What IS "KRA" In Performance Management System

Hi,

Check out the following example; I hope it will help you understand KRAs.

KRA stands for Key Result Area. Key Result Areas are a set of activities derived from short-term objectives. KRAs refer to general areas of outcomes or outputs for which the department's role is responsible.

How KRA works:
First, the Board of Directors (BOD) decides on the company's objectives and sets a specific target period. This target becomes the KRA of the CEO. Then it gets divided until it reaches the lowest level. The KRA of each person is linked, and the fulfillment of KRAs will lead to achieving the objectives set by the BOD. Hence, if one person fails, it will hamper the attainment of the desired result.

Example:
Company Name: XYZ
Business of the Company: sells PCs
Suppose the objective decided by the Board is to make a profit of 500 crores in 3 years. The KRA of the CEO is to attain a 500 crore profit in 3 years. The CEO decides to achieve this by making 400 crores by selling PCs, 50 crores by investing in stocks, and 50 crores by improving the production cycle. Now, the KRA of the Chief Marketing Officer will be to sell PCs that will generate a 400 crore profit in 3 years. He will then set the KRAs for his subordinates in a way that this target is achieved. The Chief Operating Officer has the KRA of improving the productivity cycle and producing PCs to achieve 400 crores. The Chief Finance Officer will have to oversee investing in stocks and providing finance for the purchase of raw materials, machinery, and others so that both Operations and Marketing can achieve their KRAs. The Chief People Officer (HR) generally does not have KRAs since they are a support function, but in some cases, it is done. The CPO, as his KRA, will have to provide manpower and maintain harmonious industrial relationships to ensure no disruptions in production or marketing. He will also need to provide training to improve skills for better productivity and establish a compensation and benefits structure to retain efficient employees. The Chiefs then further divide the KRAs to their subordinates. For example, the KRA of the Manager (Training) under CPO will be to provide adequate training to the workforce. Therefore, if the Manager (Training) fails, it will be reflected in the KRAs of the CPO, COO, and CEO. Similarly, if the KRA of the Assistant Manager (Training) is to find training institutes that can provide quality training and he fails, it will reflect in the KRAs of the Manager (Training), CPO, COO, and CEO. For instance, if the Deputy Manager (Training) is supposed to conduct training programs, which could not be carried out due to the lack of funds arranged by the Deputy Manager (Finance), this failure will reflect in the KRAs of the Deputy Manager (Finance), Manager (Finance), CFO, Deputy Manager (Training), Manager (Training), CPO, COO, and CEO.

Your understanding of Key Result Areas (KRAs) is quite accurate. KRAs are indeed critical in aligning individual responsibilities with the overall company objectives. Here are some practical steps to ensure effective implementation of KRAs:

1. 🗟 Establish clear and specific objectives: The Board of Directors needs to set clear, specific, and measurable objectives. These objectives should align with the company's vision and mission.

2. 🖊 Define KRAs for each role: Starting from the CEO down to the lowest level, each role should have defined KRAs. These KRAs should be a mix of quantitative and qualitative targets, directly linked to the overall company objectives.

3. 🈵 Document the KRAs: Ensure that the KRAs are documented and communicated to each individual. This will ensure everyone is aware of their responsibilities and what they are expected to achieve.

4. 🁁 Set timelines: Each KRA should have a clear timeline defining when the result should be achieved. This helps in tracking progress and identifying any deviations in a timely manner.

5. 🉚 Review and update: KRAs are not set in stone. They should be reviewed periodically and updated based on changes in the business environment, company objectives, or role requirements.

6. 🤵 Foster collaboration: Encourage teamwork and collaboration. If one person's KRA is not achieved, it can impact the overall objectives. So, it's important that everyone works together to achieve their KRAs.

7. 🔢 Use KPIs: Key Performance Indicators (KPIs) can be used to measure the success of each KRA. These KPIs should be realistic and achievable.

8. 🉂 Reward and recognize: Recognize and reward those who consistently meet or exceed their KRAs. This will motivate others to do the same.

Remember, the purpose of KRAs is to ensure everyone is working towards achieving the company's objectives. It's a tool to guide employees in the right direction and help them understand how their work contributes to the company's success. 🤠

In the case of HR, their KRAs could include areas like employee retention, satisfaction levels, training effectiveness, etc. While they are a support function, their role is critical in ensuring a motivated and well-trained workforce, which indirectly contributes to the company's success.