KRAs vs KPIs
This article explores KRAs vs KPIs and explains how your business can benefit from well-defined metrics such as Key Result Areas and Key Performance Indicators to chart your progress.
Every business will have identified its KRAs and KPIs (Key Result Areas and Key Performance Indicators) which are used to navigate the business through the challenges of the market place towards its mission and vision. In practice, these KRAs and KPIs (Key Result Areas and Key Performance Indicators) are set during the planning meeting at the end of the year where we set the performance targets for the following year.
KRAs (Key Result Areas)
KRAs, otherwise called Key Result Areas, can be described as the major areas where your department or business needs to preform exceptionally well to compete in the market.
Your key result areas are those things that you must do to achieve your business goals. You should identify the five to seven key result areas that are vital to your job or business and monitor how well you are performing
Key Result Areas Could be:
- Business Development – to significantly increase the kind and number of number customers and their contribution to annual revenues
- International Recognition – to increase the number of interested parties in the South East Asian Region for our product
- Provide an Accurate and Timely Sales Reporting System – to significantly improve the sales reporting system
- And many more …
A KRA (Key Result Area) has three qualities:
- It is an essential activity of the business. A key result is an important output that then becomes an input to the next key result area, or to the next person.
- The result area is under your control. No one else has been assigned to this area of the business. You are the only one who can do it.
- It is clear, specific, and measurable. You can determine exactly if and when the target result has been achieved
In order to determine whether the route chosen by your department or business is correct or not, the objectives are evaluated against dedicated metrics, with the help of KPIs.
KPIs (Key Performance Indicators)
These denote the quantifiable metrics, that indicate how well you are achieving defined objectives. The KRAs tell you what areas to concentrate on, while the KPIs tell you how your team is performing.
For instance, we were working with a company that had set a target of 48 hours for the conversion of PRs (Purchase Requisitions) to PO (Purchase Orders). So, I asked them, “How are you doing against the target?”
Their answer, “We have set the target and we try to hit it.”
Not the answer I was expecting. I thought the answer should be something like, “We started at 65% but today, 3 months later, we can hit 85% of the POs processed within 48 hours”
Three examples of KPIs
- Raw Scores – e.g. number of new customers as to today
- Progress – e.g. 98% Complete
- Percent Change – 35% increase in sales as of today over the last period
Successful businesses work hard to achieve their goals. They need to have a reliable road map and scoreboard to determine is they are headed towards accomplishing their mission or if, instead, they are beginning to move away from the target. KRAs and KPIs are essential business tools to help you see that you are moving in the right direction.
Business Process Improvement Seminars that Include Development of KRAs and KPIs
Upcoming Business Process Improvement Seminars
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21 Nov 2019, Thursday, Lean Kaizen and Continuous Improvement Training (One Day),
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22 Jan 2020, Wednesday, Focused Improvement: The 7 Quality Control Tools,
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