How to Identify Key Results Areas and Why? What's the differences in KRAs, goals, objectives and KPIs?

Prof.(Dr.) D G Mahto, Founder & CEO -
Abstract:
Key Result Areas: KRAs are defined objectives that are vital to the performance of an individual employee, a department, or an organization. Key Performance Indicators: A KPI is a quantifiable metric that helps assess whether an organization, department or employee is meeting certain objectives.

Key Result Areas (KRAs) are specific, measurable goals that a company or individual sets to track progress and success. They can be used in any context, but are often used in human resources to track employee goals and objectives. KRAs can be specific to an individual or to a team, and should be aligned with the company’s overall strategy. Examples of KRAs include increasing sales by a certain percentage, reducing expenses by a certain percentage, or increasing customer satisfaction by a certain percentage. Measuring progress against KRAs allows individuals and teams to track their progress and make necessary adjustments along the way.

Keywords: 
Key Result Area, Goals, Key Performance Indicator, Objective, Customer Service, Quality, Analysis, Measurable 

Learning Outcomes:
After undergoing this article you will be able to understand the following
1. What are KRAs and why it's important?
2. What do you mean by Goals?
3. What's process in terms of KRAs?
4. What's KPI?
5. How KRAs are determined?
6. What's Key Results Areas for manufacturing industry?
7. What's the KRAs of Production Department?
8. What's the KRAs of Quality Department?
9. What's the KRAs of Materials Department?
10. What's the KRAs of Sales  Department?
11. What's the KRAs of Service Department?
12. What's the KRAs of Development Department?
13. What's the KRAs of Maintenance Department?
14. What's the KRAs of HR Department?
15. What's the KRAs of Top Management?
16. How Benchmarking influences KRAs?
17. What's the difference between KRAs and KPIs?
18. Some Strategies for selection of KRAs 
19. Conclusions
20. FAQs
References 


1. What are KRAs and why it's important??
Key result areas (KRAs) broadly define the job profile for the employee and enable them to have better clarity of their role. KRAs should be well-defined, quantifiable, and easy to measure. It also helps employees to align their role with that of the organisation.

Importance of KRAs
Key Result Areas (KRAs) are important because they help organizations to measure and track the progress of their employees towards specific goals. KRAs allow organizations to identify and focus on the most important tasks that need to be completed in order to achieve their goals.
The world markets are consolidating and competitors are pushing the boundaries of productivity and value, emphasizing the focus on results. This is one of the main reasons the Key Result Areas model plays a vital role in many company leaders’ decision-making process.
As a leader, your Key Result Areas serve as the critical success factors for your company. They improve communication across teams, define your ongoing responsibilities, and convey updated strategies across all employees, effectively aligning them with the company’s goals

As a leader, your Key Result Areas serve as the critical success factors for yourcompany. They improve communication across teams, define your ongoing responsibilities, and convey updated strategies across all employees, effectively aligning them with the company’s goals. 

KRAs have become a foundational element in my business. At Consultwebs we found that having clearly defined key results areas for each position helps keep team members focused and accountable. We only have a finite amount of time in the day to accomplish our mounting task lists. KRAs ensure that people are utilizing their time on the areas that produce the most ROI.

2. What do you mean by Goals?
A goal is an idea of the future or desired result that a person or a group of people envision, plan and commit to achieve.

Goals enable us to achieve focus in life by helping us to determine what we want. They keep us motivated and propelled, constantly putting us in state of action.

Goals, when properly conceived and pursued can help us to maximize the one and only life we have to live.

Goals can be applied to different areas of our lives and they can also be based on a time range. For example, life-based goals can be personal development goals, career goals, educational goals, health goals, family and relationship goals, spiritual goals, social goals, etc.


3. What's process in terms of KRAs?

KRAs:

Key result areas (KRAs) frame out an employee’s role and responsibility in an organization. This helps employees to align their roles with the business outcome and focuses on the end result rather than the activities. It will also allow the employees to set priority goals, which makes decision-making effective.


Goals

Goals refer to specific and measurable objectives an individual or team needs to achieve to fulfil their responsibilities and contribute to the organisation’s overall success. These goals are aligned with the organisation’s objectives and are used to evaluate performance and progress.

Specific

Goals must be specific, ambiguous goals may lead to vague outcomes. The more clearly and precisely you define the expected outcome, the more the chances of achieving better results.

Measurable

Goals should be set in such a way that they produce tangible results. Using the metrics that are quantified is more helpful.

Achievable

Objectives should be attainable in reality, by taking into account the practical barriers of time, money, and labor.

