The best way to start to understand critical success factors (CSFs) and key performance indicators (KPIs) is to see some examples. Also included in the examples below is the idea of targets. These are the level of performance that is needed to reach the goals. The examples also include SMARTT goals. SMARTT stands for specific, measurable, achievable, relevant, targeted and timeframed.
Example 1: A restaurant
Goal: Increase profit by 5% by January next year by increasing throughput by 10% in lunch and dinner trade without reducing our gross margins.
| CSF | KPI | Target |
|---|---|---|
| Market share | % of business within a 5km radius | 10% |
| Customer satisfaction | % of customers who are satisfied | 95% |
| Meal quality | % of meals returned because of poor quality | 2% |
Example 2: Whitegoods manufacturer
Goal: To increase the operating profit of a washing machine manufacturer by 5% within two years.
| CSF | KPI | Target |
|---|---|---|
| High product quality | Number of warranty claims per 100 units | 3 |
| High process yields | % rolled throughput yield | 95% |
| Low production costs | Average variable costs | <$350 |
| Market share | % of the market | 15% |
Doing it yourself
When developing CSFs, KPIs and targets it can be useful to think in the following way:
- to achieve the goal it is critical to have … (these are the CSFs)
- the best indication of whether the CSF is working is … (this is the KPI)
- we will know we are on track to our goal when we have reached … (this is the target).
Using example 1 this type of thinking would look like this:
- To achieve the goal it is critical to have a share of the market, satisfied customers and quality meals.
- The best indicator of whether we have market share will be how much business we get relative to other restaurants (market share) in a five kilometre radius.
- We will know we are on track to our goal when we have 10% market share.
Developing CSFs, KPIs and targets takes practice. Having them means you focus on the things that matter most and you can keep track of progress towards your goals.
Situations change and CSFs, KPIs and targets may also need to change. They should be reviewed regularly.
Other tools to use with CSFs and KPIs
CSFs and KPIs can be used in steps 1, 4, 5, 6 and 8 of the CI&I - Continuous improvement and innovation process.
Develop target outcomes and use the SMARTT goal tool before you develop CSFs and KPIs.
Once you have your CSFs and KPIs you can use the Action design tool or Five Ws and one H to work out the key actions needed to ensure the CSFs are in place and working well.
Support to use the tool
Please contact us if you would like support to develop CSFs, KPIs and targets.
A worksheet to use as you develop CSFs, KPIs and targets can be found in the 'Documents' section on the far right.