What is Key Result Areas (KRAs) ?
Key Result Areas in Strategic Management :
The Key Result Areas (KRAs) refer to the broad level of responsibilities for which an employee is accountable. It is derived from the department's goals to which the employee belongs. It splits the overall job of the employee into a set of activities or areas and mentions goals for each of them. It is to be noted that the KRAs do not pertain to a specific task that the employee has to perform. KRAs are also called operational objectives.
There is certain ambiguity on what should be the Key Result Areas for any business. They differ from organisation to organisation. KRAs are generally the short-term objectives ranging from one to two years, which can be renewed when necessary. These objectives come under the scope of strategic objectives and sometimes the business objectives. The strategic objectives have a lot of importance for the continued existence of the firm. They comprise both financial as well as operational objectives.
The critical success factors are quite useful in identifying the key result areas, setting-up the objectives in those areas, and finally establishing the measures for evaluating the performance. Various organisations assess their performance using key. result areas which are based on critical success factors. To establish the key result areas in a better way, organisational goals along with the performance of individual employee are considered. It allows the employees and managers to ensure that one organisational objective is not realized at the cost of the other.
The key result areas seek to identify the most current and important objectives with respect to the performance management system of the organisation. It is important to choose key result areas which have the greatest relevance to the strategic objectives of the organisation. It is thus better to focus on the strategic objectives than to spread the KRAs to all areas.
Role of Key Result Areas (KRAs)
1) Clarifies Roles :
KRAS serve a very important role in clarifying the roles of people in organisations. It provides a sense of direction to the people and removes any röle ambiguity.
2) Aligns the Roles of Employees :
The KRAs create an environment of goal congruence in the organisation. KRAS make sure that every employee is working towards the same goal. They are performing to achieve the same objective. Their performances are aligned with the vision statement of the organisation. It creates alignment in every job function.
3) Focuses on Results Rather than Activity :
Key Result Areas help the organisation to focus on the results to be achieved and not the operations needed to achieve those results. It helps the employees to know what they want to achieve and up to what level. It minimizes the efforts and hence makes the organisational processes more effective.
4) Communicates the Roles of Others :
KRAs help the staffs to know their respective roles to achieve the pre-defined targets. This increases the coordination by allowing every staff member to have information about the roles performed by each other. It helps in knowing the core responsibilities of every employee.
5) Establishes Goals :
The organisation would always prefer people who keep the end result in mind than the people who are merely doing a 9 to 5 job. Setting the correct KRAs brings about a culture in which people take ownership and develop a result-oriented attitude.
6) Sets Priorities :
The key result areas help the employees to priorities their activities. Since an employee can have many objectives, he needs to examine them and segregate the important one from the not so important objectives. It helps the employees to know which activity is more important and hence which one should be carried-out first.
Applications of Key Result Areas
KRAs are applicable in the following areas:
1) Recruitment and Selection :
Having a key result area while recruiting and selecting employees helps the human resource department to produce job specifications against which the hiring can be done by them.
2) Planning :
The KRA helps the individual to set objectives pertaining to his job. These objectives can be reviewed by the managers in a time- bound and systematic manner. Individual objectives are derived from broader objectives which have been framed at the corporate, divisional and departmental levels. These objectives are also used to check the performance against the pre-set result boundaries.
3) Training and Development :
The process of performance review and appraisal of the employee based on his predefined KRAs helps to highlight the shortcomings or deficiencies in his area of work. The key result areas help in training and development of the employees by allowing the managers to compare the performances of staff against the set parameters, By training their employees, the organisation is also able to fulfill its training and development needs. These needs are aimed at developing better management skills, knowledgeable and skilled manpower, etc.
4) Organisational Structuring :
The Key Result Areas (KRAs) process also helps in streamlining the organisational structure. All roles in the organisation have distinct KRAs and reporting structures. Dotted line relationships are avoided as they can create role ambiguity. New roles in the organisation are examined by HR, and the KRA for the same is clearly defined. The KRA process thus helps the organisation to become a lean organisation with clear cut roles, zero ambiguity and better productivity.
5) Succession Planning :
Since KRAs help both the employees and management in getting trained according to individual job specifications, it becomes possible for the organisation to assign the managerial roles as per the strengths and abilities of the managers. It facilitates the formulation of smooth succession planning.
6) Performance Evaluation :
The KRA process helps in evaluating the job of managers and designing their remuneration against the set standards. It allows the employees to compare their performance with the pre-defined standards. It also allows the managers to decide the incentives and remunerations of employees. The organisation can follow a "paired comparison method" or a "commentary-based evaluation system" for job evaluation.
Guidelines for Determining Key Result Areas
For determining the key result areas, given guidelines should be followed:
- The KRAs should be recognized and established by appraiser and appraise.
- Once framed, the Key Result Areas should not change for the whole year,
- The result areas should not exceed five. These areas should define the activities of appraisee for which he is accountable.
- The number of KRAs should be practical and within the reach of the appraisee. But these areas should be challenging. so that the appraisee gives the best of his ability to achieve the organisational goals.
- The key result areas should address all those areas where the manager is needed to utilize various resources within the time period of project, which exceeds from six months up to one year.
- These areas should involve both the managerial and operational level duties of the managers.
- They should be a mix of normal work activities as well as process improvement and innovation activities which seek to develop something new.
- The KRAs should be a mix of hard areas, which are easy to measure such as productivity, sales, cost improvement, and soft areas which are difficult to measure such as learning and development.