What is KPI & KRA? How to Set Up the Right KPI & KRA in Business
As a part of the business world, it is possible to come across several abbreviations daily. Many of them are easy to understand and learn about, but some might be confusing for some. However, if you are a part of the hiring world dealing with appraisals and roles, then KPI and KRA are the most common abbreviations.
The business’s success measurement helps ensure the company’s journey and its key factors. The motive of measuring is to understand where you are, your destination, how you will reach there, and the key factors allowing you to reach there. Businesses can stick to their primary goals without wasting resources or time using the performance and growth measurement tools.
However, let us deep dive into what KPI helps in measuring the system’s functioning, whereas KRA is the measurement of specific actions and their results in the system. Both KPI and KRA aim to measure the performance of the system and company.
KPI is the Key Performance Indicator, and KRA is the Key Results (Responsibility) Area that helps measure a business’s success and progress. Let’s deep dive into KPI and KRA to understand their effect on a business’s success.
What are Key Performance Indicators?
KPI offers measurable and quantifiable values helping to evaluate employees’ and businesses’ success. However, the measurement depends on business objectives that vary from organization and company domain. Companies offer a set of tasks to employees to measure KPIs that help them analyze their performance and contribution to overall organizational goals.
KPI monitors the performance of businesses to ensure whether a target is met or not during a specific period. It analyzes and measures how employees respond to tasks, their performance, working on major events, and payment transactions.
Types of Key Performance Indicators
Organizations cause the success or failure with KPI critical metrics such as:
- Functional – The critical factor is the performance stream of each revenue, its period, and revenue sources. It calculates the revenue per unit of product, revenue per client, and other factors.
- Strategic – It measures the business operations and day-to-day business activities based on the funds. The aim is to ensure enough funds to run the process.
- Profitability – KPI helps track the expenses and income of the company to understand the loss and profit of businesses. It analyzes the business expenses and eliminates unnecessary costs if any.
What are the primary KPI Strategies?
KPI depends on several strategies that help in delivering the expected results, such as:
- Creating KPI-driven culture – If employees are not aware of KPI, it is not of much help to the business. Hence, it is essential to educate employees on what it is, how to use it, best-in-class platforms, and assigning relevant KPIs.
- Selecting the suitable KPIs – One needs to create a balance between the indicators to obtain the right results. The aim is to predict the data to improve outcomes and understand the results over time.
- Iterate – One needs to keep the KPI current by revising customer, market, and business changes. It is essential to meet the review regulations, publish the changes, and make necessary adjustments.
How to develop the right KPI?
Data is the primary factor in measuring KPI, allowing one to reach their business goals. The focus is on the effective practices and aspects such as:
- Strategic Goals – KPI works on specific business functions such as marketing, HR, sales, etc., to maintain overall business goals.
- Iterate – Customer and business changes to review the KPI and remove the irrelevant aspects to evaluate business performance.
- SMART KPIs – SMART formula helps obtain possible, specific, time-bound, realistic, and measurable results.
- Define KPI – It is essential to know the significant factors that can help you analyze performance to obtain valuable and relevant results.
- Avoid overload – Organizations must access interactive data visualization and data sets to gain accurate performance results. However, one needs to focus on impactful measurements but overloading it can mess up the outcome.
To analyze the KPI for employees, one needs to analyze business goals such as communication, teamwork, job functions, and customer services. It helps set new benchmarks in performance, opinions, and thoughts of employees, analyze how much employees are attentive to customers’ issues, etc.
What are Key Responsibility Areas?
KRA analyzes measurable and quantifiable responsibilities and tasks of employees depending on the company’s expectations, experience, and job profile. The KRA of employees is different even in the same organization based on their job roles and responsibilities. It includes the job role of HR Manager, recruiters, sales manager, marketing executives, etc.
KRA is created based on the goals that plan or evaluate the performance outcome during a specific period. It doesn’t have an essential purpose in mind compared to the KPI.
Parameters to Analyze KRA
When it comes to understanding KRA, one needs to consider several factors, including job responsibilities and descriptions. The practical approach help in gauging KRA results efficiently, such as:
Understanding Qualifications – It is vital to evaluate the business background, qualifications, internet, skillset, experience, etc. The aim is to understand the outline of the employee’s descriptions to benefit the organization.
Communicate Proactively – Employees must be aware of the critical responsibilities of their job role. It will help employees contribute to the organization’s productivity and connect with them.
How to use KRA and KPI to measure performance?
KRA measurement is not a difficult task and depends on a few key elements such as:
- Communicate the requirements – Employers need to communicate the requirements and responsibilities to the employees and team members in written format.
- Design a KRA that fits the job position – The responsibilities of a manager can’t include duties that a junior executive can manage. Hence, it is best to design a KRA that fits the position of the employees to accomplish the objective of businesses.
- Set realistic numbers – If an employee is responsible for maintaining 20 tasks per day, there will be some mess up. It is best to put actual numbers that one can keep and be productive to boost the company’s growth.
Whereas for KPI, one needs to list down the performance management metrics referring to business goals. It is essential to know the target objectives and communicate the requirements properly.
KPI & KRA FAQs:
1. What is a metric?
2. What are Qualitative and Quantitative KPIs?
3. What are internal and external KPIs?
4. Why determine employees’ responsibility in the workplace?
5. How can each job role fit the team?
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