Key Resultant Area & Key Performance Indicator (KRA & KPI)

Knowing how the different areas of your business are performing can help you to assess where your business is strong, where it is weaker and factors you can change for the better. This should help you to manage your performance proactively and efficiently. The Areas on which improvements sought for, is called Key resultant Areas (KRA) and the parameters on which such improvement expected for, is called Key performance indicator (KPI). KRAs refer to general areas of outcomes or outputs for which the department's role is responsible. A typical role target three to five KRA. Key Performance Indicators allow business owners and managers to identify and focus on company issues before they are noticed in the bottom line.

In context of Growth paradigm, there are 3 stages that needs to be followed

• STAGE 1: Define Corporate Objectives & Mission Statement
• STAGE 2: Planning Hierarchy, Job Description & Defining KPIs
• STAGE 3: Collecting accurate reports & analyzing KPA, KRA, KPIs

Importance of KRAs/ KPIs

Identifying KRAs helps individuals:

• Clarify their roles
• Set goals and objectives
• Make value-added decisions
• Focus on results rather than activities
• Communicate their role’s purposes to others
• Align their roles to the organisation’s business or strategic plan
• Prioritize their activities, and therefore improve their time/work management

Description of KRAs

Key result areas (KRAs) capture about 80% of the department's work role. The remainder of the role is usually devoted to areas of shared responsibility (e.g., helping team members, participating in activities for the good of the organisation). KRA and hence KPI is attributed to the department/ Individual which can have effect on the business results and is self-measured wherever applicable.

Development of KRA & KPI

The process to develop KRA & KPI system in an organisation may be understood as under.

We start from Corporate Objectives & Mission Statement; and we develop a plan to achieve these objectives with the help of defined organisational hierarchy. This hierarchy is communicated to the team in the form of organogram. This hierarchy is generally called organisational structure. Further according to this organogram chart every position is described with its Job Description. KRA is developed from Job Description; when the key results area is large, it is broken into manageable areas for managing/ evaluation; these sub-sections of KRAs are called KPA. KPI for each KRA/KPA comes from Detailed Plan document prepared to achieve corporate objectives.

Non-Financial KPIs

KPIs need not to be necessarily financial one. A business has to make some non-financial targets as well. Some examples of non-financial targets in marketing area may be;

1. Customers – e.g., how many you have, how often they use you and how many customers you have lost or gained?

2. Customer service – e.g., waiting times for assistance, complaints, or reasons customers have complained

3. Market share – e.g., whether your share of the market increased or decreased against competitors

Multi-Discipline Growth

Growth cannot be on a single dimension. Business should grow in balanced manner and likewise in all departments of entire business architecture. Simply, if any one department of organisation is not performing or unable to withstand on the same efficiency level as all other departments of business then growth objectives cannot be achieved. If marketing is performing well and production is unable to produce at that level then efforts of marketing may go in vain. Further, say if production is unable to produce because of labour shortage then it is problem with HR department and if it is due to late material supply or due to machine break-down then it is problem with purchase department or maintenance department respectively.

Wherever be the problem lies, actually its business & growth of business, which suffers. Hence, we must take care vigilantly, that efforts of one arm in business should not go in vain because of inefficiency of another arm. In above example it is not only the cost of marketing department that went to wastes but also the marketing team loses its faith in the operations of company. This loss of faith further demotivates them by putting the highest level of efforts.