IT Management

Chief Executives Define Their

Own Data Needs
by John F. Rockart

From the Magazine (March 1979)

Ler em português

He could have been the president of any one of a number of

successful and growing medium-sized companies in the
electronics industry. He had spent the previous day working to
salt away the acquisition of a small company that fitted an
important position in the product line strategy he had evolved for
his organization. Most of this day had been spent discussing
problems and opportunities with key managers. During both days
he had lived up to his reputation of being an able, aggressive,
action-oriented chief executive of a leading company in its
segment of the electronics field.

Unfortunately, the president had chosen the late afternoon and

early evening to work through the papers massed on his desk. His
thoughts were not pleasant. His emotions ranged from
amusement to anger as he plowed through the papers. “Why,” he
thought, “do I have to have dozens of reports a month and yet
very little of the real information I need to manage this company?
There must be a way to get the information I need to run this
company!”

In effect, he was expressing the thoughts of many other general

managers—and especially chief executive officers—whose needs
for information are not as clearly determined as are those of many
functional managers and first-line supervisors. Once one gets
above the functional level, there is a wide variety of information
that one might possibly need, and each functional specialty has
an interest in “feeding” particular data to a general manager. As
in this case, therefore, a massive information flow occurs. This
syndrome is spelled out with differing emphases by the recent
comments of two other chief executives:

“The first thing about information systems that strikes me is that

one gets too much information. The information explosion crosses
and criss-crosses executive desks with a great deal of data. Much of
this is only partly digested and much of it is irrelevant…”1

“I think the problem with management information systems in the

past in many companies has been that they’re overwhelming as far
as the executive is concerned. He has to go through reams of reports
and try to determine for himself what are the most critical pieces of
information contained in the reports so that he can take the
necessary action and correct any problems that have arisen.”2

It is clear that a problem exists with defining exactly what data

the chief executive (or any other general manager) needs. My
experience in working with executives for the past decade or more
is that the problem is universally felt—with individual frustration
levels varying, but most often high.

In this article, I will first discuss four current major approaches to

defining managerial information needs. Next, I will discuss a new
approach developed by a research team at MIT’s Sloan School of
Management. Termed the “critical success factor (CSF) method,”
this approach is being actively researched and applied today at
the MIT center. Finally, I will describe in detail this method’s use
in one major case as well as provide summary descriptions of its
use in four other cases.

Current Procedures

In effect, there are four main ways of determining executive

information needs—the by-product technique, the null approach,
the key indicator system, and the total study process. In this
section of the article, I will offer a brief synopsis of each of these
and discuss their relative strengths and weaknesses.

By-product Technique

In this method, little attention is actually paid to the real

information needs of the chief executive. The organization’s
computer-based information process is centered on the
development of operational systems that perform the required
paperwork processing for the company. Attention is focused,
therefore, on systems that process payroll, accounts payable,
billing, inventory, accounts receivable, and so on.

The information by-products of these transaction-processing

systems are often made available to all interested executives, and
some of the data (e.g., summary sales reports and year-to-date
budget reports) are passed on to top management. The
byproducts that reach the top are most often either heavily
aggregated (e.g., budgeted/actual for major divisions) or they are
exception reports of significant interest (e.g., certain jobs now
critical by some preset standard). All reports, however, are
essentially by-products of a particular system designed primarily
to perform routine paperwork processing.
Where the information subsystem is not computer-based, the
reports reaching the top are often typed versions of what a lower
level feels is useful. Alternatively, they may be the ongoing,
periodically forthcoming result of a previous one-time request for
information concerning a particular matter initiated by the chief
executive in the dim past.

Of the five methods discussed herein, the by-product approach is

undoubtedly the predominant method. It leads to the welter of
reports noted in the introductory paragraphs of this article. It has
the paper-processing tail wagging the information dog.

The approach is, however, understandable. Paperwork must be

done and clerical savings can be made by focusing on automating
paper-processing systems. It is necessary to develop this class of
data processing system to handle day-to-day paperwork.
However, other approaches are also necessary to provide more
useful management information.

Null Approach

This method is characterized by statements that might be

paraphrased in the following way: “Top executives’ activities are
dynamic and ever changing, so one cannot predetermine exactly
what information will be needed to deal with changing events at
any point in time. These executives, therefore, are and must be
dependent on future-oriented, rapidly assembled, most often
subjective, and informal information delivered by word of mouth
from trusted advisers.”

Proponents of this approach point to the uselessness of the

reports developed under the by-product method just noted.
Having seen (often only too clearly) that (1) the existing reports
used by the chief executives are not very useful, and (2) they,
therefore, rely very heavily on oral communication, advocates of
this approach then conclude that all computer-based reports—no
matter how they are developed—will be useless. They look at
inadequately designed information systems and curse all
computer-based systems.

