a list of its candidate CSFs, it can start to consider which ones are the most essential to its success.

The first candidate CSF that Freshest Farm identifies from the list above is to attract new customers. Without new customers, the store will be unable to increase its market share.

The second candidate is to maintain and develop relationships with local suppliers. This is vital to ensure freshness and to source new products.

And the third candidate is to secure financing for expansion. The store cannot meet its objectives without the funds to invest in expanding its store space.

The other factors, such as retaining and training staff, are important, but don't have the same immediate and crucial impact, so they're not critical success factors.

Critical Success Factors (also known as Key Results Areas or KRAs) are the areas of your business or project that are vital to its success.

Identifying and communicating CSFs within your organization is essential to ensure that your business or project stays focused on what needs to be done to achieve success. It can also help you to avoid wasting effort and resources on less important areas of the business.

You can identify and develop your CSFs by following these five steps:

• Research your mission, values and strategy.
• Identify your strategic objectives and "candidate" CSFs.
• Evaluate and prioritize your CSFs.
• Communicate your CSFs to key stakeholders.
• Monitor and measure your progress.

[1] Daniel, D.R. (1961). Management Information Crisis [online]. Available here .

[2] Rockart, J.F. (1979). Chief Executives Define Their Own Data Needs [online]. Available here .

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Cite this post.

AMS Citation

Gates, L., 2011: Strategic Planning with Critical Success Factors and Future Scenarios. Carnegie Mellon University, Software Engineering Institute's Insights (blog), Accessed May 16, 2024, https://insights.sei.cmu.edu/blog/strategic-planning-with-critical-success-factors-and-future-scenarios/.

APA Citation

Gates, L. (2011, February 28). Strategic Planning with Critical Success Factors and Future Scenarios. Retrieved May 16, 2024, from https://insights.sei.cmu.edu/blog/strategic-planning-with-critical-success-factors-and-future-scenarios/.

Chicago Citation

Gates, Linda Parker. "Strategic Planning with Critical Success Factors and Future Scenarios." Carnegie Mellon University, Software Engineering Institute's Insights (blog) . Carnegie Mellon's Software Engineering Institute, February 28, 2011. https://insights.sei.cmu.edu/blog/strategic-planning-with-critical-success-factors-and-future-scenarios/.

IEEE Citation

L. Gates, "Strategic Planning with Critical Success Factors and Future Scenarios," Carnegie Mellon University, Software Engineering Institute's Insights (blog) . Carnegie Mellon's Software Engineering Institute, 28-Feb-2011 [Online]. Available: https://insights.sei.cmu.edu/blog/strategic-planning-with-critical-success-factors-and-future-scenarios/. [Accessed: 16-May-2024].

BibTeX Code

@misc{gates_2011, author={Gates, Linda Parker}, title={Strategic Planning with Critical Success Factors and Future Scenarios}, month={Feb}, year={2011}, howpublished={Carnegie Mellon University, Software Engineering Institute's Insights (blog)}, url={https://insights.sei.cmu.edu/blog/strategic-planning-with-critical-success-factors-and-future-scenarios/}, note={Accessed: 2024-May-16} }

Strategic Planning with Critical Success Factors and Future Scenarios

Linda Parker Gates

February 28, 2011.

Strategic planning is a process for defining an organization's approach for achieving its mission. Conducting successful strategic planning is essential because it creates a foundation for executing work, as well as setting the stage for enterprise architecture, process improvement, risk management, portfolio management, and any other enterprise-wide initiatives. Government organizations are operating in an environment of almost near-constant change, however, which makes it hard to conduct strategic planning efforts successfully. Moreover, when organizations do tackle strategy, they often get bogged down reflecting on the past or speculating on an uncertain future. This posting describes recent work investigating and integrating techniques to improve organizational strategic planning.

For the last six years, my team in the SEI's Acquisition Support Program (ASP) has been working on a strategic planning approach that incorporates two techniques that complement strategic planning, but are rarely integrated with it. The first technique, critical success factors, determines the handful of key areas where an organization must perform well on a consistent basis to achieve its mission. The second technique, future scenarios, allows organizations to explore the forces that are most important, yet least predictable to them. These techniques are used to generate robust strategies that will serve the organization well in several potential futures, along with early warning signs to understand how the future is unfolding.

We've piloted the integrated strategic planning approach in several government organizations with positive results. In one organization, we applied the approach incorporating both the critical success factors and future scenarios techniques in their entirety to help an organization create a five-year IT strategic plan. They were able to adopt a strategy that incorporated the development of a self-service customer capability (a strategy that was identified as robust given the critical uncertainties of the organization's future), while continuing to pursue formal management of external stakeholders (a critical success factor). Without the integrated use of these techniques, the organization would likely have missed the opportunity that the self-service capability represented, and may have neglected or failed to align external stakeholder management with their strategic goals. Not only did the effort produce a robust strategic plan, but the enhanced process achieved other important--but intangible--benefits: strategic conversation among the leadership, data-based decision making, and increased communication across the organization.

One important feature of our strategic planning approach is that organizations can implement it in stages, at any level, and still realize benefits. Another organization we worked with implemented the enhancements over several annual planning cycles. They have been able to see consistent and gradual benefits with the incremental implementation. It's been gratifying to observe how the techniques complemented each other and expanded our clients' strategic thinking.

In the newly published technical report Strategic Planning with Critical Success Factors and Future Scenarios: An Integrated Strategic Planning Framework , I combine established research in strategic planning, critical success factors, and future scenarios with our insights and lessons learned regarding the value and limitations of the integrated strategic planning framework. The report also highlights specific considerations for applying this approach in the context of strategic planning for information technology.

We plan to continue our work in this field over the next several years. Proposed areas of investigation include:

• creating an integrated strategic planning process to support the integrated framework
• connecting critical success factors and future scenario indicators with project indicators in the monitoring stages of an integrated strategic management process
• exploring how critical success factors and future scenarios can lead to nimbler approaches to strategic planning for use in an agile environment

Our experience over the past six years shows how critical success factors and future scenarios can significantly improve the depth of thinking and analysis in strategic planning efforts. By managing operational commitments and the uncertain future effectively, they also demonstrate their value in a strategic management (e.g., Balanced Scorecard) process. I welcome your feedback. To download a copy of the report, please visit www.sei.cmu.edu/library/abstracts/reports/10tr037.cfm

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Understanding Critical Success Factors and Indicators in Business

F. John Reh is a business management expert, with more than 30 years of experience in the field. A writer and journalist over the past 17+ years, he has covered business management for The Balance.

The world of business is filled with words, terms, phrases, and acronyms that can be confusing. In particular, the terms Key Performance Indicators (KPI) , Critical or Key Success Indicators (KSI) and Critical Success Factors (CSF) are often used interchangeably and erroneously. The purpose of this article is to clarify the meaning of two of those phrases, Critical Success Factors and Critical or Key Success Indicators, and to describe their importance and use in business. 

Definition and Examples of Critical Success Factors

Critical Success Factors are those variables or circumstances necessary to enable a positive outcome for a business program or strategy. The CSFs are the expected causal variables of a particular desired result. Examples include:

• A project team identified the need to train in Agile methodologies to replace their reliance on the traditional critical path project approach as a critical success factor with the complicated new software development initiative.
• The general manager supported the team's recommendation for investment in a new customer relationship management software system as part of the plan to strengthen overall customer satisfaction . The new software was identified as one critical success factor for better tracking and responding to inquiries from their customers. 
• The senior management team identified three critical success factors in enabling their new strategy in the marketplace: identifying and hiring people with the right skill sets; defining and implementing a strategy execution approach that captured lessons learned in the market; and the ability of marketing to gain the attention of a critical group of early adopters in the targeted markets.
• The sales manager understands that training, follow-up, and the use of a defined sales process all contribute to increasing sales. They measure and monitor a set of indicators that tell them whether their representatives are engaging in the behaviors that enable growth in sales. 

Identifying Critical Success Factors

Management and project teams work hard to discern between variables that simply correlate with outcomes and those that have a causal effect. In many circumstances, the identification of CSFs is the result of research and exploration, financial or statistical modeling, and informed discussion and debate.

When a situation does not lend itself to rigorous statistical analysis, the identification of the CSFs involves in-depth analysis and discussion. Issues to consider when striving to identify CSFs include:

• What variables or factors are likely to impact our desired outcome?
• Are we able to perform statistical analysis based on past data?
• What changes in behavior must occur to create the desired outcomes?
• What conditions must exist or change to enable the desired outcomes?
• What skills do we need to add or acquire to achieve success?
• What tools must we add or master to allow us to achieve our goals? 

Critical or Key Success Indicators (CSIs)

While Critical Success Factors are the cause in a cause and effect relationship, CSIs are the measures that link the actions or causes to the outcomes. A Critical Success Indicator is analogous to the stopwatch time stamps of a marathon runner or the fuel economy readings in an automobile. Consider:

The marathon runner understands that they must maintain a particular pace to finish with a time that will place them in the top ten runners in their category. The readings do not impact their success directly. However, they offer guidance on whether they might increase their pace to keep up with the competition or slow down to conserve energy for the final leg of the race. The critical success factors for their running success included their training regimen, diet, and mental preparation. The readings are simply indicators of the progress toward their goals. Critical success indicators can be developed for each of these CSFs. 

A driver focused on maximizing fuel economy is dependent upon readings from the car's computer to understand how they're doing. The critical success factors for maximizing fuel efficiency include such factors as average speed and starting pace as well as stopping frequency. The economy readings are simply indicators suggesting whether the driver's actions are yielding the desired result.

The timing or reading itself does not impact the outcome or success. However, the CSI offers guidance on whether the actions are yielding the outcomes that enable increased sales. 

Developing Key Success Indicators

After careful identification of CSFs, the manager or professional works to identify measures that translate actions into meaningful measures or proxies of the CSFs. If you reference the CSI examples above, you can envision the indicators the marathon runner must monitor, including training time and effectiveness, dietary management, and sleep.

Effective managers measure and monitor and strive to correlate their measures with their CSFs over time. The process of developing Key Success Indicators is an ongoing, iterative process that requires frequent adjustments and refinements based on actual experience.

Measuring for Success

The identification of Critical Success Factors and their supporting Critical Success Indicators is an important part of improving the probability of success for an initiative or program. It's wise to heed the adage, "what gets measured gets done." Astute managers watch very carefully to correlate indicators to CSFs and to identify and substantiate that the CSFs have causal relationships with desired outcomes. It is a process that requires both art and science. 

Update by Art Petty .

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Critical success factors: what every manager should know

When you’re working on a project, it can be easy to lose sight of the most important objectives.

As you face new challenges, a changing marketplace, and even a changing team, it’s easy for things to spiral out of control.

A critical success factor (CSF) is a management concept where you highlight necessary elements for a project to ultimately succeed.

To achieve big goals, you need to find every success factor and how they’re connected.

In this article, we’ll break down exactly what critical success factors are, show some common examples, and tell you how you can find yours.

Don’t miss more quality content!

What are critical success factors.

Critical success factors are key areas you need to master if you want to achieve a larger goal or objective, whether that’s a specific project or just selling more products.

CSFs can help you focus your team’s efforts to work more effectively on what matters most. It’s a great antidote for getting sidetracked or the lulls that often come in a longer project.

What’s the difference between a CSF and a KPI?

Like a key performance indicator (KPI) , a CSF helps pave the way to project success. The difference is that CSFs often focus on more high-level concepts, not metrics or data.

To put it simply, a CSF focuses on the underlying cause of success, while a KPI measures the impact of the actions you take.

For example, if the CSF is to increase lead quality, the KPI would be the average value of new deals.

Both are useful additions to your project management toolbox.

What are the different types of critical success factors?

There are many different types of critical success factors based on your industry and other factors.

At a high level, you can categorize CSFs into 3 main types:

• Industry-specific success factors: getting featured at a specific convention, reaching a certain market, or other comparable factors.
• Strategic factors: stakeholder engagement, business partnerships, etc.
• Environmental factors: climate, potential natural disasters, local regulators, etc.

You can’t just rip off the CSFs of an unrelated company in a different industry and expect them to work.

You need to consider what can impact the success and failure of your projects and business. So consider your place in the market, unique environmental factors, and the layout of your industry.

A critical success factor only facilitates success if it’s relevant to your organization.

Why are critical factors important?

In 2021, only 55% of projects finished on time, and 27% of projects didn’t meet their goals at all, according to the latest PMI data.

( Image Source )

A critical success factor outlines an intermediary step that you must take to reach your end goal. By prioritizing these, your team can always keep on the right track.

With CSFs, you can keep your projects on time, within budget, and on target. They can help you streamline your project management and consistently achieve better results.

What are examples of critical success factors?

An example of a critical success factor could be improving stakeholder engagement or finding a business partner in a specific region.

It depends on your industry, organization size, and other variables.

In this section, we explore different examples of success factors from different types of organizations.

What are the 5 critical success factors in project management?

There are more than 5 CSFs in project management, but experts often highlight stakeholder engagement, clearly defined project plans, and more.

These are general CSFs that apply to virtually any project in any industry. Your company’s projects will also have other relevant CSFs beyond the scope of this list.

What are examples of critical success factors in marketing?

In marketing, you can use a variety of CSFs depending on the channel and target of your marketing campaign.

But there are a few universal factors that you need to consider no matter what.

What are examples of critical success factors in sales?

In sales, common critical success factors outline a high-level strategic plan to drive more leads and revenue.

If you could master even one of these, your future sales revenue will reflect that.

3 best practices to consistently achieve your CSFs

If you’re convinced that using critical success factors in your own company will be beneficial, here’s how you can make that happen.

Determine your CSFs with the entire team.

When you’re setting goals, it’s easy to take on that role alone as a manager. But that’s not ideal.

Don’t let that go to waste.

Consider risks and roadblocks, not just assets.

When you’re setting goals, the tendency is to focus on assets and potential, overlooking risks and roadblocks.

Don’t fall into this trap. Give the potential downsides all the attention they deserve.

Consider everything that can go wrong. A project sponsor could back out, a regulator could interfere, or a competitor could launch a similar campaign before you.

There are a lot of ways a project can fail.

Use analytics and visualization to keep track of your progress.

Once you’ve set your strategic goal and CSFs, you don’t want to rely on your intuition. You want concrete data to show whether you’re headed in the right direction or not.

That’s where advanced project management software comes in handy.

Secure your project’s success factors with monday.com

monday.com is the perfect platform for maximizing the impact of your new CSFs. Our Work OS goes way beyond to-do lists for your team.

You can visualize project progress with everything from color-coded boards to Gantt charts to custom bar graphs. Use fully customizable templates and an automation builder to streamline your workflow.

Use detailed views and visualization tools to keep track of progress.

With monday.com, you have plenty of options for visualizing the state of your project.

You can use:

• Color-coded grid-view — with item status visible
• Gantt chart or timeline views
• Customer graphs and charts
• A real-time multi-board dashboard

This type of oversight is especially useful if you’re developing new technology for a project sponsor. They’ll want regular progress updates.