Relevant

Goals should be relevant to all the employees involved in achieving them.

Time-bound

Setting up a deadline by which the goals should be achieved can motivate employees without putting excessive pressure on them.

4. What's KPI?

A KPI stands for a key performance indicator, a measurable and quantifiable metric used to track progress towards a specific goal or objective. KPIs help organizations identify strengths and weaknesses, make data-driven decisions, and optimize performance.

KPIs provide teams with targets to aim for, milestones to gauge progress, and insights to help guide decision-making throughout an organization. By monitoring KPIs, organizations can identify areas of strength and weakness, make data-driven decisions, and take actions to optimize performance.

5. How KRAs are determined?Guidelines for Determining Key Result Areas

Drastic market fluctuations have taught the business world a valuable lesson. The important lesson here is to evaluate and track your business performance and growth continuously. For a business organisation to remain competitive, it is important to make sure that their employee’s performance is aligned with the business’s goals and missions. The following essential steps will assist in setting up KRAs for your company:

  1. The KRAs have to be created and acknowledged. 
  2. Once calculated and established, the KRAs must not be altered or changed for the entire year, and make sure there shouldn’t be more than 5 Key Result Areas. These areas should be able to describe the activities and the work role of employees or departments for which they are responsible. 
  3. The number of KRAs identified or chosen must be realistic and doable by the employees. However, it will be difficult in certain areas, so make sure every employee or department gives their best efforts to fulfil the company’s goals. 
  4. The major Key Result Areas should be able to cover all the areas where the manager will need to utilise different resources throughout different projects, which can last from six months to one year. 
  5. Both the operational and the managerial level responsibilities of the managers should be included in the KRAs. 
  6. Make sure you include both regular working activities as well as innovation and improvement activities aimed at creating something new.
  7. The KRAs need to be a mix of hard and easily calculated metrics like revenue, productivity, and cost reduction, along with soft areas that can be difficult to measure, like development and learning. 
6. What's Key Results Areas for manufacturing industry?
A manufacturing Key Performance Indicator (KPI) or metric is a well defined and quantifiable measure that the manufacturing industry uses to gauge its performance over time. Manufacturing companies specifically use KPIs to monitor, analyze, and optimize operations, often comparing their efficiencies to those of competitors in the same sector.
  1. Throughput – This is probably one of the most fundamental KPIs for the manufacturing industry while also arguably one of the most important. The Throughput KPI measures the production capabilities of a machine, line, or plant; also known as how much they can produce over a specified time period. Throughput = # of Units Produced / Time (hour or day)
  2. Cycle Time – The cycle time KPI is very simple in nature, but that doesn’t mean it can’t be manipulated to be a very powerful tool. In the manufacturing industry, cycle time is the average amount of time it takes to produce a product. Simple, right? Maybe not as simple as you think. The cycle time metric can be used to measure the time it takes to manufacture a completed product, each individual component of the final product, or even go as far as to include delivery to the end user. Thus, cycle time can be used to analyse overall efficiency of a manufacturing process on the macro scale, as well as determine inefficiencies on a micro scale. Cycle time = Process End Time – Process Start Time
  3. Demand Forecasting – This manufacturing metric is used by companies to estimate the amount of raw materials they will require to meet future customer demand. This metric can be a little bit trickier for companies to fully utilize, as it is highly dependent on uncontrollable external factors. The basic formula is as follows: Projected Customer Demand = Raw Materials * Production Rate
  4. Inventory Turns – This is a measure of how many times inventory is sold over a specific time period and helps indicate resource effectiveness. Low ratio numbers indicate poor sales and excessive inventory, while high ratio numbers represent strong sales or insufficient inventory. Inventory Turns = Cost of Goods Sold / Avg. Inventory
  5. Production Attainment – This production performance metric measures production levels over a specific time period and calculates what percentage of the time a target production level is achieved. Production Attainment = # of Periods Production Target Met / Total Time Periods
  6. Cash to Cash Cycle Time – This is a time-based manufacturing KPI metric. It measures the amount of time it takes from an initial cash outlay for raw materials, inventory, or a manufacturing plant until the company receives cash from its customers for its products. This KPI is typically measured in days. Cash to Cash Cycle Time = Inventory Sale Date – Inventory Purchase Date
  7. Avoided Cost – This doesn’t mean you can just avoid paying bills and keep all the profits. The avoided cost manufacturing metric is an estimate of how much money you saved by spending money. Seems strange, right? The most common example is how much money is spent on machine maintenance vs. repair cost if a machine were to break down, plus the lost production value associated with the repair downtime. Avoided Cost = Assumed Repair Cost + Production Losses – Preventative Maintenance Cost
  8. Changeover Time – At the most basic level, changeover time represents the amount of time required to switch from one task to another. Typically, in manufacturing, it represents the amount of time lost from switching a production line from one product to another. However, it can also represent the amount of time lost during a shift change. Changeover Time = Net Available Time – Production Time
  9. Takt Time – This is a very useful manufacturing KPI when scheduling production orders or deciding whether to take an order from a client. Takt time is the maximum permissible amount of time that can be spent manufacturing a product while still meeting a client’s deadline. For those who are curious, Takt stands for “taktzeit,” a German word meaning “cycle time.” While very similar in nature, this is not to be confused with the cycle time KPI. Takt Time = Net Available Time / Customer’s Daily Demand
  10. Return on Assets (ROA) – You might be thinking, this seems like it has less to do with manufacturing and more to do with finance. That is because it does. However, financial metrics are just as important as manufacturing metrics. You can’t have a business if you aren’t making money. This metric evaluates how well your business is making use of its assets (money). It is the annual net income divided by total assets (fixed assets + working capital). ROA = Net Income / Avg. Total Assets

