Hi,
Check out the following example; I hope it will help you in understanding 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 upon the objectives of the company and sets a period-specific target. This target becomes the KRA of the CEO. Then it gets divided until it reaches the bottom-most rung. The KRA of each person is linked, and the fulfillment of KRAs will lead to the fulfillment of the objective 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 attain this by making 400 crores by selling PCs, 50 crores by investing in stocks, and 50 crores by improving the productive cycle.
Now, the KRA of the Chief Marketing Officer will be to sell PCs that will give the company 400 crore profit in 3 years. He will then set the KRAs for his subordinates in such a way that this target is achieved. The Chief Operating Officer has KRA of improving the productivity cycle and producing PCs by which 400 crores can be achieved. The Chief Finance Officer will have to look after 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.
Chief People Officer (HR) – Generally KRAs are difficult or not done for HR since they are essentially a support function, but in some cases, it is done.
CPO, as his KRA, will have the following responsibilities: provide for manpower and maintain harmonious industrial relationships so that there is no disruption in production or marketing, provide training to improve skills for better productivity, and frame a compensation benefit structure to retain efficient employees.
The Chiefs then divide the KRAs further to their subordinates. For example, the KRA of the Manager (Training) under CPO will be to provide adequate training to the workforce. If the Manager (Training) fails, it will be reflected in the KRAs of CPO, COO, and CEO. Similarly, if the KRA of the Assistant Manager (Training) is to locate the training institutes that can impart quality training and they are unable to achieve it, it will reflect in the KRAs of Manager (Training), CPO, COO, and CEO.
Suppose the Deputy Manager (Training) is supposed to conduct the Training Programs, which could not be carried out since the funds for training that were supposed to be arranged by the Deputy Manager (Finance) could not be arranged. This failure will reflect in the KRAs of Deputy Manager (Finance), Manager (Finance), CFO, Deputy Manager (Training), Manager (Training), and CPO, COO, and CEO.
Regards,
Shree