Share boards and reports with stakeholders and keep them engaged.

With monday.com, you can easily share board access with external sponsors and stakeholders. You can even create feedback forms so they can let your team know what they think about the direction on certain features.

If stakeholder engagement is a CSF, it’s a great way to hit 2 birds with 1 stone.

Set up custom workflows to ensure smooth collaboration.

monday.com also has advanced workflow management tools that let you control every aspect of how your team works.

You can use existing templates for several different use cases and easily customize and standardize them throughout your company.

Strategic planning is a good first step, but it’s the execution that makes all the difference.

Finding your success factors is only the first step

Not only do you have to find meaningful success factors for your company and specific project, but you also need to figure out how to realize them over time.

With monday.com, you can keep track of your success factors and project progress in general, making management a lot easier.

Try our project management template to regain control over your projects and start making meaningful headway.

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• Strategic Execution

A Quick Guide to Critical Success Factors

RELATED TAGS:

Strategic Planning , strategy execution

For businesses to succeed, they must start with an understanding of what success means for them. Leaders who want to achieve, innovate and reach new heights need a list of pivotal successes their team needs to meet.

The critical success factors of a business are crucial to its success. Without them, it won’t be able to quantify its achievements and setbacks. These factors focus your team and align tasks toward achieving your goals. Each critical success factor lays a solid foundation for future business development. 

In This Article

What Is a Critical Success Factor?

• Industry Factors
• Environmental Factors
• Competitive Factors
• Temporal Factors

Why Do Critical Success Factors Matter?

Critical success factor examples, when should you define your critical success factors.

• Define Your Mission, Values and Strategy
• Identify Your Strategic Goals and Create a CSF Shortlist
• Assess Your CSF Shortlist and Choose the Top Contenders 
• Share Your CSFs With the Right People
• Measure Your CSF Efficacy and Progress

How AchieveIt Can Help Your Organization Succeed

Let’s actually do this.

If you define the elements of your business or project that are vital to your success, you can do so with critical success factors (CSFs). Your business must achieve these high-level goals to meet your strategic objectives. Your CSFs connect with your organization’s business strategy — you can execute them throughout your organization, across programs and projects. 

CSFs give your business strategy meaningful value. Rather than measuring the success of your organization or projects, CSFs provide systems through which your company can succeed. You can establish CSFs to augment your strategies throughout daily operations and guide your business toward achieving its objectives. 

Types of Critical Success Factors

Critical success factors fall into four key categories:

1. Industry Factors

Industry critical success factors result from specific trends and characteristics unique to your industry and allow you to maintain a competitive edge within it. Some examples of industry CSFs include the following:

• Improved customer service 
• Innovation 
• Green alternatives

2. Environmental Factors

Consider the environment in which your business operates. While you have little control over the economy, technological advancements or the business climate, they’re still valuable considerations in determining critical success factors. 

Knowing what issues could impact you is crucial to preventing unnecessary risks through strategic planning. A thorough understanding of environmental factors allows you to prepare for problems in the future. Examples of environmental critical success factors include the following:

• Economic downturn
• A change in policy that directly impacts your business
• Infrastructural changes like an increase in electricity prices

3. Competitive Factors

Competitive factors stem from your customers’ view of your business relative to your competitors. Your goals will relate to either maintaining or improving your position and your critical success factors determine your actions to achieve those goals. Since other companies in your industry will be doing the same, competitive critical success factors are subject to more immediate influence.

Examples of competitive critical success factors include the following: 

• If you want to break into a new country, you may focus on a CSF like understanding cultural differences. 
• Building your appeal to a particular customer demographic could be a factor in expanding into an audience a competitor has cornered.

4. Temporal Factors

Like internal organizational changes, temporal factors are limited, short-lived factors that may affect your business. Identifying these factors allows you to counteract and overcome them effectively. Staying ahead of temporal factors can maintain your operations.

Examples of temporal critical success factors include the following:

• A rapid expansion
• Opening new offices that require hiring new staff to complement your existing team
• Unexpected changes to your business model, like creating an online store during the COVID-19 pandemic 

Businesses need to set actionable goals to succeed. With critical success factors to augment your goals, you can monitor the path your business takes to achieve them. Defining CSFs is like choosing a route on a map — you want to find the best and fastest way to reach your goals. 

CSFs help you build your business strategy. If your goal is to increase online sales, the critical success factor defines what you need to achieve this goal. With a record of the steps you took to reach it, you can identify successes and opportunities for improvement, making it easier to replicate the achievements or implement changes. 

Well-defined CSFs allow your business to prioritize specific processes to keep projects within budget and aligned with your goals. They are an excellent tool for streamlining strategic project management so your business can consistently achieve better results. 

Critical Success Factors vs. Key Performance Indicators

While critical success factors and key performance indicators (KPIs) may seem the same at first glance, there are several key differences between the two:

• Intentions:  Businesses use CSFs to guide success beforehand, using them to streamline operational processes and increase sales. KPIs measure business success, tracking how well a business meets its objectives after the fact. CSFs will augment your strategy, while KPIs will give you an idea of how well your strategy is performing. 
• Formats:  CSFs take a qualitative approach, using words and phrases to outline what a business can do to achieve its goals. KPIs are quantitative, assessing business performance with numerical evaluations like percentages and statistics. For example, a KPI could be a 15% increase in online sales.
• Places in strategic goal structure:  CSFs and KPIs are potent tools businesses can use throughout their goals. For example, you may want to improve employee engagement. You can add specificity to this goal with a CSF of providing goal-related meetings. A KPI would track how many people attend these meetings and quantify employee feedback. 

Deciding on the CSFs best suited to your business can be challenging. Companies have many goals that vary within teams and projects. Some common critical success factors across industries include the following:

• Improve social media engagement.
• Increase the number of new clients each month.
• Maintain a ‘no accident’ status in a warehouse.
• Develop and maintain successful relationships with local suppliers.
• Deliver customer-focused training to all staff.
• Develop new leadership strategies.
• Enhance the company culture.
• Improve the quality of online content.
• Advance applications to improve staff efficiency.

The list can be endless. Just as your business goals are often unique, your CSFs will be the same. Remember, while a critical success factor is tied to your goal and provides mechanisms to achieve it, CSFs are not goals themselves. Let’s have a look at some examples of how they differ:

• If your goal is to attract new customers by adding products to your range, a CSF could be to create relationships with local suppliers so you can source locally. 
• If your goal is to expand your offices, your CSFs could be securing the finance for the expansion and managing the disruptions during construction. 

The planning phase is the best time for critical success factor definition. Since CSFs are linked to your goals, it makes sense to plan the two simultaneously. Doing so aligns them and clearly shows your team’s steps to accomplish critical tasks. 

The number of CSFs you define for each goal will depend on the size and scope of the project. Generally, it’s best to try sticking to around five CSFs per goal. If you include too many, it can become challenging to integrate them into your operations and track their progress. 

How to Develop and Identify Critical Success Factors

If you’re not sure where to start, you can follow these five simple steps to set your first CSFs:

1. Define Your Mission, Values and Strategy

If you haven’t already, it’s time to write your mission and vision statement . These statements are the building blocks that make up your business — your mission, values and strategy. Be sure to consider the following: 

• What your company should prioritize
• How your goals align with your mission and values
• Any challenges you’re facing

Take environmental and strategic factors into account and identify your current strengths and weaknesses. Determine political, economic, socio-economic and technological factors that may affect your strategy and CSFs. Follow up with an analysis of your internal strengths, weaknesses, opportunities and threats. 

Identifying all the factors that influence the formulation of your CSFs will give you an accurate view of where you need to focus. 

2. Identify Your Strategic Goals and Create a CSF Shortlist

What are your company’s key strategic goals? In other words, where would you like to go? Clarify the strategic objectives linked to your mission and values. 

Once you know where you want your business to go, ask yourself one more question — how will you get there? It may seem like an obvious question, but knowing the ‘how’ is even more important than the ‘where.’ What will your business need to do to achieve your strategic objectives? Write a list of answers to this question, covering all the steps you need to take. Just like that, you have a CSF shortlist. 

One of your strategic goals may be higher staff retention. Your CSF shortlist could look like the following:

• Create ongoing learning initiatives and provide quality training.
• Improve intra-departmental communication.
• Invest in staff happiness with incentive programs.
• Provide employees with online chatrooms and forums to foster better communication.
• Create a peer reward system where employees can draw attention to one another’s achievements.

Keeping your CSFs down to about five per strategic objective allows your team to focus and give productive input toward the best results. 

3. Assess Your CSF Shortlist and Choose the Top Contenders 

Take a look at your shortlist and start evaluating each entry. Remove all but the most essential to your goal’s success. 

Keep an eye out for CSFs that influence or depend on one another. Looking at the critical success factor example list above, you’ll see that “Improve inter-departmental communication” and “Provide employees with online chatrooms to foster better communication” are linked. In this case, you could remove the first point, as the second provides a concrete method of achieving it. 

A few moments to establish your priorities could save your team from wasting effort and focus their attention on the most critical areas. As you examine your list, you may find that some of your CSFs aren’t priorities at this stage. You can note them for later strategy changes as they may become applicable. 

4. Share Your CSFs With the Right People

Once you’ve decided on your CSFs, it’s time to consider who could help your business achieve them. Consider what activities each CSF will require and which department or person will be accountable. Your CSFs may even create new roles within your organization! 

Communicating your CSFs to stakeholders and others throughout your organization is crucial. Be clear in your communications about why you chose these CSFs, why you need to achieve them and the methods you hope to use. Your team can provide you with valuable feedback and may have some ideas of their own. You can refine your CSFs together, so they fit seamlessly into the workflow of your business. With input from team leaders, you can maximize the success of your initiatives. 

5. Measure Your CSF Efficacy and Progress

CSFs are qualitative, so measuring their success can be challenging. With your stakeholders aware of your CSFs, you can ask different departments to help you find a way to measure them. Assigning someone to watch your CSF progress and make them accountable might be valuable. 

Consider attaching a KPI to each relevant critical success factor. You’ll be able to get a more accurate measure of your CSFs’ performance and identify any speedbumps in your path. If you can identify bottlenecks, you can address them. 

AchieveIt  provides organizations with integrated plan management . We help you with all your strategic planning, from plan creation and performance assessments to plan and progress management. With AchieveIt, you get an integrated view of your strategic initiatives in one place. If you need input on achieving your goals, you can turn to our execution experts to help make your goals more actionable. 

AchieveIt lets you bridge the gap between strategy and execution in the following ways:

• Align, integrate and execute strategic plans:  AchieveIt is a flexible platform capable of managing multiple strategic projects across your organization. With our systems in place, alignment is a requirement and processes are the focus. 
• Automate progress updates:  AchieveIt focuses on the end user and makes the update process easy for team members to adopt. 
• Drive meetings with context:  Communication is crucial for strategic planning and historical context adds another layer to your communications. You can drive meetings with filterable reports that allow you and your stakeholders to focus on your most important initiatives with a historical context at the click of a finger. 
• Combine qualitative and quantitative insights:  AchiveIt combines numerical data with context and supporting initiatives, so your team can understand how initiatives are performing. They can also understand why they perform specific tasks and what work is necessary to optimize results. 
• Drive insights and decisions:  You can drive your insights and decisions with AchieveIt’s customizable reports and dashboards across one or multiple plans. Automated report distribution keeps stakeholders up to date with initiatives. 
• Involve teams across your organization:  Strategic initiatives work best when everyone works together. AchiveIt provides in-depth onsite training, so everyone is on the same page. 
• Optimize your plans:  AchieveIt grants you access to professional execution experts with critical insights on achieving your strategic goals. Your execution experts are your second set of eyes, helping you streamline your plans for the best results. 
• Measure your ROI:  AchieveIt will provide detailed analyses of your success in regular business reviews. 

AchieveIt is a tool that can change your business space , focusing on bridging the gap between strategic planning and execution with innovative integrated plan management. To learn more about how to connect, manage and execute key plans and initiatives with AchieveIt,  request a demo and see how we can help make your goals actionable. 

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• Productivity

Everything You and Your Business Should Know About Critical Success Factors

The key to a successful business is hitting goals and working towards its overarching mission. However, setting goals and figuring out how you’re going to achieve them are two very different things.

The first step to achieving these goals is establishing the critical success factors of your project and business. Never heard of them? Don’t worry; we’re going to look at what critical success factors are, why critical success factors are important, and how to identify and develop critical success factors within your business.

Critical Success Factors

Critical success factors (CSFs) are the elements that are vital for the success of a company or organization. The concept behind CSFs emerged in the 1960s before being refined in the 70s and 80s by John F. Rockart into what we know today. Since then, they have become a staple across numerous industries.

While they are often tied to the overall success of a business, they can also be used for individual projects or goals .

Different Types of Critical Success Factors

Critical Success factors, as described by John F. Rockart, can be broken down into four main categories:

Strategic factors

Strategic factors focus on your specific company strategy. For example, this could include your company’s positioning or marketing efforts.

Environmental factors

These are the very broad factors that can make or break your business, such as the economy, changing technological landscape, or the rise and fall of competitors.

Industry success factors

Broader than strategic factors but not as wide as environmental factors, these are considerations about your specific industry. The tech industry, for example, might value disruption and innovation, while banking values stability and continuity.

Temporal factors

Based on internal needs and changes, these factors are often be born of short-term situations. This could be as the result of a crisis or, for example, temporary needs during an expansion.

The Difference Between Critical Success Factors and Key Performance Indicators

Both Critical Success Factors and Key Performance Indicators are common concepts in the modern business world and are often mistaken for one another or even used interchangeably.

However, while they are both important for the success of a business, they have very different roles. The difference between CSFs and KPIs, in the simplest sense, is that Critical Success Factors refer to what will lead to success (the causes) based on a company’s goals and mission. At the same time, Key Performance Indicators are used to measure that success.

KPIs are the tools that a business can use to measure whether or not the critical success factors they have identified have led to a positive outcome for the business. Furthermore, CSFs can be very broad, while KPIs tend to be more granular and quantitative.

An example of how critical success factors and Key Performance Indicators differ but complement each other could be:

A company has a goal of increasing the operating profit of its manufacturing business by 5% in three years. To do this, they set out several CSFs and KPIs. 

Each of these KPIs would then have a specific and measurable target (say, a market share of 12%). 

The goal is increased operating profit, the CSFs are how you’ll reach that goal, and the KPIs are used to measure whether the CSFs are fulfilled and the overall goal reached.

Discover More:

How to Build a High Performing Team

Reasons Critical Success Factors are Important

As the name suggests, Critical Success Factors are critical to a business doing well, and this is due to several reasons.

First, and most importantly, they lead to greater success! The clue is in the name, and this is a benefit regardless of your industry or angle.

Second, they can help you decide where your resources should go. Once you have a clear idea of the factors critical to your business, it is far simpler to allocate resources accordingly.