Proponents of the null approach see managerial use of

information as Henry Mintzberg does:

“…it is interesting to look at the content of managers’ information,

and at what they do with it. The evidence here is that a great deal of
the manager’s inputs are soft and speculative—impressions and
feelings about other people, hearsay, gossip, and so on.
Furthermore, the very analytical inputs—reports, documents, and
hard data in general—seem to be of relatively little importance to
many managers. (After a steady diet of soft information, one chief
executive came across the first piece of hard data he had seen all
week—an accounting report—and put it aside with the comment, ‘I
never look at this.’)”3

To some extent, this school of thought is correct. There is a great

deal of information used by top executives that must be
dynamically gathered as new situations arise. And, most
certainly, there are data that affect top management which are
not computer-based and which must be communicated in
informal, oral, and subjective conversations.

There are, however, also data that can and should be supplied
regularly to the chief executive through the computer system.
More significantly, as I will note later on, it is also important to
clearly define what informal (not computer-based) information
should be supplied to a top executive on a regular basis.

Key Indicator System

A clear contender today for the fastest growing school of thought

concerning the “best” approach to the provision of executive
information is the key indicator system. This procedure is based
on three concepts, two of which are necessary and the third of
which provides the glamour (as well as a few tangible benefits).

The first concept is the selection of a set of key indicators of the

health of the business. Information is collected on each of these
indicators. The second concept is exception reporting—that is,
the ability to make available to the manager, if desired, only those
indicators where performance is significantly different (with
significance levels necessarily predefined) from expected results.
The executive may thus peruse all the data available or focus only
on those areas where performance is significantly different from
planned.

The third concept is the expanding availability of better, cheaper,

and more flexible visual display techniques. These range from
computer consoles (often with color displays) to wall-size visual
displays of computer-generated digital or graphic material. A
paradigm of these systems is the one developed at Gould, Inc.
under the direction of William T. Ylvisaker, chairman and chief
executive officer. As Business Week reports:

“Gould is combining the visual display board, which has now

become a fixture in many board-rooms, with a computer
information system. Information on everything from inventories
to receivables will come directly from the computer in an
assortment of charts and tables that will make comparisons easy
and lend instant perspective.

“Starting this week Ylvisaker will be able to tap three-digit codes

into a 12-button box resembling the keyboard of a telephone. SEX
will get him sales figures. GIN will call up a balance sheet. MUD is
the keyword for inventory.
“About 75 such categories will be available, and the details will be
displayed for the company as a whole, for divisions, for product
lines, and for other breakdowns, which will also be specified by
simple digital codes.”4

At Gould, this information is displayed on a large screen in the

boardroom, and is also available at computer terminals. The data
are available in full, by exception, and graphically if desired.

As in most similar key indicator systems I have seen, the

emphasis at Gould is on financial data. Daniel T. Carroll,
reporting on Gould’s system in mid-1976, described the system’s
“core report.”5 The report, available for each of Gould’s 37
divisions, provides data on more than 40 operating factors. For
each factor, current data are compared with budget and prior year
figures on a monthly and year-to-date basis. The report, as noted
by Carroll, is ever changing, but its orientation toward “profit and
loss” and “balance sheet” data, as well as ratios drawn from these
financial data, is evident.

Total Study Process

In this fourth approach to information needs, a widespread

sample of managers are queried about their total information
needs, and the results are compared with the existing information
systems. The subsystems necessary to provide the information
currently unavailable are identified and assigned priorities. This
approach, clearly, is a reaction to two decades of data processing
during which single systems have been developed for particular
uses in relative isolation from each other and with little attention
to management information needs. In effect, this approach was
developed by IBM and others to counter the by-product method
previously noted.
The most widely used formal procedure to accomplish the total
study is IBM’s Business Systems Planning (BSP) methodology.
BSP is aimed at a top-down analysis of the information needs of
an organization. In a two-phase approach, many managers are
interviewed (usually from 40 to 100) to determine their
environment, objectives, key decisions, and information needs.
Several IBM-suggested network design methods and matrix
notations are used to present the results in an easily visualized
manner.

The objectives of the process are to develop an overall

understanding of the business, the information necessary to
manage the business, and the existing information systems. Gaps
between information systems that are needed and those currently
in place are noted. A plan for implementing new systems to fill
the observed gaps is then developed.

This total understanding process is expensive in terms of staff

time and all-inclusive in terms of scope. The amount of data and
opinions gathered is staggering. Analysis of all this input is a high
art form. It is difficult, at best, to determine the correct level of
aggregation of decision making, data gathering, and analysis at
which to work.

Yet the top-down process tends to be highly useful in most cases.

The exact focus of the results, however, can be biased either
toward top management information and functional
management information or toward paperwork processing,
depending on the bias of the study team. I have not seen a BSP
study that gives priority to top executive information in the
study’s output. The design, cleaning up, and extension of the
paper-processing information network is too often the focus of
the study team.
Each of the four current procedures just discussed has its
advantages and disadvantages. The by-product technique focuses
on getting paperwork processed inexpensively, but it is far less
useful with regard to managerial information. It too often results
in a manager’s considering data from a single paperwork function
(e.g., payroll) in isolation from other meaningful data (e.g., factory
output versus payroll dollars).