Now that we have gone over some of the basic KPIs for the manufacturing industry and have a grasp of what makes a good KPI, we can dig a bit deeper into the world of manufacturing KPIs and explore lean manufacturing KPIs.

Lean Manufacturing KPIs

Lean manufacturing is a practice of Japanese origin (name drop: Toyota) whereby companies attempt to minimize the amount of “waste” without sacrificing productivity. “Waste” in this situation doesn’t mean garbage or refuge from the production process. It actually represents any activity that does not add value from a customer’s perspective. Listed below are 10 examples of lean manufacturing KPIs:

  1. Machine Downtime Rate – While this is commonly used as a manufacturing metric to give a general snapshot of how operation is going, it doesn’t paint a full picture. Machine downtime is a combination of both scheduled downtime and unscheduled downtime. Machine Downtime Rate = Downtime Hours / (Downtime Hours + Operational Hours)
  2. Percentage Planned Maintenance – This production metric is used to analyze the ratio of scheduled maintenance against the unscheduled maintenance. This KPI is useful in identifying when more preventative maintenance is required for certain assets. PPM = (# Planned Maintenance Hours * 100) / # Total Maintenance Hours
  3. Downtime to Operating Time – This manufacturing metric can be used to measure the effectiveness of machinery maintenance and the machine itself. With effective preventative maintenance, the amount of downtime can be reduced, creating a more optimal manufacturing process. Companies aspire to reduce this ratio as much as possible. Downtime to Operating Time = Downtime / Operating Time
  4. Capacity Utilization – This production KPI measures the amount of capacity being utilized as a function of total capacity available. Ideally, companies want this number to be as high as possible, as it indicates they are making better use of their production capabilities and maximizing return on their assets. This metric can also be used by management when deciding whether to take on new orders or quoting lead time, as it gives a snapshot of available resources. Capacity Utilization = Actual Factory Utilization / Total Productive Capacity
  5. First Pass Yield – This is one of the most fundamental production KPIs. It calculates the percentage of products manufactured to specification the first time through the process. This means that they do not require any rework or become scrap. A higher FPY rate is very desirable for any company. First Pass Yield Rate = Quality Units / Total Units Produced
  6. Overall Equipment Effectiveness (OEE) – This key performance indicator is considered the gold standard for measuring manufacturing productivity. The higher your OEE, the more effective your equipment is. A score of 100 percent means that you are manufacturing 100 percent of the time, at 100 percent capacity, at a 100 percent yield (no defective parts). OEE = Availability * Performance * Quality
  7. Manufacturing Cost Per Unit – It is very important that you know the total cost associated with manufacturing a product on a per unit basis. Without it, you wouldn’t be able to price a product properly. This KPI takes into account all costs associated with production and divides the cost by the number of units manufactured. Typical costs include materials, overhead, depreciation, labor, etc. Manufacturing Cost Per Unit = Total Manufacturing Cost / # of Units Produced
  8. Material Yield Variance – This lean manufacturing KPI takes the estimated amount of material required for a product and compares it against the amount of material actually used. Material Yield Variance = Actual Material Use / Expected Material Use
  9. Maintenance Cost Per Unit – This production metric is often overlooked as people tend to consider maintenance cost to be an overhead item. However, it is an important lean manufacturing KPI to take into consideration when trying to optimize efficiency. This calculation takes the total cost of maintenance (both preventative and emergency) and divides it by the number of units produced for a specified time period. Maintenance Cost Per Unit = Total Maintenance Cost / # of Units Produced
  10. Overtime Rate – This metric compares the amount of overtime worked by employees to the amount of standard hours. It helps to identify inefficiencies in scheduling and/or staffing. Overtime Rate (Percentage) = (Overtime Hours * 100) / Regular Hours
7. What's the KRAs of Production Department?
Production Planning KPIs assist in effective evaluation of all aspects of the product life cycle right from product design and development, product management, employee training, product quality control, facility management, to product packaging and dispatch.

