A critical success factor (CSF) is something that must happen if a process, activity, service, etc., is to succeed. A key performance indicator (KPI) is a way to measure achievement of a CSF.
One of the challenges that many organizations face involves determining how many CSFs and KPIs they should define. It is very easy to go overboard in terms of the number of CSFs and KPIs used, and doing so often results in an overwhelming amount of data being displayed and collected that eventually is ignored.
ITIL recommends that an organization define two to five CSFs for each process or service, and then, two to five KPIs to measure each CSF. Simple math will quickly show that an organization can end up with:
- 10 Processes
- Five Services
- Two CSFs for each process and service, so 30 CSFs
- Two KPIs for each CSF, so 60 KPIs
In this simple example, the organization would end up with 60 KPIs to watch. Many real-life organizations have significantly more processes and services in play and would, therefore, end up with more CSFs and KPIs to manage.
In my experience, organizations need to be very careful about the CSFs and KPIs that they choose, specifically about how many of each that they ask members in the organization to review. Furthermore, it is imperative that once a measurement structure is chosen, the organization properly staffs the accountability and responsibility for the structure, so that it is kept up to date and accurate.
Another aspect of KPIs that is important to consider is that they can be quantitative or qualitative. Quantitative KPIs measure some objective aspect, whereas qualitative KPIs have a subjective component. Both types of measurements are useful, but qualitative measures are often more easily questioned and less readily accepted because of their subjective aspects.
Finally, organizations must realize that the CSFs and KPIs that they have today might not be the right set to reflect the realities of the organization tomorrow. Organizations constantly change. Therefore, many of the factors that determine success for the organization change rapidly, and many of the KPIs that could be used to measure success change and should be adjusted over time to reflect the realities of the organization.