The null approach, with its emphasis on the changeability,

diversity, and soft environmental information needs of a top
executive, has probably saved many organizations from building
useless information systems. It, however, places too much stress
on the executive’s strategic and person-to-person roles. It
overlooks the management control role of the chief executive,
which can be, at least partially, served by means of routine, often
computer-based, reporting.6

The key indicator system provides a significant amount of useful

information. By itself, however, this method often results in many
undifferentiated financial variables being presented to a
management team. It tends to be financially all-inclusive rather
than on-target to a particular executive’s specific needs. The
information provided is objective, quantifiable, and computer
stored. Thus in the key indicator approach the perspective of the
information needs of the executive is a partial one—oriented
toward hard data needs alone. More significantly, in its
“cafeteria” approach to presenting an extensive information base,
it fails to provide assistance to executives in thinking through
their real information needs.

The total study process is comprehensive and can pinpoint

missing systems. However, it suffers, as noted, from all of the
problems of total approaches. There are problems concerning
expense, the huge amount of data collected (making it difficult to
differentiate the forest from the trees), designer bias, and
difficulty in devising reporting systems that serve any individual
manager well.

New CSF Method

The MIT research team’s experience in the past two years with the
critical success factors (CSF) approach suggests that it is highly
effective in helping executives to define their significant
information needs. Equally important, it has proved efficient in
terms of the interview time needed (from three to six hours) to
explain the method and to focus attention on information needs.
Most important, executive response to this new method has been
excellent in terms of both the process and its outcome.

The actual CSF interviews are usually conducted in two or three

separate sessions. In the first, the executive’s goals are initially
recorded and the CSFs that underlie the goals are discussed. The
interrelationships of the CSFs and the goals are then talked about
for further clarification and for determination of which recorded
CSFs should be combined, eliminated, or restated. An initial cut
at measures is also taken in this first interview.

The second session is used to review the results of the first, after
the analyst has had a chance to think about them and to suggest
“sharpening up” some factors. In addition, measures and possible
reports are discussed in depth. Sometimes, a third session may be
necessary to obtain final agreement on the CSF measures-and-
reporting sequence.

Conceptual Antecedents

In an attempt to overcome some of the shortcomings of the four

major approaches discussed earlier, the CSF method focuses on
individual managers and on each manager’s current information
needs—both hard and soft. It provides for identifying managerial
information needs in a clear and meaningful way. Moreover, it
takes into consideration the fact that information needs will vary
from manager to manager and that these needs will change with
time for a particular manager.

The approach is based on the concept of the “success factors” first

discussed in the management literature in 1961 by D. Ronald
Daniel, now managing director of McKinsey & Company.7
Although a powerful concept in itself for other than information
systems’ thinking, it has been heavily obscured in the outpouring
of managerial wisdom in the past two decades. It has been
focused on and clarified to the best of my knowledge only in the
published work of Robert N. Anthony, John Dearden, and Richard
F. Vancil.8

Daniel, in introducing the concept, cited three examples of major

corporations whose information systems produced an extensive
amount of information. Very little of the information, however,
appeared useful in assisting managers to better perform their
jobs.

To draw attention to the type of information actually needed to

support managerial activities, Daniel turned to the concept of
critical success factors. He stated,

“…a company’s information system must be discriminating and

selective. It should focus on ‘success factors.’ In most industries
there are usually three to six factors that determine success; these
key jobs must be done exceedingly well for a company to be
successful. Here are some examples from several major
industries:

In the automobile industry, styling, an efficient dealer

organization, and tight control of manufacturing cost are
paramount.
 In food processing, new product development, good
distribution, and effective advertising are the major success
factors.

In life insurance, the development of agency management

personnel, effective control of clerical personnel, and
innovation in creating new types of policies spell the
difference.”9

Critical success factors thus are, for any business, 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.

As a result, the critical success factors are areas of activity that

should receive constant and careful attention from management.
The current status of performance in each area should be
continually measured, and that information should be made
available.

As Exhibit I notes, critical success factors support the attainment

of organizational goals. Goals represent the end points that an
organization hopes to reach. Critical success factors, however, are
the areas in which good performance is necessary to ensure
attainment of those goals.
Exhibit I How Attainment of Organizational Goals Is Supported by
CSFs

Daniel focused on those critical success factors that are relevant

for any company in a particular industry. Exhibit I updates
Daniel’s automobile industry CSFs and provides another set of
CSFs—from the supermarket industry and a nonprofit hospital.