Third, CSFs are flexible to both long- and short-term goals, helping your company achieve success in the here and now while not losing sight of success in the future.

Finally, CSFs can cut unnecessary KPIs. Establishing your CSFs means not wasting time and resources on areas that don’t need measuring.

Critical Success Factors Examples

As discussed, critical success factors are important at a company level but can also be applied to individual projects or departments. Whether working in sales, marketing, or project management, a few CSFs are vital for your work. Let’s take a look at some of the most common success factors examples.

Top Critical Success Factors in Project Management and Examples

There are many critical success factors in project management. Still, these are some of the top factors for most situations:

A competent project manager

For example, a project manager should have both the requisite skills to manage and be experienced in the particular project field.

Clearly defined goals

There are many ways to set clear goals, such as using SMART structures or structured deadlines. 

Clear communication

This includes simple day-to-day communication and deeper communication for the likes of conflict resolution.

Competent project teams

You need the right people for the job. If someone has no experience in marketing, it is unlikely they will thrive on a marketing project.

Support from above

Projects and their teams need support from upper management to achieve success.

Top Critical Success Factors in Marketing and Examples

The critical success factors for any marketing project will depend on its goals and the targets and channels of specific campaigns. Brand awareness, for example, has different factors than increased sales, but both could be goals of a campaign.

That said, there are some more general examples to look at:

Good customer experience

It’s hard to market something if the experience is poor. Even if the marketing is great, you will not succeed in hitting the goal (for example, more sales) if the website crashes once a person clicks on an ad.

High-quality market research

Knowing who you’re selling to is the first step to figuring out how it should be marketed. This all starts with research, making it a fundamental factor.

Actionable reporting

On the other end, once a campaign runs, a business also needs a way to know if they have hit their KPIs to make adjustments for the future. Thus, good reporting is also vital.

Top Critical Success Factors in Sales and Examples

What you’re selling, how you’re selling it, and who you’re selling to will all lead to different CSFs. They always need to be completely custom to your business, but there are a few sales CSFs to consider:

Good customer relationships

It is always important that the sales team has a good relationship with customers. Otherwise, it is a non-starter.

Good quality leads

It often isn’t just about the number of sales leads, but how likely they are to convert and how much they will be worth if they do.

Increased industry contacts

Depending on your business, a big part of your sales strategy can be based on contacts. Networking for sales staff can be vital.

How to Identify and Develop Your CSFs

With these more general critical success factors in mind, it is really important that you develop clear CSFs based on your specific project. It is easier than it seems and can be achieved by following these steps:

It all Starts with Research

For starters, you need to research your company mission and strategy because this is what you’ll be basing your CSFs on. Next, you need to research the specific issues that could influence your project. A PEST Analysis will help establish the external factors, while a SWOT analysis can explore the internal factors.

Identify Your Objectives and Possible CSFs

The next step is to identify the goals of your project and reflect on what needs to happen to achieve those goals. The ideas you come up with at this stage will be candidates for your final critical success factors.

Prioritize Your CSFs

Just as you must prioritize your tasks in a day , you must also prioritize your CSFs. Go through the list of candidates you created during the previous step and identify those that are really vital. As you do so, you will likely be able to blend or merge many of the CSFs you have identified.

For example, “Low return rate” and “high-quality product” are strongly linked, and if you focus on the latter, the former is likely to improve without much attention.

Communicate to Relevant Stakeholders

The next step is communicating your critical success factors to the people that matter. Consider who is best positioned to achieve the goals, which team members need to know, who will be accountable, and if your company infrastructure is good enough to use these new CSFs.

Monitor and Measure

Finally, you need to establish how you will know that your CSFs are being achieved. This is where KPIs come in, and you will often need several to properly measure each CSF.

How Spike can Help you in Your Next Project

To maximize the benefits of your newly-implemented critical success factors, consider a project management platform to help monitor your progress, collaborate with team members, stay on top of tasks, and more.

Spike is a full productivity platform built into your inbox, meaning your team is able to get a clear overview of the project using Tasks and To-Do Lists , measure the progress of each task in real-time, and stay on top of individual, project and company goals.

What’s more, Spike offers advanced collaboration tools such as online Notes for real-time teamwork , as well as video and voice calls for when you need to align with colleagues to hit those KPIs and achieve your CSfs. For when chatting face-to-face isn’t needed, or even desirable , Spike has Conversational Email, which offers the power of traditional business email with the simplicity of instant messaging.

Hitting your goals and making your project or company succeed is hard work, but the first step to making it happen is establishing and understanding the Critical Success Factors that apply to your work.

Once you have these, you can collaborate with your team to achieve them, whether you’re looking to grow your agency, build the best product possible, or introduce your brand to the world.

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Tips and Tools for Focusing Project Management Efforts with Critical Success Factors

By Kate Eby | February 14, 2023

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Reaching project goals is easier when you focus activities and align teams with critical success factors. Think of critical success factors as a way to meet strategic targets with less friction and more profit.

Included on this page, you’ll learn why projects fail and the five steps to identifying critical success factors . Plus, you’ll find a project manager’s guide to critical success factors and a downloadable PowerPoint template for critical success factors in project management .

What Are Critical Success Factors?

Critical success factors (CSF) are activities you do to meet stated business or project goals for improved competitive performance. Organizations of every type, for-profit and nonprofit, use CSFs to decide what to focus on to yield desired results.  

“Critical success factors came into use in the 1960s as an executive tool to track corporate performance,” explains Alan Zucker, author and Principal of Project Management Essentials, LLC . “Critical success factors distill corporate data to the essential items for the organization’s success.” 

Zucker notes that project managers (PMs) combine strategy-focused measures with critical success factors. Key success factors (KSFs) state the essential elements required for a company to compete in its target markets. Objectives and key results (OKRs) are a framework to define measurable goals and track outcomes. Quantifiable measures known as key performance indicators (KPIs) help evaluate the success of an organization. 

How does success look? Examples of critical success factor-driven, strategically based projects deliver within the specified timeframe and budget. The team has fulfilled the criteria and met agreed-upon metrics, and company workflows and corporate culture have remained stable.

What Are Critical Success Factors in Project Management?

Critical success factors in project management are variable activities and attributes. Project managers use critical success factors to meet company goals as they relate to assigned deliverables. Managers will monitor the factors against agreed-upon metrics. 

A 2012 research study, "Critical Success Factors in Projects," by Pinto, Slevin, and Prescott, cites experts who stress that project management isn’t just a tactical function. Diligent project planning and management of critical success factors support organizational strategy, generate value overall, and make project management a strategic component of corporate well-being.

Why Do We Need to Identify Critical Success Factors in a Project?

Identifying critical success factors is part of effective project management. Organizing projects to support identified critical success factors make for positive outcomes based on thoughtful consideration. Successful implementations positively influence short-, medium-, and long-term profitability and a company’s competitive advantage. 

Jon M. Quigley, Principal and Founding Member of Value Transformation , notes that critical success factors clarify a project's value to the organization and how to manage and evaluate projects after completion. “A project that meets schedule and budget but delivers an output that does not meet stated critical success factors is the same as a failure,” notes Quigley. “All projects are subject to constraints and trade-offs while in the planning stages and in process. Without knowing the quantifiable outcome, decisions made during the project aren’t likely to help you hit a target you don’t understand or even know.”

Critical success factors drive multiple benefits, including the following:

• Reduced Action Bias: “Defining clear critical success factors reduces the risk of action bias — the tendency to favor action over inaction,” Zucker from Project Management Essentials explains. “Executives and project managers may leap too quickly from ‘we have a problem’ to ‘here is the solution; let’s go!’ without considering all the ramifications. Taking time to identify and assess critical success factors puts on the brakes and makes for a more thoughtful approach to any potential project's value.”
• Greater Competitive Edge: A 2014 research study by Zawawi, Yusof, and Aris, “Determining Critical Success Factors of Project Management Practice: A Conceptual Framework,” reveals a crucial overall benefit. The study finds that “[d]etermining critical success factors will give the organization/company a competitive edge and is the bottom line of success in fulfilling the responsibility of a project management company. This, in turn, will give rise to satisfied investors and professional bodies and make the project management company prosper.”
• Control and Accountability: Critical success factor best practices dictate clear reporting of every aspect of a project, full support of agreed-upon criteria by all stakeholders, and a project manager with overall control and ultimate accountability. Reporting on an ongoing basis and providing transparency in every aspect to those charged with governance and senior stakeholders is a best practices tenet in advanced project management.

What Are the Most Important Critical Success Factors in Project Management?

There are critical success factors common to projects of all kinds. Success factors include defining clear goals and adhering to set budgets and deadlines. However, supporting people is paramount to success, so they work as a team at peak performance levels.

“What projects have in common is they all are about people,” says Randall Englund, author and Principal of Englund Project Management Consultancy . “People do matter. Projects typically do not rise or fall due to technical elements; they succeed or fail based on how well people work together. For example, meeting the classic triple constraints , or even a sales quota, is more often related to how well we estimate or plan.”

Research in 2015 by Belieu, Crisan, and Nistor on “Main Factors Influencing Project Success,”  collected data from project management professionals and found multiple common critical success factors. That data aligns with subsequent studies on specific projects such as IT, healthcare, and marketing.

The analysis revealed these top five ranking overarching success factors:

• Goal Definition and Direction The top factor for 70.2 percent of respondents was clarity about why a project makes sense and how to reach goals. This result outranked all other aspects in the study. 
• Team Competencies People charged with working on a project need skill sets that match requirements, according to over 53 percent of respondents.  
• Clear Roles and Responsibilities In the study, 53.2 percent of respondents thought clarity around who does what and how is key for successful projects.
• Communication and Consultation More than 40.4 percent of project professionals in the study said that information sharing and collaboration were vital to project success.
• Adherence to Budget, Timeframe, and Performance Criteria The team respecting financial, time, and performance metrics was the fifth area deemed essential by 40.4 percent of people in the study.

Understand Why Projects Fail Before You Identify Success Factors

Project failures often result from a combination of factors. Projects can fail because they aren’t the right project to undertake. When the right project fails, a lack of planning, inattention to metrics, and poor monitoring are the usual culprits. 

“The Project Economy Has Arrived,” a 2021 Harvard Business Review article, reports that projects are the heartbeat of most companies — yet 65 percent of projects are unsuccessful. With such a high failure rate for projects of all kinds, project managers need to know the pitfalls and take steps to avoid them so your organization can flourish. 

According to Project Management Essentials’ Zucker, these four conditions lead to failure:

• “The Bridge to Nowhere: Something Is Built, but Goals Haven’t Been Reached.” Lack of strategy leads to a dead end. “Too often, organizations initiate large undertakings without clearly defining the desired outcome (what) or benefits (why),” says Zucker. “You have to ask why . The desired outcome describes how the project moves the organization forward or advances its strategy, and the benefits describe the quantitative or qualitative impacts. Impacts are often better, faster, and cheaper, like increased revenue, reduced costs, or faster speed to market.” 
• “Wandering Through the Forest: Lack of Framework Wastes Time.” No one can afford to waste time dithering. There must be a solid framework and project planning, a breakdown of managed tasks from the outset, and accountability with all team members for process and progress.
• “The Money Pit: Spending in Overdrive.” This type of failure is about inadequate attention to budget or lack of constant monitoring to contain costs. Cost overruns are a result of no set project lifecycle or end date, poor scope definition or lack of scope management, and undisciplined cost controls. The worst scenario is not paying attention to vendor costs or other expenses. 
• “In the Dumps: Total Project Failure.” Money spent, and there’s nothing to show for it. Often this situation is due to incomplete or poor planning, a lack of attention to risk management , or inattention to the business environment. 

Quigley offers an example of failure that occurred because the what and why weren’t correctly addressed. “One organization spent millions of dollars building a data warehouse and reporting solution, only to realize that it could have provided more relevant information if the planning had been done correctly. The data did not provide insights to drive critical business decisions and therefore was a failure.” 

Sometimes you can’t state the critical success factors, which is a sign to stop the project before it begins. “In another project, I  successfully pushed back on an executive who wanted to implement an IT cost management system,” Zucker shares. “The project manager provided the CIO with inexpensive ad hoc reports to help define the what and why . The larger project was never started because clear critical success factors couldn’t be defined. Recognizing that was a success, and it left time and money for more beneficial projects with a solid foundation.”

How to Identify Project Critical Success Factors

Five steps help identify critical project success factors. First, align the project with corporate strategy. Gain stakeholder consensus on project objectives, scope and timeframe. Then, hone your list to the most essential elements, identify risks, and set metrics. 

“The first step when creating critical success factors is defining the desired outcome,” recommends Zucker of Project Management Essentials. “That sounds easy to do, but it’s not. The desired outcome is more than deploying a new application or capability; it describes how that capability serves the organization. Once the desired outcome is understood, define the qualitative and quantitative success measures. One method to consider using is SMART principles to describe critical success factors.”

5 Steps to Determine if Your Project Meets Critical Success Factors

Before you start on a project, follow these steps to help ensure it will meet critical success factors.

• Align with Strategy Derrick Hathaway, Sales Director at VEM Medical , advises, “Organizational strategy is the filter to determine a thumbs-up or thumbs-down for potential projects. Question how the project will move the organization forward, and be fearless in vetoing proposed projects peripheral to organizational goals.” 
• Gain Consensus Bring all stakeholders, including internal and external clients, sponsors, project managers, and team members, together for an in-person or virtual meeting. “List candidate critical success factors to generate a comprehensive list by the team,” says Hathaway. “Assess and prioritize the full list.”
• Hone In on the Essentials Cross-examine your project’s individual goals. Narrow the list to the five most critical success factors. Why? Because it is easier to monitor and assess a limited number of essential concerns.
• Identify Potential Risks Risk management is crucial to many projects and an imperative in large-scale, multinational, compliance-sensitive or highly competitive environments. Risk management involves identifying, evaluating, and preventing or mitigating project risks that can impact the desired outcomes. Project managers are typically responsible for overseeing a project's risk management process.
• Set Metrics Decide on metrics for critical success factors, identify how to measure and monitor them, and determine how to handle divergence from set metrics.

Critical Success Factors in Project Management Presentation Template

Download a Critical Success Factors in Project Management Presentation Template for PowerPoint | Google Slides

This flexible template simplifies presenting or workshopping critical success factors for a project. Contents include pages to name clients, sponsors, and other stakeholders. You’ll find slides to cover strategy and project descriptions, timing, critical success factor details, along with information on the project manager and team members. You can also add any communication and tracking tools you’ll use to onboard and engage participants.

Role of the Project Manager in Critical Success Factors

Project managers play a multifaceted role in critical success factors implementation. They identify goals, prioritize tasks, and allocate resources. Project managers create value, focus on customer needs, build great teams, and challenge the status quo.

