Every organization has a vision, mission, and strategy. They have two goals: long-term goals, which may span 5 to 10 years, and short-term goals. These goals align with the vision, mission, and strategy of a company. They are segregated across various departments. Therefore, the company's goals are divided into department-specific goals, which then cascade down to individual goals. This way, if you backtrack, each individual works towards the department goal, which in turn helps the organization achieve its overall vision, mission, and strategy.
Company Vision
Let's say the company's vision is to:
1. Become global leaders in a specific area
2. Innovate
3. Enhance stakeholder value
4. Achieve customer satisfaction
Mission
The mission here would be to:
1. Bring innovation through new product technology
2. Minimize costs to increase customer satisfaction
3. Reduce defects
4. Ensure on-time delivery
5. Expand with new business units and increase operations, etc.
Strategy
The strategy would be:
1. HR:
- Recruitment: To bring in knowledge workers and minimize attrition
- Training: To enhance employee knowledge by understanding individual and organizational training needs
- Performance Appraisal: Improve performance by finding ways for individual improvements
2. Operations:
- Increase production
- Reduce defects
- Ensure on-time delivery
- Manage the supply chain
3. Production:
- Increase labor productivity
- Implement quality control
- Manage the workforce, etc.
4. Finance:
- Conduct financial budgeting
- Increase stakeholder value
- Control costs, etc.
Strategic Goals Using KRA, KPA, and KPI
These strategic goals are implemented using KRA, KPA, and KPI:
- KRA: Key Result Areas
- KPA: Key Performance Areas
- KPI: Key Performance Indicators
These KRAs, KPAs, and KPIs are applicable organization-wide and then tailored to the department and individual levels. There can be 3-5 KRAs, and for each KRA, there can be 2-3 KPAs. KPIs are measures/indicators for the KPAs.
For example, for an HR department, the KRA can be:
1. Recruitment/Selection
2. Workforce Planning
3. Diversity Management
4. Performance Management
5. Reward Management
6. Workplace Management
7. Industrial Relations
8. Safety and Health Workplace
9. Building Capabilities and Organizational Learning
10. Effective HR Management Systems, etc.
Example of KRA and KPI
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
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
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]
Balanced Scorecard
The Balanced Scorecard provides organizations with the ability to clarify vision and strategy and translate them into action. By focusing on future potential success, it becomes a dynamic management system that reinforces, implements, and drives corporate strategy forward. It provides feedback on both internal business processes and external outcomes to continuously improve strategic performance and results.
The Balanced Scorecard looks at an organization from four different perspectives:
1. Financial perspective - Return on investment, shareholder value
2. Customer perspective - Customer satisfaction, corporate image
3. Process perspective - Processes in which we should excel to succeed
4. Innovation perspective - How we will learn from past lessons and sustain our ability to change and improve
The bottom level is the financial perspective, and the top-most is learning and growth (Innovation). Each perspective is given a measure. Not more than 22% of your measures should be financial, about 23-25% should be customer-oriented, approximately 28-30% should cover the process perspective, and 23-25% should cover innovation. We also mention our objectives, measures, targets, and initiatives.
As Sai mentioned, 360-degree feedback is also another tool for performance appraisal. A 360 evaluation focuses on subjective areas such as teamwork, character, and leadership effectiveness and does not focus much on job requirements. Since it is more behaviorally oriented, we don't 100% rely only on 360-degree feedback.
I hope I have answered your question to the best of my knowledge.
Regards,
Kiruthika