As this exhibit shows, supermarkets have four industry-based

CSFs. These are having the right product mix available in each
local store, having it on the shelves, having it advertised
effectively to pull shoppers into the store, and having it priced
correctly—since profit margins are low in this industry.
Supermarkets must pay attention to many other things, but these
four areas are the underpinnings of successful operation.

Writing a decade later, Anthony and his colleagues picked up

Daniel’s seminal contribution and expanded it in their work on
the design of management control systems. They emphasized
three “musts” of any such system:
“The control system must be tailored to the specific industry in
which the company operates and to the specific strategies that it
has adopted; it must identify the ‘critical success factors’ that
should receive careful and continuous management attention if the
company is to be successful; and it must highlight performance with
respect to these key variables in reports to all levels of
management.”10

While continuing to recognize industry-based CSFs, Anthony et

al. thus went a step further. They placed additional emphasis on
the need to tailor management planning and control systems to
both a company’s particular strategic objectives and its particular
managers. That is, the control system must report on those
success factors that are perceived by the managers as appropriate
to a particular job in a particular company. In short, CSFs differ
from company to company and from manager to manager.

Prime Sources of CSFs

In the discussion so far, we have seen that CSFs are applicable to

any company operating in a particular industry. Yet Anthony et
al. emphasized that a management control system also must be
tailored to a particular company. This must suggest that there are
other sources of CSFs than the industry alone. And, indeed, there
are. The MIT team has isolated four prime sources of critical
success factors:

1. Structure of the particular industry.

As noted, each industry by its very nature has a set of critical
success factors that are determined by the characteristics of the
industry itself. Each company in the industry must pay attention
to these factors. For example, managers of supermarkets will
ignore at their peril the critical success factors that appear in
Exhibit I.
2. Competitive strategy, industry position, and
geographic location.
Each company in an industry is in an individual situation
determined by its history and current competitive strategy. For
smaller organizations within an industry dominated by one or
two large companies, the actions of the major companies will
often produce new and significant problems for the smaller
companies. The competitive strategy for the latter may mean
establishing a new market niche, getting out of a product line
completely, or merely redistributing resources among various
product lines.

Thus for small companies a competitor’s strategy is often a CSF.

For example, IBM’s competitive approach to the marketing of
small, inexpensive computers is, in itself, a CSF for all
minicomputer manufacturers.

Just as differences in industry position can dictate CSFs,

differences in geographic location and in strategies can lead to
differing CSFs from one company to another in an industry.

3. Environmental factors.
As the gross national product and the economy fluctuate, as
political factors change, and as the population waxes and wanes,
critical success factors can also change for various institutions. At
the beginning of 1973, virtually no chief executive in the United
States would have listed “energy supply availability” as a critical
success factor. Following the oil embargo, however, for a
considerable period of time this factor was monitored closely by
many executives—since adequate energy was problematical and
vital to organizational bottom-line performance.

4. Temporal factors.
Internal organizational considerations often lead to temporal
critical success factors. These are areas of activity that are
significant for the success of an organization for a particular
period of time because they are below the threshold of
acceptability at that time (although in general they are “in good
shape” and do not merit special attention). As an example, for any
organization the loss of a major group of executives in a plane
crash obviously would make the “rebuilding of the executive
group” a critical success factor for the organization for the period
of time until this was accomplished. Similarly, while inventory
control is rarely a CSF for the chief executive officer, a very
unusual situation (either far too much or far too little stock)
might, in fact, become a high-level CSF.

Like Organizations, Differing CSFs

Any organization’s situation will change from time to time, and

factors that are dealt with by executives as commonplace at one
time may become critical success factors at another time. The key
here is for executives to clearly define at any point in time exactly
those factors that are crucial to the success of their particular
organizations in the period for which they are planning.

One would expect, therefore, that organizations in the same

industry would exhibit different CSFs as a result of differences in
geographic location, strategies, and other factors. A study by
Gladys G. Mooradian of the critical success factors of three similar
medical group practices bears this out.11 The medical group
practices of the participating physicians were heterogeneous with
regard to many of these factors. Each group, however, was well
managed with a dynamic and successful administrator in charge.

Mooradian defined the CSFs through open-ended interviews with

the administrator of each group practice. She then asked the
managers to define their critical success factors and to rank them
from most important to least important. Finally, to verify the
factors selected, she obtained the opinions of others in the
organization.

Exhibit II shows the administrators’ key variables for the three

group practices, ranked in order as perceived by the managers of
each institution. It is interesting to note that several of the same
variables appear on each list. Several variables, however, are
unique to each institution. One can explain the difference in the
CSFs chosen by noting the stages of growth, location, and
strategies of each clinic:

Exhibit II Critical Success Factors for Three Medical Group

Practices

The first medical group is a mature clinic that has been in

existence for several years, has a sound organization structure,
and has an assured patient population. It is most heavily
concerned with government regulation and environmental
changes (such as rapidly increasing costs for malpractice
insurance), which are the only factors that might upset its
highly favorable status quo.
 The second group practice is located in a rural part of a
relatively poor state. It is dependent on federal funding and
also on its ability to offer a type of medical care not available
from private practitioners. Its number one CSF, therefore, is its
ability to develop a distinctive competitive image for the
delivery of comprehensive, quality care.