So the key results areas in production are
Throughput time
Operations cost
On time delivery
Takt time

8. What's the KRAs of Quality Department?
Management of the quality of raw materials, assemblies, products and components, services related to production, and management, production and inspection processes comes under the aegis of Quality Department.

9. What's the KRAs of Materials Department?
Materials managers oversee a company's inventory and purchasing operations. They collaborate with engineers and designers to determine the materials needed to complete manufacturing or construction projects according to specifications, research vendors for those materials, then order them.

10. What's the KRAs of Sales  Department?
A sales department is responsible for selling products or services for a company. The department comprises a sales team that works together to make sales, increase profitability and build and maintain relationships with customers to encourage repeat purchases and brand loyalty.

11. What's the KRAs of Service Department?
A customer service department helps answer customer questions and provides assistance at all stages of the customer experience. The responsibilities of a customer service department include: responding quickly to customer concerns.

12. What's the KRAs of Development Department?
The research and development department helps their company decide which products and services would most likely find success if offered to their clients and customers. There are several R&D job responsibilities and functions the department performs to produce usable data to help develop these products and services.

13. What's the KRAs of Maintenance Department?
Supervise and lead the maintenance team, including technicians and contractors, ensuring they are well-trained and equipped. Develop and implement preventive maintenance programs for all equipment, systems, and facilities.
14. What's the KRAs of HR Department?
Key Result Area/KRAs outline an employee's roles and responsibilities within their organization. KRAs help individuals align their roles to the larger business plan and focus on results rather than activities. This allows employees to set priority goals and objectives, and make effective decisions.
15. What's the KRAs of Top Management?
The top management in any business are responsible for things like:
  • Creating and maintaining the company's vision.
  • Managing company finances.
  • Developing goals and plans to achieve them.
  • Overseeing daily operations.
  • Hiring, training, and developing talent.
  • Establishing and upholding the company culture.
16. How Benchmarking influences KRAs?
The main reason to create benchmarks for your business is to find areas where your performance falls below the standards other organizations set. Identifying these areas for improvement will help focus your time and resources.
Benchmarking can help you improve your small business's performance. It allows you to measure and assess your business against competitors in your industry and helps you identify areas for improvement.

17. What's the difference between KRAs and KPIs?
KRA (Key Responsibility Areas) is a set of goals and objectives that needs to be accomplished for a job. 

KPI (Key Performance Areas) are the criteria by which the accomplishment of KRAs is measured.

The main differences between KRAs and KPIs are the following

18. Some Strategies for selection of KRAs 
The Key Result Areas for an organization should focus on the vital areas that fit best with an organization's strategic goals and most directly drive its success. Determining those success factors will require some analysis and discussion among organization employees and leaders.
How to create key result areas: Strategies 
  • Evaluate how you're performing. Before getting started, examine your role and your duties and write them down. ...
  • Discuss your KRAs with your manager. ...
  • Outline specific tasks for your job. ...
  • Determine KPIs to measure KRAs. ...
  • Put your key result areas in writing. ...
  • Review and revise KRAs regularly.
  • Defining strategy and goals at the organizational level – The leadership team identifies 3-5 KRAs that are critical to achieving the overall business strategy such as revenue growth, customer satisfaction, new product development etc.
  • Department/team goal setting – Once organization-wide KRAs are set, they are translated into more specific Key Result Areas for various departments and teams that ultimately ladder up to the organizational KRAs. For example, the sales team’s KRAs could include monthly recurring revenue and customer retention rate.
  • Individual performance management – Managers work with employees to define 3-5 Key Result Areas aligned to the employee’s specific role that connect to the department’s KRAs. For instance, an individual sales rep’s KRA may be new customer acquisitions.
  • Project management – Project teams establish Key Result Areas to track achievement of project outcomes. Example KRAs could be project budget adherence, delivery to schedule, and quality standards.
  • Common organizational KRAs – Revenue, profitability, customer satisfaction, product quality, market share, operational efficiency, and employee engagement.
19. What are the advantages of KRAs?