“For a start, the project manager ensures there are some success factors. They facilitate the identification process, and the resulting criteria are the project’s North Star,” advises Elizabeth Harrin, Director of Otobos Consultants Ltd., and author of Managing Multiple Projects . “All decisions tie back to the project manager, who must ask ‘does making this choice help us get closer to delivering on our success factors?’ If so, then it is in the interest of the project. If not, think again.”

“The project manager has many areas of responsibility,” points out Kristina Kushner , PMP, Principal of Crizper, and Content Creator and Mentor for Women in Tech, WomenTech Network, and Riga TechGirls. “They may vary depending on the seniority level of a project manager, the team composition, the team seniority level, and the company’s role requirements.”

Project Managers Guide to Using Critical Success Factors 

Critical success factors give project managers a pathway to control their assignments. Control derives from agreement and dialogue about these factors with major stakeholders before starting the project. Then, the entire team works together, guided by critical success factors.

Tips for Using Critical Success Factors Based on the “Right” Rules

Tips for using determinants of project success fall into three “right” areas. Make sure you are doing the right project, doing the project right, and then use what you know to do subsequent projects correctly and consistently. 

The rule of right is covered in Stretton’s 2015 “Project Success and Failure Series” in PM World Journal and is based on the Project Management Institute (PMI) Talent Triangle. The method gives project managers a high-level framework to organize current and future projects based on stated organizational strategies and goals. 

Tips for project managers using critical success factors include the following:

• Know What You Are Improving: Kerry Anne Hoffman, Project Manager at So Very Kerry, advises, “Designate projects as official projects and organize them accordingly from the outset, or they are doomed to fail. Define who benefits from completing this project and what will improve once it’s complete. Success is not just finishing the project – it’s what got better due to completing it.”
• Measurement Is for All: Kushner reminds us, “Success criteria must be measurable and meaningful. The measurement system should also be the same for all the stakeholders, which helps everyone understand the project goals from the same perspective, measure the project's success, and see where the team stands in reaching the project goal.”
• Be Realistic: Sometimes, the desire to please management can set you up for failure. Your team can help decide on the achievable scope. Take a good look at what’s possible, but don’t limit your reach. “Knowing if our expectations are beyond capability and reality is complex,” Quigley points out. “Simultaneously, going beyond perceived bounds is the reason for Olympic champions and new technology and applications (intellectual property generation).” 
• Understand Manpower and Resource Issues: Take nothing for granted regarding resources. “The impact of the project load on the organization’s talent can be misunderstood. The same issue applies to specialized equipment,” says Quigley. “Dive deep to ensure you have the people, equipment, and time you need to succeed. What are the limits on the number of project hours with the amount of talent in the organization? Underestimating or not knowing can result in projects where team members work a wild number of hours to ensure the project’s success. It’s a situation that isn’t sustainable. The assumption that team members’ availability is 40 hours a week for a single project is not a good way to estimate, for example, but I’ve seen it happen.”
• Dive Deep on Management Needs: For project managers to take control, they need to be in sync with management’s take on critical success factors – even if they agree to your list. “Pin key stakeholders to one critical success area each to probe for the real answer,” advises Englund. “Surprising replies may surface, and responses may be conflicting. The project manager’s role is to get to the bottom of what’s needed, integrate answers, and work to make them happen. Once you sort out their definitions, you have clear marching orders and forewarning about what is important to key stakeholders.” 
• Possess Project Integration and Other Advanced Management Skills: Project integration management is the knowledge area that ensures coordination among all aspects of a project. The 2010 study “Critical success factors in project management: implication from Vietnam” published in the Asia Pacific Business Review found that its results “demonstrated that factors related to the manager and member competencies affect success criteria. It suggests that more emphasis on developing these competencies through appropriately training managers and professionals in skills and certifications drives project success. Manager and team competencies are more important to the success of a project in the implementation and completion stages. This is where project managers have a major role in effective performance.” Get more training in managing projects regularly from PMI or other learning institutions.  
• Prevent Scope Creep Even Through Change: Don’t fear change, but ensure you know how to control it. “I have witnessed a project go millions of dollars over budget and have six months added due to scope creep and unmanaged changes,” says Quigley, who often consults on large-scale engineering projects. “Projects are learning environments, and not expecting changes in the course of doing the work is unreasonable. Change is not the problem; uncontrolled and uncoordinated changes are costly. Experience has taught me this is a significant source of project failure.” The path to control is constant monitoring, communication, and cost assessments for any necessary changes, as well as managing scope creep before it gets out of hand.
• Use Tested Tools and Techniques: Learn how to work with tools and techniques before you use them. “When a project manager and team leader use untested tools and techniques, it can lead to a slew of serious issues later in the project's lifecycle,” Vem Medical’s Hathaway notes. “That’s because the team must deal with the learning curve of new techniques on top of their regular project responsibilities.”
• Keep Scanning the Environment: “Meeting the triple constraints is just a starting point,” says Englund. “Sometimes a project can be right on scope, schedule, and resources, but fail to succeed — perhaps because the market changed, a competitor outdid you, or a client changed its mind.”
• Prepare for Trade-Offs: Quigley explains, “Be ready for conflicting department priorities. When you have to make trade-off decisions, you can expect difficult discussions across an organization's departments. For example, one part of the organization's measurement of success may run contrary to the trade-off, making that part of the organization very uncooperative.”
• Keep Everyone in the Loop: Be sure to communicate with all project members and stakeholders to ensure everyone understands which tasks have priority, so everyone is on the same page.
• Know When You’re Done: You should always have a clear testable definition of “done.” Zucker declares, “Once the objectives are defined, the next question describes how we will know they have been achieved (key results).” He adds, “An effective way to facilitate this part of the discussion is by asking, ‘what does ‘done’ look like?’”

Project Critical Success Factors Tracking Templates

Download a Project Critical Success Factors Template for Excel | Google Sheets

This template makes it easy for project managers to take control and keep stakeholders and team members in the loop. The dashboard view allows you to track progress against deadlines, show resource allocation, budget and financial status, risk analysis, and which tasks are pending or open. By capturing all data in a single location, you make communication transparent and facilitate a way to create and share reports quickly and accurately. 

• Evaluate Results and Take Lessons Forward: Your project isn’t done and put to bed until you look at every aspect of it. Evaluate how well the critical success factors served the team, what worked and what didn’t. Note those processes and activities and apply it when you develop the next project. This information will make the planning process faster and more productive, often resulting in a template for similar projects.

One item to note is that project success and project management success differ. Findings in 2018 by Mahmoud, Haleema, and Almamlook, “Overview Success Criteria and Critical Success Factors in Project Management,” reveal that “project success and project management success are not the same. Failure could be avoided by paying careful attention to the project management success criteria and critical success factors, which, if absent, cause failure. Project success is often assessed only at the end of the project lifecycle, as project management outcomes are available and convenient to measure. The right project will succeed almost without the success of project management, but successful project management could enhance its success.”

Keep Remote Teams on the Same Page with Critical Success Factors

Remote project management teams are more prevalent since the start of the pandemic in 2020. Critical success factors are pillars that project managers and remote teams lean on to guide them in their work, regardless of location. 

All project managers need the fundamental skill of being comfortable while managing people wherever they are, particularly since the pandemic. A 2022 report by Upwork predicts an 87 percent increase from pre-pandemic levels of people working from home. That means 36.2 million workers, or 22 percent of Americans, will be remote by 2025.

Here are some tips on using critical success factors to manage remote teams :

• Project Plan with Precision: “Without a path to success, you’re not working on a project, but simply a task that needs to get done,” says So Very Kerry’s Hoffman. “Project planning makes remote work easier for everyone on the team and is the next step after you’ve set up your critical success factors.”
• Enforce Tight Quality Assurance: “Controlling and monitoring are critical components of project management,” says Vem Medical’s Hathaway. “A project can succeed only with proper governance regardless of location.”
• Communicate with Transparency: When team members are around the state, or even the world, keep the lines of communication open to accomplish remote work . “Demonstrate to your team to use clear language, and do not hide or obfuscate the state of the work effort,” Quigley recommends.“Tell your team that if there is bad news, there will be no shooting of the messenger. State how you see things and collectively explore to see if you are correct. There is no foul in showing what you see and why you interpret it in a particular way. Decisions and rationale for that decision should be open to scrutiny. The team can make or help make decisions, and the project manager should be good with that approach. Knowing when to stand your ground and when it is time to listen and adapt are good skills.”
• Make Mini Meetings a Habit: Hold frequent and short-duration meetings – adopt the daily scrum meeting and cover : 1. What did you do yesterday? 2. What are you doing today? 3. What obstructions are slowing you or preventing you from accomplishing the objective? If you don’t want to adopt the Scrum format, hold short meetings with an agenda and provide team members access to the action item list with project management tools. Not every team member needs to attend every session; rather than one big project meeting, break them up by topic. Having the entire team together is essential, but it is equally important to reduce meeting impact on the available time for work. 
• Use Online Messaging Apps as Needed: Make extensive use of messaging and chat. Quigley says he takes advantage of instant messaging to keep things moving briskly and answer urgent questions from team leaders. “When teams are remote, drive-by communications and shouting across the open floor plan are replaced with emails, texts, IMs, chat, and Zoom calls.”
• Select High-Performance Project Management Software: A project plan and all that goes into that is simple to share when you have a high-performance project and work management platform. Find a secure platform that lets you organize resources, time, and budget, and allows for document sharing and fast messaging with your team and stakeholders. If you don’t already have a solution that you like, read this guide on picking project management software for guidance.

Critical Success Factors: Examples in Various Industries 

Critical success factors differ depending on the industry. While the specific factors vary, research into the value and use of essential elements of success has gained traction in various sectors, particularly in developing economies seeking a competitive edge. 

Examples of the use of critical success factors in different industries around the world include the following:

• Business Tourism and Critical Success Factors Example: This qualitative research “Critical Success Factors of a Business Tourism Destination: Supply Side Analysis” in 2017 by Maraia, Du Plessis, and Saayman identifies the critical success factors to grow business tourism destinations in South Africa and be more competitive as a destination. Human resources, finances, customer focus, and product aspects were identified as the most valuable success factors. The education of the market as a primary way to enhance and boost business tourism was a result of the research.
• New Product Development and Critical Success Factors Example: Dubai is expanding its economic base and exploring new product development as an avenue for growth. The 2021 research “Critical Success Factors of New Product Development: Evidence from Select Cases” by Dwivedi, Karim, and Staresinic pinpointed 12 factors. The factors identified to guide new product development projects were not ranked because the importance of the factors shift depending on the type of product developed. Effective communication , management commitment, clarity around goals, user involvement, cross-functional teams, structured process, highly qualified team members, support for an entrepreneurial culture, alignment with strategy, out-of-the-box thinking, adequate funding, and increasing product development speed were the identified critical success factors.  
• IT Project Management and Critical Success Factors Example: Organizations worldwide make significant yearly investments in various information technology projects for development and maintenance. A Malaysian 2017 study, “The Critical Success Factors (CSFs) for IT Projects” by Ali Yahya Gheni, Marzanah A. Jabar, Yusmadi Jusoh, and Norhayati Mohd Ali, found developers and IT managers ranked nine factors that make or break projects. The finding was that a committed and motivated team was the number one factor in success with a result of 68 percent. Following that factor, the following seven are internal communication, use of tools and infrastructures, good estimation, skilled project manager, skilled teams, risk analysis, and clear goals and objectives. They found the least important factor was project monitoring with a score of 15.5 percent. 
• U.S. Government Contract Management Critical Success Factors: In 2010, “Critical Success Factors in Government Contract Management” research by Rene G. Rendon reviewed how the Department of Defense (DoD) can use critical success factors. Findings suggest that DoD’s focus on shared knowledge areas and processes impacts contracts and projects. Addressing the essential factors of success of techniques, workforce, leadership, relationships, policies, and resources to improve the DoD’s management of projects and contracts.

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Critical Success Factors In A Nutshell

Critical success factors (CSFs) are elements that must be met for an organization to achieve its goals. A critical success factors analysis might help businesses identify the opportunities based on the goals and missions of the business both short and long term.

Table of Contents

Understanding critical success factors

Critical success factors have a few non-negotiable characteristics.

• Be synonymous with a high-level goal.
• Directly be linked to the business strategy .
• Be integral to organizational success.
• Benefit the individual, department, or organization as a whole.

In terms of a precise definition, critical success factors are generally action phrases describing the desired result and the action itself. 

For example, a company might seek to be service-oriented when working with its customers. Another may opt to work toward a higher quality order fulfillment experience through process improvements.

Regardless of the particular CSF or industry concerned, it must be stressed that the preferred course of action is aligned with organizational goals and mission .

Determining critical success factors

Establishing a suite of critical success factors can be performed in five steps:

• Assemble a team from the top level of the organization. Seniority is important to guide proper strategy and ensures there is buy-in from those with the power to make decisions. Some businesses may choose to bring in consultants to facilitate the process.
• Incorporate employee feedback to create a list of around 10 to 15 critical success factors. Be sure to incorporate a broad swathe of employees, backgrounds, skills, departments, and expertise.
• Use multiple frameworks to understand the key elements of each goal. A business may choose to use an OAS (Objective, Advantage, Scope) statement to help them describe its strategy and strategy execution. A SWOT analysis can also be performed to optimize performance, maximize potential, manage competition, and minimize risk. Then, combine a strategic plan with a change agenda to outline what needs to change for goals to be met.
• Determine which factors are key to achieving long-term plans. Using key insights from the frameworks in step 3, determine the most salient critical success factors. These factors and their associated goals should then be grouped by category. As a general rule, the categories of finance, customer, process, and people are a good place to start.
• Strategic plan implementation – it is important to take action on a strategic plan to see the real benefits. Some organizations opt to use a balanced scorecard (BSC) which helps them understand if they are acting in such a way that their objectives will be met. What’s more, the balanced scorecard lists smaller action tasks that keep the team motivated to follow through on the strategic plan.

Different types of critical success factors

According to American organizational theorist and MIT lecturer John F. Rockart, there are five broad CSF types:

• Temporal factors – or factors critical to the success of managing short-term or temporary situations. A somewhat temporal factor was the introduction of COVID-19 hygiene protocols in many brick-and-mortar businesses.
• Management-position factors – these factors are identified by managers who have a unique perspective on continuous improvement, company culture, and employee engagement. Factors are specific to the individual role or expertise of each manager. For example, an operations manager may gauge success through production efficiency and cost control.
• Industry-related factors – or factors an organization must satisfy to remain industry competitive. For an airline company, a CSF may be an average delay time of no more than ten minutes.
• Peer-related factors – which factors relate to the relative position of a business with respect to its competitors? An industry leader will be more focused on maintaining a competitive advantage. On the other hand, a smaller player may consider success to be an increase in market share driven by higher brand loyalty.
• Environmental factors – describing any factor happening external to the organization over which it has no control. Examples include public or economic policy, competitor behavior, and technological innovation . Critical environmental success factors should always seek to mitigate, anticipate, and stay ahead of the curve wherever practicable. 

