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Critical Success factors

• Strategic factors or key factors for success

• Specific to an industry

• Can be identified along various functional areas

• Vary with firm’s position relative to its rivals

• Affected by changes in external environment

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Critical Success factors

Industry Critical Success factors

Airline Fuel efficiency; load factors; on the board comfort; reservation system

Automobile Fuel efficiency; design; maneuverability; aesthetics;

Retail chain Inventory turnover; product mix; pricing; sales promotion

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Critical Success factors

• Important to identify CSFs while framing objectives

• Generate CSF: – what does it take to be successful in this business?

• Draw CSF into objectives– What should the organisations goal and objectives be

with regard to CSFs?

• Identify performance standards– How to know whether organisation is successful on

this factor?

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Strategic decisions

• Rare– No precedent– Need broad perspective (beyond functional

skills)– Taken at top level

• Consequential– Long term future depends on these decisions– Involve substantial resources– May require resource reallocation – Need strong commitment of top level

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Strategic decisions

• Directive– Guide actions– Govern functional decisions– Have enduring effects

• Future orientation– Long term– Based on forecasts– Strong environment scanning needed

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Strategic Decision Makers

• Board of Directors– Apex Governing body

• Top management– Apex Executive body

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Board of Directors

• Responsibilities of Board of Directors– Setting corporate strategy– Deciding succession– Controlling and monitoring– Reviewing and approving resources– Caring for shareholders

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Board of Directors

• Phantom

• Rubber stamp

• Minimal Review

• Nominal Participation

• Active Participation

• Catalyst

Low

High

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Board of Directors

• Internal Directors: senior executives– from among top management

• External Directors: independent directors– from other organisations /individuals

• Cross Directors: – same director and two boards

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Top Management

• Characteristics– Few tasks are continuous but responsibility always present– Require wide range of capabilities

• Analytical• Awareness of events• Interest in multiple actions• Ability to pursue abstract ideas

• Effects– Have unplanned free time– May have tendency to pursue activities which suit temperament

“Good business leaders create vision, articulate vision, own the vision and relentlessly drive it to completion”

- John Welch

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Top Management

• Responsibilities of Top Management– Fulfill key roles– Provide executive leadership– Manage strategic planning process

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Key Roles

• Mintzberg identified ten key roles which vary in importance and time needed for each– Figurehead– Leader– Liaison– Monitor– Disseminator– Spokesperson– Entrepreneur– Disturbance handler– Resource allocator– negotiator

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Executive Leadership

• Articulate a transcendent goal

• Present a role to others to follow

• Communicate high performance standards for self and others

• Show confidence in followers’ abilities

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Strategic Planning Process

• Take long range view

• Use information provided by– Strategic planning staff– Divisional managers– Functional managers

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Modes of strategy formulation

• Entrepreneurial: proactive search – Environment is a force to be used and

controlled

• Adaptive: reactive solutions– Environment is too complex

• Planning: proactive search and reactive solutions– Environment scanning to acquire key

information