KRAs offer organizations numerous benefits when implemented effectively:

  1. Strategic Focus – KRAs bring focus to the 3-5 vital metrics that will drive achievement of strategic goals rather than getting lost in the weeds of multiple tactical metrics. This strategic focus enhances results.
  2. Alignment – Well-cascaded KRAs align efforts at all levels of the organization towards the same strategic outcomes creating synergy between departments, teams, and individuals.
  3. Accountability – With defined Key Result Areas and assigned owners, accountability for performance on metrics is established. This drives greater ownership and commitment.
  4. Measurement – KRAs provide quantifiable metrics that allow for objective measurement of performance against both short-term and long-term goals at all levels.
  5. Prioritization – Resources can be directed towards activities that will move the needle on the most critical and strategic Key Result Areas for the organization.
  6. Transparency – Openly sharing KRA targets and performance fosters organization-wide collaboration towards shared goals versus working in silos.
  7. Clarity – KRAs give clarity on what must be achieved at all levels – from new employee to CEO – in order to execute strategy.
  8. Continuous Improvement – Tracking KRAs allows data-driven reviews of performance which enables problem-solving and continuous improvement.
  9. Simplicity – Relying on vital few Key Result Areas is simpler than tracking multiple tactical metrics and gives a fast but strategic view of performance.
  10. Motivation – Well-designed KRAs tuned to each role foster engagement and motivation by connecting individual contribution to company success.
20. What are the disadvantages of KRAs?

While powerful when used effectively, there are some common mistakes organizations make with Key Result Areas:

  • Too many KRAs – The purpose of KRAs is to identify the vital few metrics that matter most. More than 5-7 Key Result Areas per goal diffuses focus and effort.
  • Unclear or vague KRAs – Well-defined KRAs are specific, measurable, and focused on outcomes. Unclear or subjective Key Result Areas are difficult to track and manage.
  • Not updating KRAs regularly – KRAs should align to evolving organizational strategy and priorities. Stale KRAs risk misalignment.
  • No linkage between KRAs – KRAs should logically connect across levels to create line of sight from individual metrics up to strategic goals.
  • Not assigning accountability – Key Result Areas need assigned owners responsible for performance at each level to drive results.
  • Lack of regular reviews – Leadership needs to frequently review performance on KRAs and take corrective actions when required.
  • Using KRAs for compensation only – Over-emphasis on compensation can undermine the benefits of Key Result Areas for managing performance.
21. Conclusions

To create strong, qualitative key results for your objectives, ask yourself the following questions so you can have the highest-quality key results areas.

1. Are the Key Results areas Aligned with goals set ?

2. Are the Key Results Measurable?

3. Are the Key Results the same as your team’s day-to-day tasks?

4. Is there Pairing Between Key Results?

5. Are the Key Results Controllable?

6. Is There an Accountability System for Key Results?

20. FAQs
Q. Why is it important to identify Key Result areas?
Ans. Companies use key result areas that they can measure for each employee in their specific job role to ensure critical goals are being reached. If you're interested in understanding how to measure your own performance in your job, it's helpful to understand what key result areas are.

Q. What is the difference between goals and KRA?

Ans. It is important to be specific and clear when defining KRAs and goals. KRAs should be linked to the overall objectives of the organisation and should be related to the specific responsibilities of the employee's role. Goals should be specific, measurable, achievable, relevant, and time-bound (SMART)

Q. How to provide clarity on company objectives? 
Ans. The complete transparency is the key to avoiding any confusion. By having regular check-ins, it is easier to gauge how the team is doing and make any needed changes to workloads.

References 



Prof. (Dr.) D. G. Mahto is a multifaceted professional, serving as a Director, Professor, Philanthropist, HEI Builder, prolific writer, international consultant, reviewer, and expert career advisor at "Career Education for Success—Discover, Apply, Succeed!" He has guided countless individuals, products, and brands in discovering their true potential through insightful content, purposeful concepts, and motivational writing. With a deep sense of leadership and a commitment to community upliftment, he inspires others with his success stories and takes on the challenge of driving technological transformation, redefining social impact, and fostering interpersonal relationships for a more meaningful, balanced life. Prof. Mahto is dedicated to bridging the gap between dreams and reality for young people, striving for qualitative change in their lives. To explore his articles, books, and international journal contributions, visit his blogs at Career Education Success Now, Career Edus, and Discover Knowledge Wisely. You can also reach out to him via email.

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