Drawbacks of Critical Success Factors (CSFs)

Oversimplification of complexities:.

• Risk of Reductionism: Focusing solely on CSFs can oversimplify the complexities of business operations, potentially neglecting other important aspects that contribute to success.
• Limited Scope: CSFs often represent a narrow view of success, which might not encompass all elements critical for long-term sustainability and growth .

Rigid Framework:

• Inflexibility: The identification of CSFs might lead organizations to adhere rigidly to certain strategies, potentially limiting adaptability in a rapidly changing business environment.
• One-Size-Fits-All Approach: CSFs identified for one organization or industry may not be applicable to another, limiting their usefulness in diverse contexts.

Potential Misalignment with Goals:

• Not Aligned with All Objectives: CSFs might not align perfectly with every strategic objective of an organization, leading to potential conflicts or misdirected efforts.
• Overemphasis on Short-Term Goals: The focus on critical factors for immediate success might overshadow long-term strategic planning.

Implementation Challenges:

• Difficulty in Identification: Correctly identifying true CSFs can be challenging and may require extensive research and analysis .
• Resource Allocation: Emphasizing CSFs might lead to disproportionate allocation of resources to certain areas, neglecting others.

When to Use Critical Success Factors

Ideal scenarios:.

• Strategic Planning: Useful in the strategic planning process to focus on key areas that need attention.
• Performance Management: Can guide performance management systems by identifying key areas for evaluation.
• Project Management: Helpful in project management to ensure that essential elements for project success are considered and monitored.

Strategic Application:

• Goal Setting: CSFs can be instrumental in setting operational or project-specific goals.
• Business Analysis: Useful for business analysts to determine the key factors that will influence the success of business initiatives.

How to Use Critical Success Factors

Identifying and implementing csfs:.

• Conduct Thorough Analysis: Analyze the business environment, market conditions, and internal capabilities to identify CSFs.
• Stakeholder Engagement: Involve various stakeholders in the identification process to ensure a comprehensive understanding of different perspectives.
• Align with Strategic Goals: Ensure that CSFs align with the overall strategic goals and objectives of the organization.
• Prioritize Resource Allocation: Allocate resources effectively to address identified CSFs, balancing them with other operational requirements.
• Regular Monitoring and Review: Continuously monitor the progress and impact of CSFs and adjust strategies as necessary.

Best Practices:

• Balanced Approach: While focusing on CSFs, maintain a balanced approach that considers other important aspects of the business.
• Integration with Overall Strategy: Integrate CSFs into the broader strategic planning and operational processes.
• Flexibility and Adaptation: Be prepared to revise CSFs as the business environment and organizational objectives evolve.

What to Expect from Implementing Critical Success Factors

Enhanced focus and efficiency:.

• Improved Strategic Focus: Helps in maintaining a clear focus on key areas that are critical for success.
• Increased Operational Efficiency: Prioritizing efforts on CSFs can lead to more efficient use of resources and time.

Potential Organizational Challenges:

• Initial Resistance: Changes in focus and strategy based on CSFs might face resistance from employees accustomed to existing practices.
• Balancing Act: Navigating the focus on CSFs while attending to other important business aspects can be challenging.

Impact on Decision-Making and Performance:

• Data-Driven Decisions: Encourages data-driven decision-making focused on key success areas.
• Performance Enhancement: Can lead to enhanced organizational performance by concentrating efforts on crucial success drivers.

Long-Term Organizational Benefits:

• Sustainable Success: Identifying and focusing on CSFs can contribute to the long-term success and sustainability of the organization.
• Enhanced Competitiveness: A well-implemented CSF strategy can enhance an organization’s competitiveness in its market.

Key takeaways:

• Critical success factors are objectives that must be satisfied for an organization to meet goals, objectives, or missions.
• Critical success factors are created by assembling a team of senior managers and incorporating employee feedback. Frameworks such as the SWOT analysis and OAS statement then help the organization determine which CSFs are the most important for success.
• Critical success factors are grouped into five general types: temporal, management-position, industry-related, peer-related, and environmental.

Key Highlights

• Critical Success Factors (CSFs) are fundamental elements that an organization must satisfy to accomplish its goals, objectives, or mission .
• They serve as the cornerstone of strategic planning and execution, guiding the organization’s actions towards successful outcomes.
• Alignment with High-Level Goals : CSFs are tightly aligned with the overarching goals and strategic direction of the organization.
• Link to Business Strategy : They are directly connected to the organization’s strategic plans, ensuring that efforts are in line with its intended trajectory.
• Integral to Organizational Success : CSFs are not merely optional; they are crucial for achieving the organization’s desired outcomes.
• Beneficial at Various Levels : CSFs have a positive impact on individuals, specific departments, and the organization as a whole.
• Action-Oriented Descriptions : CSFs are expressed as action phrases that outline both the intended result and the specific actions needed to achieve it.
• Leadership Involvement : Assemble a team of senior managers who can provide strategic insight and decision-making authority.
• Employee Involvement : Incorporate feedback from a diverse range of employees, representing various backgrounds, skills, and expertise.
• Framework Utilization : Utilize strategic frameworks such as SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) and OAS statements (Objective, Advantage, Scope) to identify key elements.
• Prioritization and Categorization : Determine the most critical CSFs by analyzing insights from the frameworks. Group them by categories like finance, customer, process, and people.
• Implementation and Tracking : Act on the strategic plan and monitor progress using tools like Balanced Scorecards. These tools ensure that actions are aligned with CSFs and strategic objectives.
• Temporal Factors : Address short-term or temporary situations that require specific attention, adaptation, or response, such as COVID-19 hygiene protocols in businesses.
• Management-Position Factors : Reflect the unique perspectives and responsibilities of managers in areas like continuous improvement, company culture, and employee engagement.
• Industry-Related Factors : Encompass the requirements an organization must fulfill to maintain competitiveness within its industry.
• Peer-Related Factors : Consider the organization’s relative position and competition within the market, shaping the focus on maintaining competitive advantages.
• Environmental Factors : Address external influences beyond the organization’s control, emphasizing the need to anticipate, mitigate, and adapt to changes in the business environment.
• CSFs provide a framework that ensures the organization’s efforts are directed towards its most critical objectives.
• They enhance employees’ understanding of key priorities, fostering a shared sense of purpose and collaboration.
• CSFs promote an inclusive and cohesive workplace culture, as everyone contributes to achieving common goals.
• By focusing on CSFs, organizations increase their likelihood of achieving success and staying responsive to changing circumstances.

Types of Organizational Structures

Siloed Organizational Structures

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Connected Business Frameworks

Portfolio Management

Kotter’s 8-Step Change Model

Nadler-Tushman Congruence Model

McKinsey’s Seven Degrees of Freedom

Mintzberg’s 5Ps

COSO Framework

TOWS Matrix

Lewin’s Change Management

Organizational Structure Case Studies

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eBay Organizational Structure

IBM Organizational Structure

Sony Organizational Structure

Facebook Organizational Structure

Google Organizational Structure

Tesla Organizational Structure

McDonald’s Organizational Structure

Walmart Organizational Structure

Microsoft Organizational Structure

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How to use critical success factors (CSFs) to support your strategic plan

That’s where critical success factors (CSFs) come in. CSFs are a list of the key success factors your team needs to hit in order to achieve your goals. Critical success factors, combined with a three-..

Goal-setting is a lot like building a pyramid: It all relies on a strong base. You can’t set the very top pieces without a steady foundation—but building that foundation from scratch can be tough.

That’s where critical success factors (CSFs) come in. CSFs are a list of the key success factors your team needs to hit in order to achieve your goals. Critical success factors, combined with a three- to five-year strategic plan, help you create a strong goal-setting base. Then, build specific project deliverables and project goals off of that steady foundation to hit your goals on time, every time.

If you’ve never set critical success factors before, or if you aren’t even sure where to start when it comes to strategic planning, here’s everything you need to know to get started.

What are critical success factors (CSFs)?

Critical success factors (CSFs) are high-level goals that your organization must meet in order to achieve your strategic objectives. You can implement CSFs at the project, program, or organizational level, though they’re most frequently used by entire departments or organizations because of their close connection to an organization’s business strategy. Hitting your critical success factors usually results in meaningful value and positive income for your organization.

Notably, CSFs are high-level strategic goals—they don’t necessarily include execution details. For example, imagine you set a critical success factor to increase brand awareness. This is a lofty goal—and one that drives significant value and market share for your organization. To actually achieve this CSF, dedicated projects and teams work on a variety of initiatives and set quantitative key performance indicators (KPIs) to get a clear picture of exactly what your teams want to achieve by when.

Examples of critical success factors (CSFs)

A critical success factor can be anything. These lofty goals help you orient your team towards where you need to go. Then, project managers use CSFs to guide their own initiatives and ensure they’re ready for success.

The critical success factors you set depend on your organization’s overall strategic goals. Here are a few CSFs you might create, depending on the plans your organization has for the next three- to five-years of growth:

Updated marketing playbook

New product features

Performance management reviews

Building a robust sales team to acquire new customers

The history of critical success factors

The concept of a success factor was first developed in 1961 by D. Ronald Daniel, a consultant for McKinsey & Company. Later, John F. Rockart published an article in the Harvard Business Review codifying and naming the critical success factor method. In that 1979 article, Rockart defines CSFs as:

The relationship between strategic goals, CSFs, KPIs, and more

When it comes to goal-setting, there are a lot of acronyms to juggle and keep track of. Each goal-setting methodology is slightly different—but don’t let the acronyms overwhelm you. To understand what each acronym stands for, and how they stack up, let’s take a look at a typical strategic planning process.

Start with your strategic plan

Strategic planning is the parent of any goal-setting process. Before you set goals, you first need to establish your strategy. A strategic plan helps you define where your organization wants to go and what actions you need to take to achieve those goals.

Identify your KPAs and KRAs

KPAs, otherwise known as key performance areas, are the areas of your business that are critical to your success. For example, if you work at a software company, one key performance area might be your software being online and bug-free. Alternatively, if you work at a manufacturing company, a relevant KPA might be your facilities being up and fully functional.

It’s important to understand your key performance areas in order to identify areas that you want to home in on when you begin setting goals. To go back to our example of a software company, if your software is frequently experiencing bugs or downtime, a good goal is to improve or reduce that downtime.

KRAs stand for key result areas—these are focus areas you identified in your strategic plan. KRAs are broader than goals. For example, a key result area for your business might be “profitability” or “efficiency.” Then, when you set goals, describe exactly what you need to improve in those areas.

Choose your goal-setting methodology

Once you have your strategic plan, it’s time to implement a goal-setting methodology. The two main goal-setting methodologies are OKRs and CSFs (in combination with KPIs). In practice, only plan to use one of the two goal-setting methodologies, since they’re very similar.

OKR stands for Objectives and Key Results. If you’ve never set goals before, OKRs are a good place to start because they follow a simple framework:

The Objective is the goal you want to achieve—increase brand awareness, create the lowest carbon footprint in your industry, that sort of thing.

The Key Result is the metric by which you measure your progress towards your objective—drive one million web visitors, ensure one-quarter of your product’s material is compostable, and so on.

CSFs—critical success factors—function similarly to the O in OKRs. These are the main objectives your organization is working towards in order to hit your three- to five-year strategic plan.

To make CSFs actionable, pair them with key performance indicators (KPIs). KPIs are quantitative metrics of how your team or organization is progressing towards important business objectives. A good KPI gives you a sense of whether you’re on track to achieve your critical success factors and, as a result, your strategic goals.

The different types of CSFs—and why they matter

Traditionally, critical success factors are broken out into five different types. Understanding the types of CSFs helps you make sure you aren’t missing any critical success factors as you plan for the coming goal period.

1. Industry-related critical success factors

Sometimes, there are certain critical success factors that your organization must keep up with in order to remain competitive. In order to track industry-related CSFs, your team needs to proactively track and predict industry trends.

Innovation to stay ahead of competitor’s inventions

Sustainability in packaging or manufacturing to meet customer expectations

Customer service that goes above and beyond the industry average

2. Competitive critical success factors

These critical success factors are impacted by what your competitors are doing, and how their success or failure impact your organization. This isn’t a 1:1 comparison to what your competitors are doing—rather, these CSFs are influenced and impacted by how your customers see your business in relation to your competitors.

Being considered a “luxury” brand

Appealing to a certain customer demographic

3. Temporal critical success factors

As the name suggests, temporal factors aren’t going to permanently affect your company. Rather, these critical success factors are temporary, limited factors that favorably or unfavorably  impact your business. Identifying and overcoming these factors—if applicable—supports continued business growth.

Unexpected but temporary changes to your business model

Reduced staffing capacity due to a specific, temporary issue

Hiring talent to support the opening of a new office or region

4. Environmental critical success factors

These critical success factors are things your organization has no direct control over—though that doesn’t make them any less valuable. Proactively labeling and tracking environmental factors is a great way to get ahead of any potential problems in the future and prevent unnecessary risk.

A downturn in the economy

A change in policy that impacts your business

Industry regulation

5. Management position critical success factors

Unlike the four main types of CSFs, management position critical success factors are unique to a specific person and position—rather than to an entire organization. If you are in a management position, consider setting a CSF to improve your management and leadership skills .

Conflict resolution training

Implementing team-wide project risk management processes

Workload management practices

5 steps to identify CSFs

Critical success factors are a great way to set and track success criteria. If you’re ready to get started, follow these five steps for success.

Create a strategic plan. CSFs build on your organization’s three- to five-year strategic plan , so start by creating that if you haven’t already. Because a strategic plan identifies your high-level objectives for multiple years, it’s a key building block for CSFs further down the road.

Review the strategic plan with executive stakeholders. Once you’ve created your strategic plan, assemble your strategic management project team—the key stakeholders who create your critical success factors. Go through the strategic plan and identify business processes and key result areas (KRAs) that are critical, make-or-break-it areas for the organization. For example, imagine you identify customer satisfaction as a KRA for the coming goal period.

Identify your critical success factors and share them with your broader organization. Once you’ve identified your KRA(s), attach related critical success factors to help you achieve your goals. For example, if your KRA is customer satisfaction, an associated CSF is to improve customer relationships through dedicated customer service teams. Once you identify CSFs, share them out with your broader team for feedback.

Connect CSFs to KPIs to make them actionable. To transform your CSFs into action, connect them to quantifiable key performance indicators (KPIs). For example, if your CSF is to improve customer relationships through a dedicated customer service team, create a KPI to build a customer success team with at least 10 team members before the end of the quarter and a second KPI to hit a 12 hour customer service response time by the end of the fiscal year.

Monitor and measure. Once your CSFs and KPIs are created, all that’s left is to monitor them for success. If you haven’t already, set up a goal-tracking system to track and manage your organization’s top level goals—as well as the projects and initiatives that feed into those goals.