The third clinic is a rapidly growing, new group practice, which

was—at that point in time—heavily dependent for its near-term
success on its ability to “set up” an efficient operation and bring
on board the correct mix of staff to serve its rapidly growing
patient population.

In looking at these three lists, it is noticeable that the first four

factors on the mature clinic’s list also appear on the other two
lists. These, it can be suggested, are the all-encompassing
industry-based factors. The remaining considerations, which are
particular to one or the other of the practices but not to all, are
generated by differences in environmental situation, temporal
factors, geographic location, or strategic situation.

CSFs at General Manager Level

To this point, I have discussed CSFs strictly from the viewpoint of

the top executive of an organization. Indeed, that is the major
focus of the MIT research team’s current work. It is, however,
clear from studies now going on that CSFs, as might be expected,
can be useful at each level of general management (managers to
whom multiple functions report). There are significant benefits of
taking the necessary time to think through—and to record—the
critical success factors for each general manager in an
organization. Consider:
The process helps the manager to determine those factors on
which he or she should focus management attention. It also
helps to ensure that those significant factors will receive careful
and continuous management scrutiny.

The process forces the manager to develop good measures for

those factors and to seek reports on each of the measures.

The identification of CSFs allows a clear definition of the

amount of information that must be collected by the
organization and limits the costly collection of more data than
necessary.

The identification of CSFs moves an organization away from

the trap of building its reporting and information system
primarily around data that are “easy to collect.” Rather, it
focuses attention on those data that might otherwise not be
collected but are significant for the success of the particular
management level involved.

The process acknowledges that some factors are temporal and

that CSFs are manager specific. This suggests that the
information system should be in constant flux with new reports
being developed as needed to accommodate changes in the
organization’s strategy, environment, or organization structure.
Rather than changes in an information system being looked on
as an indication of “inadequate design,” they must be viewed as
an inevitable and productive part of information systems
development.

The CSF concept itself is useful for more than information

systems design. Current studies suggest several additional areas
 of assistance to the management process. For example, an area
that can be improved through the use of CSFs is the planning
process. CSFs can be arrayed hierarchically and used as an
important vehicle of communication for management, either as
an informal planning aid or as a part of the formal planning
process.

Let me stress that the CSF approach does not attempt to deal with
information needs for strategic planning. Data needs for this
management role are almost impossible to preplan. The CSF
method centers, rather, on information needs for management
control where data needed to monitor and improve existing areas
of business can be more readily defined.

Illustrative CSF Example

Let us now turn to an example of the use of this approach. The

president referred to at the start of this article is real. He is Larry
Gould, former president of Microwave Associates, a $60-million
sales organization serving several aspects of the microwave
communication industry.12 When he first looked carefully at the
“information” he was receiving, Gould found that some 97
“reports” crossed his desk in a typical month. Almost all were
originally designed by someone else who felt that he “should be
receiving this vital data.”

However, the reports provided him with virtually nothing he

could use. A few gave him some “score-keeping data,” such as the
monthly profit statement. One or two others provided him with
bits and pieces of data he wanted, but even these left major things
unsaid. The data were either unrelated to other key facts or
related in a way that was not meaningful to him.
The concept of critical success factors sounded to him like one
way out of this dilemma. He therefore, with the MIT research
analyst, invested two two-and-a-half-hour periods in working
through his goals, critical success factors, and measures. First, he
noted the objectives of the company and the current year’s goals.
Then, he went to work to assess what factors were critical to
accomplish these objectives.

Factors & Measures

The seven critical success factors Gould developed are shown in

Exhibit III, along with from one to three prime measures for each
factor (although he also developed some additional measures).
The reader should note that this specific set of CSFs emerged only
after intensive analysis and discussion. At the end of the first
meeting, nine factors were on Gould’s list. By the end of the
second meeting, two had been combined into one, and one had
been dropped as not being significant enough to command
ongoing close attention.
Exhibit III CSFs Developed to Meet Microwave Associates’
Organizational Goals

Most of the second interview session centered on a discussion of

the measures for each factor. Where hard data were perceived to
be available, the discussion was short. Where softer measures
were necessary, however, lengthy discussions of the type of
information needed and the difficulty and/or cost of acquiring it
often ensued. Yet convergence on the required “evidence” about
the state of each CSF occurred with responsible speed and clarity
in each case. Some discussion concerning each CSF and its
measures is perhaps worthwhile. Consider:

1. Image in financial markets.

Microwave Associates is growing and making acquisitions as it
seeks to gain a growth segment of the electronics industry. Much
of the company’s growth is coming from acquisitions. Clearly, the
better the image on Wall Street, the higher the price-earnings
ratio. The measure of success here is clear: the company’s
multiple vis-à-vis others in its industry segment.

