Understanding KRA, KPA, and KPI
Key Result Areas (KRA)
“Key Result Areas” or KRAs refer to general areas of outcomes or outputs for which the department's role is responsible. A typical role targets three to five KRAs.
Value of KRAs
Identifying KRAs helps individuals:
• Clarify their roles
• Align their roles to the organization's business or strategic plan
• Focus on results rather than activities
• Communicate their role's purposes to others
• Set goals and objectives
• Prioritize their activities, and therefore improve their time/work management
• Make value-added decisions
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 organization).
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Key Performance Areas (KPA)
When the key results area is large, it is broken into manageable areas for managing/evaluation. These sub-sections of KRAs are called KPAs.
Example:
KRA = Recruitment/Selection
KPA 1 = Recruitment
KPA 2 = Selection
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Key Performance Indicators (KPI)
To manage each KRA/KPAs, a set of KPIs are set. KRA and hence KPI is attributed to the department/individual which can have an effect on the business results and is self-measured where applicable.
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Core KRAs of HR Department
- Recruitment/Selection
- Workforce Planning
- Diversity Management
- Performance Management
- Reward Management
- Workplace Management
- Industrial Relations
- Safety and Health Workplace
- Building Capabilities and Organization Learning
- Effective HR Management Systems, Support, and Monitoring
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KRAs [Key Result Areas] are managed by
- KPAs [Key Performance Areas]
- KPIs [Key Performance Indicators]
Key Performance Areas
These are the areas within the HR Department, where an individual or group is logically responsible/accountable for the results. To manage each KRA/KPAs, a set of KPIs are set. KRA and hence KPI is attributed to the department which can have an effect on the business results and is self-measured where applicable.
The Importance and Weightage of These Elements
KRAs/KPAs/KPIs are guided by the
* Vision Statement
* Mission Statement
* Corporate Objectives
* Corporate Strategy
* Corporate Business Units/Departmental Plans/Strategy
For the budget period, which is usually 12 months.
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The Evaluation of HR Department
The evaluation of the HR Department can have four levels of perspective.
1. Strategic Perspective — The results of strategic initiatives managed by the HR group. The strategic perspective focuses on the measurement of the effectiveness of major strategy-linked people goals. For instance, the business strategy called for major organizational change programs as the business faced major restructuring and multiple mergers and acquisitions. In this context, the organization's change management capability will be a key factor in the success or failure of its execution. Therefore, measuring the ability of the business to manage change effectively is the core measure of the effectiveness of HR and will be a key strategic contribution to the future success of the business.
Examples:
- Change management capability of the organization
- Organization compensation and benefit package with respect to market rate
- Organization culture survey
- HR Budget/Actual
- HR Costs Benchmark Externally
- HR annual resource plan
- Skills/competency level
2. Operational Perspective — The operational tasks at which HR must excel. This piece of the Balanced Scorecard provides answers to queries about the effectiveness and efficiency in running HR processes that are vital to the organization. Examples include measuring HR processes in terms of cost, quality, and cycle time such as time to fill vacancies.
Examples:
- Time taken to fill vacancies
- Cost per recruitment promotions
- Absenteeism by job category
- Accident costs
- Accident safety ratings
- Training cost per employee
- Training hours per employee
- Average employee tenure in the company
- Lost time due to injuries
- Number of recruiting advertising programs
- Number of employees put through training
- Turnover rate
- Attrition rate
3. Financial Perspective — This perspective tries to answer questions relating to the financial measures that demonstrate how people and the HR function add value to the organization. This might include arriving at the value of the human assets and total people expenses for the company.
Examples:
- Compensation and benefits per employee
- Sales per employee
- Profit per employee
- Cost of injuries
- HR expenses per employee
- Turnover cost
- Employee workers' compensation costs
4. Customer Perspective — This focuses on the effectiveness of HR from the internal customer viewpoint. Are the customers of HR satisfied with their service; are service level agreements met; do the customers think they can get better service elsewhere? Conducting an HR customer survey might typically arrive at this.
Examples:
- Employee perception of the HRM
- Employee perception of the company as an employer
- Customer/market perception of the company as an employer
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Example for Developing Your Organization
Suppose the corporate objective for the organization is to improve the company's competitive positioning and productivity by 10%.
HR Department Objective for the Period is to improve productivity by 10%.
This means KRAs, KPAs, and KPI [shown in brackets] for HR.
KRA 1 - Recruitment/Selection
KPA 1 - Recruitment
[KPI = Average time taken for recruitment per employee = 2 months]
KPA 2 - Selection
[KPI = Average cost per new employee = $10,000]
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KRA 2 - Performance Management
KPA 1 - Performance Appraisals
[KPI = All staff to be appraised at least once annually]
KPA 2 - Succession Planning
[KPI = 8 potential staff to be identified and talent managed]
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KRA 3 - Reward Management
KPA 1 - Market Oriented Salary Structuring
[KPI = Total compensation to sales 12%]
KPA 2 - Benefits Planning
[KPI = 6% of total salary bill]
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KRA 4 - Building Capabilities and Organization Learning
KPA 1 - Training
[KPI = Average training hours per employee annually = 24 hours]
KPA 2 - Management Development
[KPI = Average MD cost per employee annually = 16,000 dollars]
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KRA 5 - Workplace Management and Relations
KPA 1 - Job Evaluations
[KPI = 600 lower staff, below grade 4, to be evaluated]
KPA 2 - Employee Communications
[KPI = 4 newsletters on intranet, one per quarter]
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KRA 6 - Workforce Planning/Diversity
KPA 1 - Absenteeism
[KPI = Absent rate at 5%]
KPA 2 - Turnover
[KPI = Turnover rate at 7%]
KPA 3 - Diversity
[KPI = 3 females to be inducted into management cadre]
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KRA 7 - Safety and Health Workplace
KPA 1 - Safety
[KPI = Accident safety ratings, benchmark with industry]
KPA 2 - Health
[KPI = Actual health expenditure vs budget]
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KRA 8 - Effective HR Management Systems, Support, and Monitoring
KPA 1 - HRIS
[KPI = Finalize the software. $0.5 million capital budget]
Regards,
Leo Lingham