Create, strategize, flourish

Good critical success factors help your team home in on the most important parts of your strategic plan in order to hit your goals. If you’ve never tracked CSFs before, make sure you’re doing so in a goal management tool, like UDN Task Manager Goals . That way, every team member has clarity on your exact CSFs, the KPIs to help you get there, and the progress of each initiative.

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Summary. The five key success factors — strategic focus, people, operations, marketing, and finance — help businesses determine their strategy for long-term success. Critical success factors, on the other hand, are the steps a company needs to complete to reach a goal.

As an organization that caters to its consumers, comprehending the needs and values of a business’s target demographic is crucial to forming a logical strategy.

Identifying and understanding the five key success factors of business is the best way to establish a foundation of knowledge about a company and its customers.

Key Takeaways

The five key success factors of business are:

Strategic focus

Companies need to implement all five key success factors in order to be successful in the long term.

Critical success factors are accomplishments businesses must have in order to meet their goals.

5 Key Success Factors of Business

What is a critical success factor, how to determine your business’s critical success factors, examples of critical success factors, factors of success in business faq.

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The key success factors are a series of five overarching aspects that ultimately determine a business’s long-term success.

The five larger groups contain ten smaller conditions, which need to be satisfied for the business to (hypothetically) thrive. In each of the world’s most profitable companies, the five success factors join together to establish a cohesive unit that’s lucrative for the long term.

The 5 Key Success Factors of business is a theory of strategic business management posed by Buck Lawrimore. The concept was derived after the analysis of over 100 popular books and 20 years.

Below is a definition for each factor:

Strategic focus. The strategic focus aspect of success means that the company’s goals, brand, and actions all move towards a targeted goal. The companies that manage to last in competitive markets are the ones whose leaders define their values and a realistic mission.

This factor is about sticking to the ultimate business objective and ensuring that every project is an effort toward this. A significant part of the strategic focus is making sure that the target chosen is constructed from the customer’s wants and needs .

Strategic Focus Key Success Factor Examples: Establishing and sharing core values that align with customers Leaders of the business are devoted to upholding the business’s core values The overall company mission is pursued through realistic goal-setting

People. The second ingredient for business success is the personnel that makes up the corporation. A company’s staff is what expands its development, which means it’s crucial to hire a team that’s qualified, dependable, and passionate about performing well.

This success factor also refers to how satisfied a business’s employees are with working there.

Just as much as employees need to strengthen the business, the business needs to provide its team with adequate opportunities for success as well. Satisfaction with working for your business builds productivity and increases employee retention rates .

People Key Success Factor Examples: Hiring the most qualified applicants based on their skills and experience The company’s employees fully understanding their job responsibilities Employees are given the chance to provide meaningful input on business decisions

Operations. The daily and long-term functioning of a company is defined as its operations. The specific operations that a business handles differ depending on the industry it exists in.

For example, the operations of a company that produces jeans likely involve sourcing materials, product creation, and generating sales. The business operations of a pediatrician ’s office would be very different.

For operations to be successful, the functions need to be recorded and have a measurable efficiency to determine if the processes need tweaking over time.

Operations Key Success Factor Examples: Processes focused on providing excellent service to the customer All operation efforts being documents and trackable over time Procedures being continually evaluated to ensure effectiveness

Marketing. Marketing acts as the branch between a company and its customers. There are many facets to good marketing, such as targeting the right audience, forming a recognizable brand, and evaluating consumer satisfaction post-purchase.

Marketing attracts new customers to your brand through media communication, supporting business growth. Without its customers, a business is quick to fall flat on its face.

Marketing Key Success Factor Examples: Defining a target marketing audience for the business Expanding the customer base through media communication and advertisements Eagerly receiving customer feedback and using it to improve

Finances. The final factor of success is often the first one that people’s mind jumps to when they consider the term, finances.

A company’s finances refer to the entirety of its assets, which include things like sums of money, properties, and materials.

In addition to maintaining the company’s financial data, it also includes their product’s financial characteristics. Pricing has a considerable impact on how customers perceive the product and how well it sells.

Finances Key Success Factor Examples: The products are appropriately priced for a profit to be made while still attracting and maintaining customers Keeping track of finances for a better understanding of company health Every employee of the company understands how their actions affect profits and finances

Critical success factors are a business management framework similar to the Five Factors, but it’s composed of the elements necessary to complete a project. It’s a checklist of qualities that enable a professional goal to be accomplished.

Unlike the Five Factors model, critical success factors do not outline the success of businesses. Rather:

They describe what needs to be done to achieve and provide a reliable system of measuring success.

A company’s critical success factors vary greatly depending on the circumstances of their industry, competitors, and what their goals are.

A business that sells alarm systems to homeowners might look at sales and the percentage of customers who left positive reviews to quantify their success.

Alternatively, a social media manager would consider their critical success factors to be the number of new customers generated monthly and website traffic.

Gather a group to manage critical success factors. Before beginning work towards establishing a business’s critical success factors, gather a team to handle the matter.

Delegating tasks ensures that nothing gets overlooked. The main participants in this group should be senior employees since they are the most experienced in the business and on the team.

Request feedback from employees . A company’s employees are its eyes and ears. As such, they usually have extremely valuable insight into what a business needs to do to succeed in long-term goals.

Develop business goals. Before evaluating the conditions needed to accomplish an objective, the business first must set its goals.

Consider what is needed to achieve these goals. This is the part where critical success factors come into play. Now that a list of achievable short and long-term goals has been set, think about what steps need to be taken to achieve them.

The elements required to reach a goal describe the company’s critical success factors when it comes to that particular project.

For example, a restaurant whose long-term goal is to improve its profits by 6% might take on the critical success factors of improving customer satisfaction and the quality of its food.

Put the plan into action. The beauty of critical success factors is that they map out a strategic plan for completing a professional goal . With an inventory of the most essential success factors settled, the only thing left to do is explain and execute the strategic plan.

To quantify the effectiveness of critical success factors over time, establish a measurement system. With a goal involving an aspect, like sales, measuring success is straightforward, but that’s not the case for every critical success factor.

Observe and evaluate as needed. A strategy based on critical success factors has been put into motion, but that doesn’t mean the job is done.

Strengthening employee satisfaction . Employees are the backbone of the company they represent. This means that boosting employee satisfaction is often a relevant critical success factor in improving other aspects like productiveness, regardless of industry.

Improving sales and profit. Since many businesses survive off of maintaining sales and profits, it makes sense that it’s a popular critical success factor. Improving these finances is implemented as a critical success factor when the long-term goal involves needing increased funding. For example, a dog groomer who wants to expand their business by buying a second location might address the success factor of improving sales to buy the new property.

Brand awareness. Customers need to know that a business exists for it to survive among its competition. A lot of companies feel this pressure and choose to focus on brand awareness as a critical success factor. Building up a name for a brand helps solidify standing in the market and assists in working towards a variety of long-term goals.

What are the five key success factors for a successful business?

The five key success factors for a successful business are:

What are success factors in business?

Success factors in business are the elements required for a business to be successful in the long term. Success factors can also be the steps a company needs to complete in order to meet a goal — these are usually called critical success factors.

University of Missouri System – Success Factors and Other Competency Models

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Sky Ariella is a professional freelance writer, originally from New York. She has been featured on websites and online magazines covering topics in career, travel, and lifestyle. She received her BA in psychology from Hunter College.

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Joint force quarterly 82 (3rd quarter, july 2016), the primacy of cog planning: getting back to basics.

By Steven D. Kornatz Joint Force Quarterly 82

C enter of gravity (COG) continues to be a popular topic in military journals, blogs, and lectures. Many recent discussions have tended to be ambivalent at best toward the value of the concept of COG. Several of these dialogues present detailed contrarian views to the validity of Carl von Clausewitz’s much analyzed theory of COG (or Schwerpunkt , as presented in On War ). They discuss how this theory is too complex to be used by U.S. military planners. However, the painstaking discussion of Clausewitz is done at the expense of missing the fact that the refined, modern-day view of COG is a critical concept for planners to understand and apply. When done correctly, COG planning methodology is the primary practical way to link an objective to a course of action (COA). This is not to assert that proper employment of COG methodology is always easy. Application in certain scenarios may be complex, but the important aspect of COG methodology is that when properly employed, it is the foundation of and gives direction to COA development.

Servicemembers provide cover after tactical air insertion with Army UH-60 Black Hawk helicopter at Fort Dix, New Jersey, April 10, 2014 (U.S. Air National Guard/Matt Hecht)

Root of the Problem

Some planners and many senior staff officers lack detailed knowledge of and confidence in the value and practical use of COG methodology. This comes primarily from three factors: overreliance on Clausewitz’s COG theory, differing doctrinal definitions of COG-related terms, and varying joint and Service doctrinal COG methodologies.

Present-D ay Relevance of COG . Clausewitz’s theory is touted as the foundation for the U.S. military’s application of COG in current planning doctrine. While Clausewitz’s theory may provide some foundational legitimacy to the concept, it has little value in establishing detailed practical application of COG for planners, particularly at the operational level of war. For the many reasons recently presented by Dale Eikmeier, military planners need to be much less concerned with Clausewitz’s history and theory of COG than with the more critical value and application of contemporary COG methodology. 1 In other words, while the theory of COG is sound, it does not answer modern-day methodology questions.

Differing Definitions . Joint Publication (JP) 5-0, Joint Operation Planning , defines center of gravity as a “source of power that provides moral or physical strength, freedom of action, or will to act.” 2 It was only a short time ago that each Service had its own definition of COG. While it is significant that Service and joint COG definitions now align, the definition itself is too generic to be of value to planners.

Modern-day COG theorists have their own variations on the definition, which obviously had some influence on the current joint definition. Joe Strange proposed defining COG as “primary sources of moral or physical strength, power and resistance.” 3 Milan Vego defined COG as:

a source of massed strength—physical or moral—or a source of leverage, whose degradation, dislocation, neutralization, or destruction would have the most decisive impact on the enemy’s or one’s own ability to accomplish a given military objective; tactical, operational, and strategic centers of gravity are differentiated; each center of gravity is related to the corresponding military objective to be accomplished. 4

While both of these definitions use language similar to the current joint definition, Vego’s in particular presents three components that are critical to practical application by planners. His statement that “destruction would have the most decisive impact on the enemy’s or one’s own ability to accomplish a given military objective” ties COG directly to the objective and also specifies that a COG exists for both the enemy and oneself. In arguing that “tactical, operational, and strategic centers of gravity are differentiated; each center of gravity is related to the corresponding military objective to be accomplished,” Vego clarifies that COGs exist at each level of war and are tied to specific objectives tasked to each level of war.

COG analysis methodology in Navy Warfare Publication (NWP) 5-01, Navy Planning , combines the aspect of Vego’s writings that indicates how to identify a COG with Strange’s writings on how to attack/defend it. However, Navy doctrine uses some of the same terms as joint doctrine but defines them differently. Critical factors are defined as critical strengths (CSs) and critical weaknesses (CWs) in NWP 5-01, but are comprised of critical capabilities (CCs), critical requirements (CRs), and critical vulnerabilities (CVs) in JP 5-0.

Varying Methodologies. Various methodologies exist in doctrine that attempt to describe the practical application of the COG concept for use by planners. These methodologies mostly rely on Strange’s writings to determine how to attack (or defend) a COG. The identification of a COG, however, is glossed over in most doctrine (NWP 5-01 is an exception). 5 Some doctrinal methodologies tend to take a critical concept and make it overly complex. Examples include JP 2-01.3, Joint Intelligence Preparation of the Operational Environment , which describes a COG as originating in a nodal system where it “typically will not be a single node in the system, but will consist of a set of nodes and their respective links” 6 with no explanation as to how to identify the system, and Air Force Doctrine Document 3-0, Operations and Planning , which recommends synthesizing four different methodologies to identify and analyze COGs. 7

U.S. Soldiers with 2 nd Cavalry Regiment study map in preparation for convoy through area near Amberg, Germany, en route to U.S. Army Europe Joint Multinational Readiness Center’s Hohenfels Training Area in Germany, October 16, 2012, during Saber Junction 2012 (DOD/Markus Rauchenberger)

Practical Application

Practical application requires a practical definition of COG. The current doctrinal definition is rather ambiguous. Based on the military application of COG analysis, a simpler, reasonable definition follows: COG is the principal force/entity that accomplishes the objective at a specified level of war.

No matter which COG methodology is employed, planners cannot rely on a checklist mentality to implement COG in their work; they must have an internalized understanding of why COG is important to their efforts and confidence in a clear methodology to conduct its identification and analysis. Understanding the usefulness of COG comes from appreciating that its identification is a process that determines what (a force or entity) accomplishes a stated objective. The “thing” that accomplishes the objective is critical to planners because it must be dealt with, directly or indirectly, to preclude an adversary from accomplishing its objective. Likewise, the thing that accomplishes our friendly objective must be given a priority of effort, be sustained, and be protected for us to be successful.

Vego’s writings provide a credible method to identify a COG by determining CSs and CWs that are essential to accomplishing the objective. 8 The COG is identified as the CS that actually accomplishes the stated objective. After listing the critical strengths, planners can analytically go down the list one by one and ask, “Does this critical strength accomplish the objective?” If the answer is “yes,” then it is a COG. If the answer is “no,” then it is probably a critical capability or critical requirement and possibly a critical vulnerability. The complexity arises in identifying critical strengths. Planners must ensure they are as detailed as possible in listing CSs to be as discrete as possible in the identification of a COG. This is essential, particularly at the operational level of war and the component (domain-related) level where a COG will typically be a specific force. For example, if Combined Force Maritime Component Commander (CFMCC) planners are working to identify a friendly COG in the maritime domain where an objective is seizure of an island, some critical strengths may be identified as ships, mines, and integrated air defense systems. The term ships , however, may be too general. Based on CFMCC maritime objectives, the landing force (amphibious ships and Marines) may be what explicitly accomplishes the objective, and the remainder of the surface ships (aircraft carriers, destroyers, supply ships, patrol vessels, and so forth) are merely in support. Knowing the value of detail in determining critical strengths and critical weaknesses to the COG process will yield more discrete and effective COG identification. This will allow for more focused analysis and clarity in COA development. The determination of both CSs and CWs is crucial not only because it narrows down the list of potential COGs (COG comes from a list of CSs), but also because the list of CWs will support determination of CVs later in the methodology.

Once the COG is identified, the CC/CR/CV method of analysis presented by Strange comes into play. This part of the methodology is how planners take an identified COG and ascertain the things that are critical to attack (or defend), which are clearly linked to undermining the COG. This becomes the foundation of the COAs . To be valid, each proposed COA must neutralize (defeat, destroy, and so forth) the enemy’s identified COG and must protect and support the identified friendly COG. Further COG analysis, to the level of CVs, provides details of susceptible aspects of critical requirements that can undermine a COG. With this understanding, COA development ensues, with planners employing innovation to propose different ways (the how ) to neutralize the enemy COG while defending the friendly COG. This is the reason for the primacy of COG to planning: it links an objective to CVs that provide the foundation for the COAs (see figure 1).

