For decades, business consultants and authors have studied the most successful companies in America and the world, and attempted to define what separates the winners from the losers. Almost daily someone will come up with his or her own list of what he thinks are the key factors for success – often called Critical Success Factors.
We have studied these many Critical Success Factors for over 20 years, tried out the most promising ones in the real world with our clients, and found what works best. Over time it became apparent that all these consultants and authors were saying very much the same thing, just using different language. That’s because the Critical Success Factors for any organization are directly related to what an organization is, and how it operates in the world. It’s sort of like saying, to survive as a human you have to have food, water, the right temperature range and protection from danger. Once you understand what an organization needs to survive, you can better understand the Critical Success Factors.
What Any Organization Needs To Survive And Succeed
- People – those who make up the organization
- Purpose – a reason for organizing and working together
- Processes – activities which the people undertake to fulfill their purpose
- Physical Resources – a place to work, the right equipment, money to pay the bills and the people who work there
- Customers – people outside the organization who are willing to pay money in return for the products and services the organization provides; for government organizations taxpayers are the customers; many nonprofits depend on contributions from donors who believe in the value of what the organization is doing.
But it’s not just the existence of these five basic factors that enables success -it’s what you do with them. In the same manner, just having a body will not make you a successful athlete – you have to train, learn the skills, practice, eat right, sleep enough, and much more. So now let’s translate the five basic factors into what we call the 5 Key Success Factors – the consistent winners, the best of the best.
The 5 Key Success Factors Of All Organizations
Managing and developing people – People today want some direction and structure, but they also want freedom and encouragement to develop their skills and knowledge. Effectively managing people requires balancing constraining forces (providing direction, structure, organization, some rules) with liberating forces (encourage personal growth, development and creativity). If you as manager/leader err too much in one direction or the other, your organization will be either too rigid or too chaotic. To make it more complicated, each person has a different set of needs for structure vs. freedom, order vs. opportunity, logic vs. personal values, factual information vs. meaning and connections, and so on. Effective managers do not manage all people the same, except for some basic rules. They manage each person according to what he or she needs, what motivates them to do their best. Very complicated but essential for success.
Strategic focus – In today’s rapidly changing world, it’s not just enough to have a purpose for existing. Leaders have to focus the organization’s resources on the greatest opportunities, which shift with each new day. Just run through your mind what has happened in the world or your organization in the past year or two, and you’ll understand what we mean by the reality of constant change. Doors open and doors close. Major customers or income sources can change or even go out of business at any time. So it’s necessary for leaders to keep focused on the desired end results such as increased sales and profits, or more satisfied customers, while constantly steering the organization across the stormy waters of the marketplace. As the illustration shows, the job of focused leaders is to connect and align all the Success Factors for optimum performance.
Operations, or what people do all day – What the people in your organization do day in and day out to create value for customers, to earn or justify income, strongly determines whether you succeed or fail. Like the other Top 5 Success Factors, you can’t separate operations from strategic focus which gives direction, people which do the work, customers who pay the money and physical resources to do the work. Effective operations ensure that customers get exactly what they want at the right time, the right price and the right quality. Thus effective operations management focuses on what is called cycle time (producing a product or service from start to finish), cost control, and quality control (which requires some form of measurement). Strategic focus is largely externally oriented, operations largely internally oriented. Both need to be totally in sync with each other – not something that happens automatically but rather requiring constant effort. This is why communication is the true lifeblood of a successful organization – a high flow of information so everyone and everything is connected. Easy to say, hard to do.
Physical resources – Finances, facilities and equipment are the big 3 physical resources. If you don’t have enough money, you can’t start or sustain an organization. And one of the biggest expenses is providing adequate facilities and equipment for people to work in and with. Experienced managers learn that cash flow is king. It doesn’t matter how much customers owe you, it’s when their money enters your bank account so you can use it to sustain the organization. Failing to manage cash flow is the No. 1 reason for business failure. Too many business owners leave the money up to someone else and can easily get blind-sided when suddenly the money isn’t there to keep the doors open. And in a few rare, unfortunate cases, the person tracking the money embezzles or cooks the books, then you really are in trouble. Likewise nice facilities can be energizing, something to feel proud about, but also very expensive. The economy is always cyclical, and if you buy or lease really nice facilities when times are good, paying for them can be difficult or impossible in a downturn.
Customer relations – Customers are where the money comes from, so in many ways this is the most important success factor. As the famous business guru Peter Drucker said years ago, The purpose of a business is to get and keep customers. Getting customers involves marketing – indeed this success factor includes all kinds of marketing and sales. The key to successful customer relations is to give them what they need, not just what you want to sell. Effective sales and marketing begins with asking existing and potential customers what they need, what problem they want solved or deficiency filled. By keeping in touch with customers and asking these questions often, you’ll do a better job of developing customer loyalty and keeping competitors away. In the broadest sense customer relations can be considered the organization’s relationships with the external world. It involves tracking competitor actions, analyzing changes in the market environment, and adapting according. This is closely linked to Strategic Focus.
Get The Whole Story
To learn more about these all-important keys to success, purchase a copy of our latest book, The 5 Key Success Factors of Business: A Powerful System for Total Business Success. It includes much more detail than the summary above. You’ll find it chock full of valuable information and practical tips for your business or organization, based on over 20 years of studying the success secrets of leading companies and field-testing them in the real world to determine what works best. Order your copy today for valuable insights into business success factors you won’t find anywhere else! Click here to check out the book on amazon.com (opens in a new window).