2. Technological reputation with customers.

Although Microwave Associates has some standard products, the
majority of its work is done on a tailor-made, one-shot basis. A
significant number of these jobs are state-of-the-art work that
leads to follow-on production contracts. To a very large extent,
buying decisions in the field are made on the customer’s
confidence in Microwave’s technical ability. Sample measures
were developed for this CSF. The two measures shown in this
exhibit are at the opposite extremes of hard and soft data. The
ratio of total orders to total bids can be easily measured. While
this hard measure is indicative of customers’ perception of the
company’s technical ability, it also has other factors such as “sales
aggressiveness” in it.
The most direct measure possible is person-to-person interviews.
Although this measure is soft, the company decided to initiate a
measuring process through field interviews by its top executives.
(Other measures of this CSF included field interviews by sales
personnel, assessment of the rise or fall of the percentage of each
major customer’s business being obtained, and so forth.)

3. Market success.
On the surface, this CSF is straightforward. But, as shown by the
measures, it includes attention to current market success, as well
as the company’s progress with regard to significant new market
opportunities (e.g., the relative rate of growth of each market
segment, opportunities provided by new technology, and relative
—not just absolute—competitive performance).

4. Risk recognition in major bids and contracts.

Because many of the jobs accepted are near or at the state of the
art, controlling the company’s risk profile is critical. As noted in
the exhibit, a variety of factors contribute to risk. The
measurement process designed involves a computer algorithm to
consider these factors and to highlight particularly risky
situations.

5. Profit margin on jobs.

When profit center managers have low backlogs, they are often
tempted to bid low to obtain additional business. While this
procedure is not necessarily bad, it is critical for corporate
management to understand the expected profit profile and, at
times, to counter lower-level tendencies to accept low-profit
business.

6. Company morale.
Because of its high-technology strategy, the company is clearly
heavily dependent on the esprit of its key scientists and
engineers. It must also be able to attract and keep a skilled work
force. Thus morale is a critical success factor. Measures of morale
range from hard data (e.g., turnover, absenteeism, and tardiness)
to informal feedback (e.g., management discussion sessions with
employees).

7. Performance to budget on major jobs.

This final CSF reflects the need to control major projects and to
ensure that they are completed on time and near budget. Adverse
results with regard to timeliness can severely affect CSF #2
(technological perception), and significant cost overruns can
similarly affect CSF #1 (financial market perception). In general,
no single job is crucially important. Rather, it is the profile of
performance across major jobs that is significant.

Reports & Subsystems

Given the foregoing CSFs and measures, the next step was to
design a set of report formats. This step required examination of
both existing information systems and data sources.

For the soft, informal, subjective measures, this process was

straightforward. Forms to record facts and impressions were
designed so as to scale (where possible) perception and highlight
significant soft factors.

For some of the hard computer-based measures, existing

information systems and data bases supplied most of the
necessary data. However, in every case—even where all data were
available—existing report forms were inadequate and new reports
had to be designed.
Most important, however, two completely new information
subsystems were needed to support the president’s CSFs. These
were a “bidding” system and a vastly different automated “project
budgeting and control” system. (Significantly, each of these
subsystems had been requested many times by lower-level
personnel, who needed them for more detailed planning and
control of job bidding and monitoring at the product-line
manager and manufacturing levels.) Subsequently, these
subsystems were placed at the top of the priority list for data
processing.

In summarizing the Microwave case, it is clear that the exercise of

discovering information needs through examination of the chief
executive’s critical success factors had a number of specific
benefits. All of the seven general advantages of the CSF method
for information systems development previously noted applied to
some extent. However, the importance of each of these varies
from organization to organization. At Microwave, the most
striking advantages were:

The conscious listing (or bringing to the surface) of the most

significant areas on which attention needed to be focused. The
process of making these areas explicit provided insights not
only into information needs, but also into several other aspects
of the company’s managerial systems.

The design of a useful set of reports to provide the information

needed for monitoring ongoing operations at the executive
level. (There clearly were other data needed—i.e., for
developing strategy, dealing with special situations, and so on.)
The CSF route, however, focused on the data needed for the
ongoing “management control” process, and this need was
significant at Microwave.
 The development of priorities for information systems
development. It was clear that information needed for control
purposes by the chief executive should have some priority. (It
also highlighted priorities for other management levels.)

The provision of a means of hierarchical communication among

executives as to what the critical factors were for the success of
the company. (Too often, only goals provide a major
communication link to enhance shared understanding of the
company and its environment among management levels.) This
hierarchical approach provided another—and we believe more
pragmatic and action-oriented—means of communication. At
Microwave, there is a current project aimed at developing and
sharing CSFs at the top four management levels.