NWP 5-01 does an effective job of describing the CC/CR/CV COG analysis methodology, but it is too vague in stating, “Many of these elements (CCs) are often found in the joint functions.” 9 Planners must go to the six joint (or operational) functions (command and control, intelligence, sustainment, movement and maneuver, fires, protection) to begin their COG CC analysis. Common problems in resolving the CCs arise from two challenges. First, planners forget the necessary linkage that must be maintained from objective to COG to CC. For each identified CC, the linkage question, “Does this CC enable the COG to accomplish the objective?” must be asked. Without this linkage, the value of the process will break down. Second, planners often simply list the six joint functions as the CCs and move on. This also undermines the value of the process. In our example, if the landing force is identified as the friendly COG that seizes an island (objective), just stating “operational sustainment” as a CC is too general—this means everything is a priority for sustainment. A more refined CC associated with operational protection may be to “sustain the combat force ashore.” This provides a more discrete view of priorities for sustainment in the COA. Additionally, there often are multiple CCs associated with a joint function.

Similarly, a linkage must be maintained from CCs to CRs, which are the resources that allow the CC to enable the COG to accomplish the objective. In the above example, logistics ships, ship-to-shore connectors, ammunition, and food are resources that allow the CC (sustain combat force ashore) to enable the COG (landing force) to accomplish the objective (seize the island). This analytic linkage must be maintained for COG analysis to be useful.

The analysis continues further with determination of CVs. They are not CRs; they are “an aspect of a critical requirement which is deficient or vulnerable to direct or indirect attack that will create decisive or significant effects.” 10 For the friendly COG, CVs are aspects of CRs that must be protected or mitigated. For the enemy, CVs are aspects of CRs that will provide for indirect attack of the enemy COG. In our example, a CV may be the susceptibility of logistics ships to submarine attack during transit. The CV is not the logistics ships; it is their vulnerability to submarine attack. The planners must determine how to mitigate that vulnerability in COA development to protect the ability of the COG to accomplish the objective. Otherwise, the commander will assume tremendous risk to mission success (see figure 2).

Is COG Analysis Too Difficult?

Some recent articles propose doing away with or dramatically altering COG analysis in planning. Lawrence Freedman suggests that instead of analyzing COGs, planners should answer the question, “What is the position you wish to reach?” 11 Jeff Becker and Todd Zwolensky expound upon Freedman’s writings and recommend replacing COG with “joint maneuver.” 12 While intriguing, neither of these assertions provides a practical methodology for planners to link COAs to an objective. Freedman’s “position you wish to reach” sounds like just another way of stating an objective. Likewise, to be useful, Becker and Zwolensky’s corollary to Freedman must identify what “joint maneuver” will be used against. In all likelihood, it will be a COG.

Dale Eikmeier and, more recently, Jan Rueschhoff and Jonathan Dunne proposed determining CCs first and then working backward to identify the COG because COG identification is difficult to do. 13 In practical application, how can one identify CCs that enable a COG to accomplish an objective without first identifying the COG that actually accomplishes the objective? Certainly, the objective-COG-CC-CR-CV-COA linkages allow for a verifying “backward look” after the analysis has been completed. However, trying to identify a COG after determining CCs weakens the value of the linkage-based requirements of the COG analysis components.

On a practical level, planners must be able to rationalize and recommend to the commander the best employment of resources that will allow us to accomplish our objectives while precluding the enemy from accomplishing theirs. The important fact to remember is that COG analysis is a component of planning that focuses the efforts of planners. It is not an elusive “search for the knockout blow,” but simply a planning tool (albeit a complex one at times) that underpins a COA. How else can planners determine and prioritize what to attack and defend? Additionally, the COA must be assessed in execution to verify that the COG linkages determined in planning are in fact proving successful. Taking the COG linkages into execution, we have a cyclical pattern: determine objectives, identify COG, plan to attack/defend COG, execute the plan, assess the plan, and adapt the plan (by revisiting objectives and so forth). Without COG analysis, planners will be taking a shot in the dark at what to attack/defend.

Another potentially confusing point is that the friendly COG does not necessarily attack the enemy COG directly. Friendly and enemy COGs must be analyzed separately in planning since they are based on specific friendly and enemy objectives. When possible, planners should be innovative in COA development in using non-COG (friendly) resources to degrade or defeat the enemy COG, allowing the friendly COG to focus on accomplishing the friendly objective. For example, using friendly airpower to degrade enemy infantry forces (enemy COG) that are defending an island (enemy objective) will enable the friendly landing force (COG) to more readily seize the island (objective). Independent COG analysis by the J2 (for the enemy) and planning team (for the friendly) will keep friendly and enemy COGs from being intermixed, allowing more innovation in COA development.

COGs at each level of war are based on tasks from higher headquarters that become subordinate objectives (see figure 3). Objectives at one level necessitate tasks to subordinates. These tasks become objectives to that subordinate level, necessitating determination of a COG that accomplishes the nested subordinate objective. Complexity arises at the higher levels of war when the COG may not be a military force.

Vego states, “The true value of center of gravity may be the framework the concept provides for thinking about war. In other words, the process of determining centers of gravity may be as important as the product.” 14 This underpins the idea that COG analysis is for planning . It gives planners something on which to focus the use of resources. In execution, however, staffs must use assessment to determine if the plan (based on COG analysis) is trending toward accomplishing the objective. If not, the COG analysis may be in error (that is, the CVs may not be as clearly linked to the COG and objective as planners originally thought), and a branch plan may need to be implemented.

All doctrine agrees that a COG is related to an objective. Objectives exist at each level of war, and objectives are accomplished by a COG. Joint and Service doctrine COG methodologies should be much more similar than they are currently. The methodology must have two parts: identification (what accomplishes an objective) and analysis (how to attack/defend it). Strange’s analysis methodology (CC, CR, and CV) is common within Service and joint doctrine and logical. The problem that arises is what may be the most important aspect of COG methodology: identification of a COG. This is where Vego’s methodology is particularly valuable. Just because COG analysis is difficult to do well does not mean it should not be used. It is the practical way to tie an objective to a COA.

U.S. Soldiers with 3 rd Squadron, 2 nd Cavalry Regiment, approach objective during squadron-level field training exercise at Tapa Training Area, Estonia, April 6, 2016 (U.S. Army/Steven M. Colvin)

What Really Matters

The following are COG-related ideas that are critical for planners (from planning team members to commanders) to know and believe:

• A COG is based on and linked to an objective; indeed, it is what accomplishes an objective.
• COG identification and analysis provide the foundation for COA development.
• COG is a planning concept; objectives or capabilities may change in execution, necessitating re-analysis of COGs.
• A great part of the value of COG analysis to planners are the discussion and debate that arise from conducting the analysis.
• Because they are based on objectives, COGs exist at each level of war and in each domain; this necessitates COG analysis by all joint task force components.
• Identification and analysis of COGs must be done as discretely as possible for focus and clarity in COA development.
• Do not assume that the friendly COG will be used to defeat the enemy COG; this may be an inefficient use of resources.
• Multiple varying objectives may necessitate multiple COGs.
• To limit confusion, planners should use level-of-war modifiers when discussing and briefing COG (for example, combatant commander COG, theater-strategic COG, joint task force COG, operational COG, maritime COG, and so forth).
• When planners truly understand COG, the concept and methodology are valuable and usable across the range of military operations.

COG identification and analysis are critical aspects of planning that enable planners and decisionmakers to have clarity in linking objectives to COAs. Without detailed use of the COG concept, planners may propose COAs that are not directly linked to the stated objective. COG methodologies must be understood deeply to ensure COG is given appropriate consideration throughout the planning process. JFQ

Australian Army Lieutenant and Gunner from 8/12 Regiment coordinate fire support as U.S. Marine from 2 nd Battalion, 7 th Marine Regiment looks on during Combined Joint Live Fire Exercise on Townshend Island during Talisman Sabre 2011 (Australian Army/Janine Fabre)

1 Dale C. Eikmeier, “Give Carl von Clausewitz and the Center of Gravity a Divorce,” Small Wars Journal , July 2, 2013, available at < smallwarsjournal.com/jrnl/art/after-the-divorce-clausewitz-and-the-center-of-gravity > .

2 Joint Publication (JP) 5-0, Joint Operation Planning (Washington, DC: The Joint Staff, August 11, 2011), xxi.

3 Joe Strange, “Centers of Gravity and Critical Vulnerabilities: Building on the Clausewitzian Foundation So We Can All Speak the Same Language,” Perspectives on Warfighting no. 4, 2 nd ed. (Quantico, VA: Marine Corps University, 1996), 43.

4 Milan Vego, Joint Operational Warfare: Theory and Practice (Newport, RI: U.S. Naval War College, 2009), VII-13.

5 Navy Warfare Publication (NWP) 5-01, Navy Planning (Washington, DC: Headquarters Department of the Navy, December 2013) , appendix C.

6 JP 2-01.3, Joint Intelligence Preparation of the Operational Environment (Washington, DC: The Joint Staff, May 21, 2014), IV-11.

7 Air Force Doctrine Document 3-0, Operations and Planning (Washington, DC: Headquarters Department of the Air Force, November 9, 2012), 111–117.

8 Vego, VII-15–VII-24.

9 NWP 5-01, C-3.

10 JP 5-0, GL-8.

11 Lawrence Freedman, “Stop Looking for the Center of Gravity,” War on the Rocks , June 24, 2014, available at < http://warontherocks.com/2014/06/stop-looking-for-the-center-of-gravity/ >.

12 Jeff Becker and Todd Zwolensky, “Go Ahead, Forget Center of Gravity,” War on the Rocks , July 9, 2014, available at < http://warontherocks.com/2014/07/go-ahead-forget-center-of-gravity/ > .

13 Dale C. Eikmeier, “A Logical Method for Center-of-Gravity Analysis,” Military Review (September–October 2007), 62–66; Jan L. Rueschhoff and Jonathan P. Dunne, “Centers of Gravity from the ‘Inside Out,’” Joint Force Quarterly 60 (1 st Quarter 2011), 120–125.

14 Vego, VII-14.

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Business Plan 101: Critical Risks and Problems

When starting a business, it is understood that there are risks and problems associated with development. The business plan should contain some assumptions about these factors. If your investors discover some unstated negative factors associated with your company or its product, then this can cause some serious questions about the credibility of your company and question the monetary investment. If you are up front about identifying and discussing the risks that the company is undertaking, then this demonstrates the experience and skill of the management team and increase the credibility that you have with your investors.  It is never a good idea to try to hide any information that you have in terms of risks and problems.

Identifying the problems and risks that must be dealt with during the development and growth of the company is expected in the business plan. These risks may include any risk related to the industry, risk related to the company, and risk related to its employees. The company should also take into consideration the market appeal of the company, the timing of the product or development, and how the financing of the initial operations is going to occur. Some things that you may want to discuss in your plan includes: how cutting costs can affect you, any unfavorable industry trends, sales projections that do not meet the target, costs exceeding estimates, and other potential risks and problems.  The list should be tailored to your company and product. It is a good idea to include an idea of how you will react to these problems so your investors see that you have a plan.

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Exit Planning

Secure your company’s future: 4 steps for CEOs to create a successful exit plan

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Economists have forecasted the potential of a long, deep and far-reaching global Great Depression starting in 2030. Meanwhile, the baby boomer generation hit “ peak 65 ” in 2024, resulting in an influx of CEO and key leadership retirements.

With this possibility looming on the horizon, it’s no surprise that 23% of CEOs are planning to exit their business, according to Q3 2023 Vistage CEO Confidence Index . Of those, more than half plan to do so within the next five years.

Whether they are one of the CEOs planning their exit or sale, or simply forecasting their next five years of business, organizations should always have a succession plan at the ready.

This is a broad, comprehensive strategy focused on ensuring continuous operations and strategic leadership development. It requires a variety of facets and considerations, including an exit plan — a strategy created to facilitate the transition between the current and incoming CEO. An exit plan becomes particularly critical when an exit is imminent, but it’s always relevant.

When not executed well, a CEO transition can have dire effects for an organization. However, a strategically executed exit plan can create seamless continuity, and ensure the new CEO is positioned to sustain growth and achieve success. It can also increase retention , maintain productivity and eliminate potential vulnerabilities .

To optimize an exit plan, CEOs should consider four factors, in order:

1. Timeline

The further in advance a CEO can begin to plot their transition, the better. What activities are required six months out are much more expedited than when a CEO first considers retiring.

Either way, leaders should have a plan detailing when to identify their successor and how long they will need to offboard. The timeline should factor in whether the new CEO will be an internal promotion, which will require some degree of training and development, or an external hire, which will require a search and onboarding process.

2. Communication strategy

Next, leaders need to begin considering their plan for communicating this news throughout the organization. The changing of leaders can be unsettling; employees may feel anxious about the unknown of “starting over” with a new leader.

How the news is communicated — both in terms of the existing leader leaving and the new leader coming in — is a very delicate matter. It’s critical to have already thought of answers to anticipated employee questions. Each contributor, regardless of level or title, should know how this change will impact them and their role.

3. Knowledge transfer

Once the transition is initiated, there is a lot of work to be done. CEOs are charged with helping their predecessor understand the organization as it stands today — challenges, opportunities, weaknesses and strengths — and assimilate to the organization’s culture.

While the new CEO may ultimately determine they want to make changes, it is the current CEO’s job to help establish some degree of continuity. Some CEOs stay on as a board member or in an advisory role for a while after leaving to help oversee a smooth transition.

4. Personal plan

While CEOs are often very busy planning this transition, they must pause and fine-tune their next steps. Some may find it helpful to build in a time for reflection before making any big decisions post-exit.

As the Baby Boomer generation begins to leave the workplace at historic levels, many may be grappling with whether they are ready to dive into retirement head-first, consult part-time, mentor or join advisory boards.

Either way, CEOS need to contemplate their next move, just as much as they consider the future of their company.

Transitions, when done poorly, can leave an organization without direction, relying on a new leader to establish a sense of culture. They can break down trust and result in a mass exodus.

An exit plan is a mission-critical consideration with the power to ramp the company up for its next chapter and create a lasting legacy. Every leader should remember: A transition isn’t complete at 5:00 p.m. on the CEO’s last day — it’s only final once the organization is smoothly moving in the right direction under new leadership.

This article first appeared in Inc.

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Joe Galvin is the Chief Research Officer for Vistage Worldwide. Vistage members receive the most credible, data-driven and actionable thought leadership on the strategic issues facing CEOs. Through collaboration with the Vistage community of…

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FACT SHEET: President   Biden Takes Action to Protect American Workers and Businesses from China’s Unfair Trade   Practices

President Biden’s economic plan is supporting investments and creating good jobs in key sectors that are vital for America’s economic future and national security. China’s unfair trade practices concerning technology transfer, intellectual property, and innovation are threatening American businesses and workers. China is also flooding global markets with artificially low-priced exports. In response to China’s unfair trade practices and to counteract the resulting harms, today, President Biden is directing his Trade Representative to increase tariffs under Section 301 of the Trade Act of 1974 on $18 billion of imports from China to protect American workers and businesses.   The Biden-Harris Administration’s Investing in America agenda has already catalyzed more than $860 billion in business investments through smart, public incentives in industries of the future like electric vehicles (EVs), clean energy, and semiconductors. With support from the Bipartisan Infrastructure Law, CHIPS and Science Act, and Inflation Reduction Act, these investments are creating new American jobs in manufacturing and clean energy and helping communities that have been left behind make a comeback.   As President Biden says, American workers and businesses can outcompete anyone—as long as they have fair competition. But for too long, China’s government has used unfair, non-market practices. China’s forced technology transfers and intellectual property theft have contributed to its control of 70, 80, and even 90 percent of global production for the critical inputs necessary for our technologies, infrastructure, energy, and health care—creating unacceptable risks to America’s supply chains and economic security. Furthermore, these same non-market policies and practices contribute to China’s growing overcapacity and export surges that threaten to significantly harm American workers, businesses, and communities.   Today’s actions to counter China’s unfair trade practices are carefully targeted at strategic sectors—the same sectors where the United States is making historic investments under President Biden to create and sustain good-paying jobs—unlike recent proposals by Congressional Republicans that would threaten jobs and raise costs across the board. The previous administration’s trade deal with China  failed  to increase American exports or boost American manufacturing as it had promised. Under President Biden’s Investing in America agenda, nearly 800,000 manufacturing jobs have been created and new factory construction has doubled after both fell under the previous administration, and the trade deficit with China is the lowest in a decade—lower than any year under the last administration.   We will continue to work with our partners around the world to strengthen cooperation to address shared concerns about China’s unfair practices—rather than undermining our alliances or applying indiscriminate 10 percent tariffs that raise prices on all imports from all countries, regardless whether they are engaged in unfair trade. The Biden-Harris Administration recognizes the benefits for our workers and businesses from strong alliances and a rules-based international trade system based on fair competition.   Following an in-depth review by the United States Trade Representative, President Biden is taking action to protect American workers and American companies from China’s unfair trade practices. To encourage China to eliminate its unfair trade practices regarding technology transfer, intellectual property, and innovation, the President is directing increases in tariffs across strategic sectors such as steel and aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, ship-to-shore cranes, and medical products.   Steel and Aluminum   The tariff rate on certain steel and aluminum products under Section 301 will increase from 0–7.5% to 25% in 2024.   Steel is a vital sector for the American economy, and American companies are leading the future of clean steel. Recently, the Biden-Harris Administration announced $6 billion for 33 clean manufacturing projects including for steel and aluminum, including the first new primary aluminum smelter in four decades, made possible by the Bipartisan Infrastructure Law and the Inflation Reduction Act. These investments will make the United States one of the first nations in the world to convert clean hydrogen into clean steel, bolstering the U.S. steel industry’s competitiveness as the world’s cleanest major steel producer.   American workers continue to face unfair competition from China’s non-market overcapacity in steel and aluminum, which are among the world’s most carbon intensive. China’s policies and subsidies for their domestic steel and aluminum industries mean high-quality, low-emissions U.S. products are undercut by artificially low-priced Chinese alternatives produced with higher emissions. Today’s actions will shield the U.S. steel and aluminum industries from China’s unfair trade practices.   Semiconductors   The tariff rate on semiconductors will increase from 25% to 50% by 2025.   China’s policies in the legacy semiconductor sector have led to growing market share and rapid capacity expansion that risks driving out investment by market-driven firms. Over the next three to five years, China is expected to account for almost half of all new capacity coming online to manufacture certain legacy semiconductor wafers. During the pandemic, disruptions to the supply chain, including legacy chips, led to price spikes in a wide variety of products, including automobiles, consumer appliances, and medical devices, underscoring the risks of overreliance on a few markets.   Through the CHIPS and Science Act, President Biden is making a nearly $53 billion investment in American semiconductor manufacturing capacity, research, innovation, and workforce. This will help counteract decades of disinvestment and offshoring that has reduced the United States’ capacity to manufacture semiconductors domestically. The CHIPS and Science Act includes $39 billion in direct incentives to build, modernize, and expand semiconductor manufacturing fabrication facilities as well as a 25% investment tax credit for semiconductor companies. Raising the tariff rate on semiconductors is an important initial step to promote the sustainability of these investments.   Electric Vehicles (EVs)   The tariff rate on electric vehicles under Section 301 will increase from 25% to 100% in 2024.   With extensive subsidies and non-market practices leading to substantial risks of overcapacity, China’s exports of EVs grew by 70% from 2022 to 2023—jeopardizing productive investments elsewhere. A 100% tariff rate on EVs will protect American manufacturers from China’s unfair trade practices.   This action advances President Biden’s vision of ensuring the future of the auto industry will be made in America by American workers. As part of the President’s Investing in America agenda, the Administration is incentivizing the development of a robust EV market through business tax credits for manufacturing of batteries and production of critical minerals, consumer tax credits for EV adoption, smart standards, federal investments in EV charging infrastructure, and grants to supply EV and battery manufacturing. The increase in the tariff rate on electric vehicles will protect these investments and jobs from unfairly priced Chinese imports.   Batteries, Battery Components and Parts, and Critical Minerals   The tariff rate on lithium-ion EV batteries will increase from 7.5%% to 25% in 2024, while the tariff rate on lithium-ion non-EV batteries will increase from 7.5% to 25% in 2026. The tariff rate on battery parts will increase from 7.5% to 25% in 2024.   The tariff rate on natural graphite and permanent magnets will increase from zero to 25% in 2026. The tariff rate for certain other critical minerals will increase from zero to 25% in 2024.   Despite rapid and recent progress in U.S. onshoring, China currently controls over 80 percent of certain segments of the EV battery supply chain, particularly upstream nodes such as critical minerals mining, processing, and refining. Concentration of critical minerals mining and refining capacity in China leaves our supply chains vulnerable and our national security and clean energy goals at risk. In order to improve U.S. and global resiliency in these supply chains, President Biden has invested across the U.S. battery supply chain to build a sufficient domestic industrial base. Through the Bipartisan Infrastructure Law, the Defense Production Act, and the Inflation Reduction Act, the Biden-Harris Administration has invested nearly $20 billion in grants and loans to expand domestic production capacity of advanced batteries and battery materials. The Inflation Reduction Act also contains manufacturing tax credits to incentivize investment in battery and battery material production in the United States. The President has also established the American Battery Materials Initiative, which will mobilize an all-of-government approach to secure a dependable, robust supply chain for batteries and their inputs.   Solar Cells   The tariff rate on solar cells (whether or not assembled into modules) will increase from 25% to 50% in 2024.   The tariff increase will protect against China’s policy-driven overcapacity that depresses prices and inhibits the development of solar capacity outside of China. China has used unfair practices to dominate upwards of 80 to 90% of certain parts of the global solar supply chain, and is trying to maintain that status quo. Chinese policies and nonmarket practices are flooding global markets with artificially cheap solar modules and panels, undermining investment in solar manufacturing outside of China.   The Biden-Harris Administration has made historic investments in the U.S. solar supply chain, building on early U.S. government-enabled research and development that helped create solar cell technologies. The Inflation Reduction Act provides supply-side tax incentives for solar components, including polysilicon, wafers, cells, modules, and backsheet material, as well as tax credits and grant and loan programs supporting deployment of utility-scale and residential solar energy projects. As a result of President Biden’s Investing in America agenda, solar manufacturers have already announced nearly $17 billion in planned investment under his Administration—an 8-fold increase in U.S. manufacturing capacity, enough to supply panels for millions of homes each year by 2030.   Ship-to-Shore Cranes   The tariff rate on ship-to-shore cranes will increase from 0% to 25% in 2024.   The Administration continues to deliver for the American people by rebuilding the United States’ industrial capacity to produce port cranes with trusted partners. A 25% tariff rate on ship-to-shore cranes will help protect U.S. manufacturers from China’s unfair trade practices that have led to excessive concentration in the market. Port cranes are essential pieces of infrastructure that enable the continuous movement and flow of critical goods to, from, and within the United States, and the Administration is taking action to mitigate risks that could disrupt American supply chains. This action also builds off of ongoing work to invest in U.S. port infrastructure through the President’s Investing in America Agenda. This port security initiative includes bringing port crane manufacturing capabilities back to the United States to support U.S. supply chain security and encourages ports across the country and around the world to use trusted vendors when sourcing cranes or other heavy equipment.   Medical Products   The tariff rates on syringes and needles will increase from 0% to 50% in 2024. For certain personal protective equipment (PPE), including certain respirators and face masks, the tariff rates will increase from 0–7.5% to 25% in 2024. Tariffs on rubber medical and surgical gloves will increase from 7.5% to 25% in 2026.   These tariff rate increases will help support and sustain a strong domestic industrial base for medical supplies that were essential to the COVID-19 pandemic response, and continue to be used daily in every hospital across the country to deliver essential care. The federal government and the private sector have made substantial investments to build domestic manufacturing for these and other medical products to ensure American health care workers and patients have access to critical medical products when they need them. American businesses are now struggling to compete with underpriced Chinese-made supplies dumped on the market, sometimes of such poor quality that they may raise safety concerns for health care workers and patients.   Today’s announcement reflects President Biden’s commitment to always have the back of American workers. When faced with anticompetitive, unfair practices from abroad, the President will deploy any and all tools necessary to protect American workers and industry.  

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Arizona is poised for further momentum after TSMC, Intel and other semiconductor victories

Arizona, over the past three years, has scored some huge victories in luring major semiconductor investments to the state, including a major Intel Corp. expansion in Chandler and the construction of three new factories in north Phoenix by Taiwan Semiconductor Manufacturing Co.

Could all this be the prelude to an even bigger second act?

“There is critical mass — that’s the opportunity we have now in Arizona,” said Brian Harrison, president of TSMC Arizona. “We have a great opportunity to do even more in the next 10 years.”

Harrison described how the company’s factories or fabs in Taiwan have become hubs around which chemical suppliers, tool-equipment makers and other businesses have clustered. His comments came during a “Silicon Desert” forum hosted by EMD Electronics, which supplies equipment and provides testing services to semiconductor customers in Arizona and elsewhere.

The demand for semiconductors remains on a growth track, fueled by consumer products such as cellphones and computers, automobiles, data centers, and pretty much every other modern electrical device or industry. Artificial intelligence has provided new impetus.

A rising percentage of chips now are manufactured abroad, mainly in Taiwan, and reversing that trend has been the thrust of the CHIPS & Science Act of 2022. Under that legislation, the U.S. Commerce Department so far this year has awarded up to $8.5 billion in grants to Intel and $6.5 billion to TSMC, along with $162 million to Chandler-based Microchip Technology and other recipients.

Semiconductor manufacturers are using that money, combined with pledges for billions of dollars more in low-rate federal loans, to leverage their own investments.

TSMC’s planned Arizona investments have risen to $65 billion , along with $20 billion in recent new commitments by Intel. Those have helped to boost total semiconductor investments in Arizona to more than $100 billion over the past four years, said Sandra Watson, president and CEO of the Arizona Commerce Authority and another speaker at the forum hosted by EMD Electronics, a business of German science and technology giant Merck KGaA.  

Planning began before passage of key federal legislation

Arizona has fared well lately in this regard partly because of advance planning, Watson said. In 2021, a year before the CHIPS Act was enacted, the Commerce Authority brought together more than 50 industry leaders from various states, along with educational institutions such as Arizona State University and others, to develop a strategy. “We were able to establish a very strong plan,” Watson said, with collaboration the key.

Harrison echoed that sentiment and noted that TSMC considered many other locations in various states for its factories or fabs. Many of these other places had “different factions with their own vague agendas,” he said, rather than a unified gameplan like Arizona. “Everyone has water and roads,” he quipped.

More Arizona-focused technology announcements will be forthcoming, said Watson and Sean Fogarty, vice president of international business development at the Greater Phoenix Economic Council.

“We have a healthy pipeline of prospects” that are considering expansion here, with foreign businesses representing about one-third of those companies, Fogarty said.

Arizona already features a deep supplier base, a pro-business environment, favorable tax policies and an expanding workforce, Fogarty said. All that complements an educational system that is ramping up to funnel workers into the industry, from engineers at Arizona State University and the University of Arizona to technicians receiving training through the Maricopa Community College system and other programs . In addition, Arizona continues to add population, with many of the newcomers in the prime 18-to-44 working-age group, Fogarty said.

The power to make chip-expansion happen

Another critical consideration is the electricity to power these new industrial complexes, as well as related industries such as data centers, of which metro Phoenix now has one of the highest concentrations in the Western Hemisphere .

The EMD Electronics conference included assurances from both of the major electric utilities operating around metro Phoenix that power will be available when expansions get up and running.

“We are aggressively (adding) new resources over the next five years,” said Karla Moran, manager of economic development at Salt River Project. That includes more solar generation, mobile-home-sized batteries to store power early in the morning for release later in the day, and additional pumped-storage hydro capacity .

Kelly Patton, economic development manager at Arizona Public Service, said much the same. “We have prepared for this growth,” she said.

Both utility executives made the case for continuing to keep natural gas-fired plants in the mix for a while longer, despite emissions that make them targets for criticism from environmental groups and others. “If a monsoon hits and the solar field goes down, we can ramp up that natural gas,” Patton said.

Actually, the availability of renewable energy is another factor that gives Arizona an edge, as some companies expanding here, including Apple with its new data center in Mesa, have asked for it, Watson said.

A key factor in the Phoenix area’s success in attracting semiconductor manufacturers and other industries, she added, was ongoing efforts to keep the major utilities in the loop.

Some 54 megaprojects are in the works now across all industries, Watson said, and the Commerce Authority shares that information with local utilities. “We map out what sites they are considering so that our utilities can plan,” she said. “So the utilities know, in the next five years, where they need to be.”

While water is another critical need for the semiconductor industry, conference participants didn’t assess it as a key obstacle for Arizona, especially as manufacturers, including Intel, are striving to improve their recycling efforts. SRP, which supplies about half of the Valley’s water needs, said its reservoirs by later this spring are expected to be near full capacity .

For Arizona’s semiconductor industry, many of the “i’s” still need to be dotted and the “t’s” crossed. The giant fabs and expansion projects still need to be built, equipped and staffed with trained workers, many of whom haven't completed or even started their educations. Suppliers need to be ready and waiting, with fewer of the supply-chain disruptions that have plagued the industry in recent years. Labor relations need to be maintained if not improved. The power and water for these complexes need to keep flowing, and partnerships strengthened.

But the infrastructure and other foundations have been laid and Arizona is in a good position for expansion, said Cori Masters, a senior semiconductor research analyst based in the Valley for Gartner.

“Now’s the time for ramping," she said.

Reach the writer at [email protected].