Other Case Examples

The critical success factors developed in four other cases provide

useful additional background for drawing some generalizations
about the method and executive information needs. These CSFs
are arrayed in Exhibit IV.

Exhibit IV CSFs in Four Cases

Major oil company.
The chief executive of this centralized organization responded
quickly and unhesitatingly concerning his critical success factors.
His goal structure was oriented toward such traditional measures
as increasing return on investment, increasing earnings per share,
and so forth. Yet he felt there were two major keys to profitability
in the future. One was to improve relationships with society as a
whole and with the federal government in particular. The other
was the urgent need to provide a broader base of earnings assets
in petroleum-shy future decades.

As a result of this view of the world, the CEO had initiated major
programs to develop new ventures and to decentralize the
organization. To facilitate the acquisition process, emphasis was
placed on cash flow (liquidity) as opposed to reported earnings. In
addition, prime attention was given to understanding and
improving external relationships.

All of these efforts are reflected in the company’s critical success

factors shown in Exhibit IV. Progress in each of these areas is
monitored weekly. CSFs #1, #3, and #4 are reported on with regard
to both actions taken and the appropriate executive’s subjective
assessment of results attained. Liquidity measures are provided
by computer output. New venture success is now assessed by a
combination of hard and soft measures.

Store furnishings manufacturer.

This midwestern company has three major product lines. The
largest of these is a well-accepted but relatively stable traditional
line on which the company’s reputation was made (product line
A). In addition, there are two relatively new but fast-growing lines
(B and C). The president’s preexisting information system was a
combination of monthly financial accounting reports and several
sales analysis reports.
The president’s critical success factors directly reflected the
changing fortunes of the product lines. There was a need to
concentrate on immediate foreign penetration (to build market
share) in the two “hot” lines. At the same time, the president saw
the need to reassess the now barely growing line on which the
company was built three decades ago.

Equally significant, whereas direct selling had been the only

feasible mode for the traditional line, the new lines appeared to
respond heavily to trade advertising to generate both leads and, in
some cases, direct-from-the-factory sales. Because margins are
relatively tight in this competitive industry, one factor critical to
the company’s success with this new product structure, therefore,
was a redesign of the sales compensation structure to reflect the
evidently diminished effort needed to make sales in the new lines.

A similar need for cost-consciousness also dictated attention to

the CSFs of production scheduling efficiency and productivity
improvements through the increasing mechanization of
production facilities. Finally, strengthening the management
team to take advantage of the opportunities presented by the new
product lines was felt to be critical by this president.

The analysis of CSFs in this case indicated a need for two major
changes in formal information flow to the president.
Subsequently, a far more meaningful production reporting
system was developed (to support CSF #4), and a vastly different
sales reporting system emphasizing CSFs #2 and #3 was
established.

Government hospital.
The CSFs for the director of a government hospital reflect her
belief in the need for her organization to radically restructure
itself to adapt to a future health care environment perceived as
vastly different. She believes that her hospital and its sister
government agency hospitals must provide specialized, cost-
conscious, comprehensive health care for a carefully defined
patient population. Moreover, this care will have to be integrated
with that provided by other government hospitals and private
hospitals within the region of the country in which the hospital
exists.

The director’s critical success factors are thus, as shown in Exhibit

IV, concerned primarily with building external links and
managing cooperation and resource sharing within the set of
eight government agency hospitals in her region. The director is
also concerned with the development of adequate data systems
and methods to manage effective and efficient use of scarce
medical resources.

The organization currently has only minimal management

information—drawn in bits and pieces from what is essentially a
financial accounting system designed primarily to assure the
safeguarding and legal use of government funds. The director’s
desire to get involved in a CSF-oriented investigation of
management information needs grew from her despair of being
able to manage in the future environment with existing
information.

The MIT research team is currently conducting a study involving

CSF-based interviews with the top three levels of key managers
and department heads in the hospital. Their information needs
are heavily oriented toward external data and vastly improved
cost accounting.

Major electronics division.

This decentralized electronics company places return-on-
investment responsibility on the top executive of a major
division. His first two CSFs indicate his view of the need for an
increasing emphasis on marketing in this traditionally
engineering-oriented organization. As Exhibit IV shows, CSFs #3,
#6, and #7 are oriented toward the need for more cost-effective
production facilities.

Equally important is his attention to new product development

(CSF #5) in a fast-moving marketplace. In conjunction with this,
CSF #4 reflects his view that a healthy portfolio of government
R&D contracts will allow a much larger amount of research to be
performed, thereby increasing the expected yield of new ideas
and new products. Thus he spends a significant share of his time
involved in the process of assuring that government research
contracts are being avidly pursued (although they add relatively
little to his near-term bottom line).

Efforts to improve the information provided to this division

manager have revolved primarily around making more explicit
the methods of measuring progress in each of these CSF areas.
More quantitative indexes have proved to be useful in some areas.
In others, however, they have not improved what must be
essentially “subjective feel” judgments.

Supportive CSF Information

Previously, I discussed the advantages (both general and specific

to one case) of using the CSF process for information systems
design. Additionally, some important attributes of the types of
information necessary to support the top executive’s CSFs can be
drawn from the five examples. Consider:

Perhaps most obvious, but worth stating, is the fact that

traditional financial accounting systems rarely provide the type
of data necessary to monitor critical success factors. Financial
accounting systems are aimed at providing historical
information to outsiders (e.g., stockholders and others). Only
very occasionally is there much overlap between financial
accounting data and the type of data needed to track CSFs. In
only one of the companies studied was financial accounting
data the major source of information for a CSF, and there for
only one factor. However, the need for improved cost
accounting data to report on CSFs was often evident.

Many critical success factors require information external to

the organization—information concerned with market
structure, customer perceptions, or future trends.
Approximately a third of the 33 CSFs in the five examples fit
this description. The data to support these CSFs are not only
unavailable from the financial accounting system but, in the
majority of cases, are also unavailable as a byproduct of the
organization’s other usual day-to-day transaction-processing
systems (e.g., order entry, billing, and payroll). The information
system must therefore be designed, and the external
information consciously collected from the proper sources. It
will not flow naturally to the CEO.

Many other CSFs require coordinating pieces of information

from multiple data sets that are widely dispersed throughout
the company. This is perhaps best noted in the Microwave case,
but it is a recurrent feature in all companies. This situation
argues heavily for computer implementation of data base
systems that facilitate accessing multiple data sets.

A small but significant part of the information concerning the

status of CSFs requires subjective assessment on the part of
others in the organization, rather than being neatly
quantifiable. About a fifth of the status measures at the
companies studied require subjective assessment. This is
significant managerial data, and top executives are used to
these soft but useful status measures.
(However, it should be noted, many more of the measures at first
devised were subjective. It takes considerable work to find
objective measures, but in more instances than originally
perceived, suitable objective measures are available and can be
developed.)

Critical success factors can be categorized as either the

“monitoring” or the “building” type. The more competitive
pressure for current performance that the chief executive feels,
the more his or her CSFs tend toward monitoring current
results. The more that the organization is insulated from
economic pressures (as the government hospital was) or
decentralized (as the oil company was becoming), the more
CSFs become oriented toward building for the future through
major change programs aimed at adapting the organization to a
perceived new environment.

In all cases that I have seen thus far, however, there is a mixture of
the two types. Every chief executive appears to have, at some
level, both monitoring and building (or adapting) responsibilities.
Thus a great deal of the information needed will not continue to
be desired year after year. Rather, it is relatively short-term
“project status” information that is needed only during the
project’s lifetime. Periodic review of CSFs will therefore bring to
light the need to discontinue some reports and initiate others.

1. Interview with Anthony J.F. O’Reilly, president of H.J. Heinz

Co., M.I.S. Quarterly, March 1977, p. 7.

2. Interview with William Dougherty, president of North Carolina

Bank Corporation, M.I.S. Quarterly, March 1977, p. 1.

3. See Henry Mintzberg, “Planning on the Left Side and Managing

on the Right,” HBR July–August 1976, p. 54.
4. “Corporate ‘War Rooms’ Plug into the Computer,” Business
Week, August 23, 1976, p. 65.

5. Daniel T. Carroll, “How the President Satisfies His Information

Systems Requirements,” published in Society for Management
Information Systems Proceedings, 1976.

6. Management control is the process of (a) long-range planning

of the activities of the organization, (b) short-term planning
(usually one year), and (c) monitoring activities to ensure the
accomplishment of the desired results. The management control
process thus follows the development of major strategic
directions that are set in the strategic planning process. This
definition roughly follows the framework of Robert N. Anthony,
Planning and Control: A Framework for Analysis (Boston: Division
of Research, Harvard Business School, 1965).

7. See D. Ronald Daniel, “Management Information Crisis,” HBR

September–October 1961, p. 111.

8. See Robert N. Anthony, John Dearden, and Richard F. Vancil,

“Key Economic Variables,” in Management Controls Systems
(Homewood, Ill.: Irwin, 1972), p. 147.

9. Daniel, “Management Information Crisis,” p. 116.

10. Anthony, Dearden, and Vancil, “Key Economic Variables,” p.

148.

11. Gladys G. Mooradian, “The Key Variables in Planning and

Control in Medical Group Practices,” unpublished master’s thesis
(Cambridge, Mass.: MIT, Sloan School of Management, 1976).

12. Since this was originally written, Gould has assumed the
position of chairman of the board at M/A-COM, Inc., a holding
company of which Microwave Associates is a subsidiary.
A version of this article appeared in the March 1979 issue of Harvard Business
Review.

JR
John F. Rockart is the director of the Center for
Information Systems Research at the
Massachusetts Institute of Technology’s Sloan
School of Management in Cambridge,
Massachusetts.