KRA and KPI are two metrics crucial for determining whether the organizational strategies are moving in the right direction or not.
KRA is Key Result Areas while KPI is Key Performance Indicators.
KRA talks about the set of expectations that are defined at the beginning of the year to the employees. It gives details about all the assigned tasks to employees and expectations out of those tasks throughout the year.
While, for effectively monitoring the performance of every individual towards the set objectives, KPIs come into play. KPI is performance metrics that tell if the organization is making progress towards its objectives. to quantify the results. It should also be agreed at beginning of the year.
Let us understand how Key Result Areas differs from Key Performance Indicators –
What is Key Result Area KRA
KRA stands for Key Result Areas and it indicates the fundamental areas of the result.
All the roles are set with specific metrics that are required to adhere to strictly. Every department and employee has their own unique KRAs, and accordingly, they are required to stimulate outcomes.
For instance, an HR department or an HR manager’s KRA can be recruitment.
The companies give KRA to their employees to understand their job role inside the organization. Accordingly, these departments or employees are expected to produce quality results.
Additionally, Key Result Area KRA highlights the job description of all the job profiles. These assist in the understanding of the responsibilities and roles of the employees.
This helps the employees to channelize their effort with the goal in hand.
Key Result area KRA can be termed as a strategic factor that the firm utilizes, and they can be implicit or explicit. This assists them in bringing about favorable results and fulfill the main objectives and goals of the organization.
Key Result Area KRAs outline the scope of the product and the services which are on offer by the organization to their respective customers and consumers.
Key Result Area demands excellent efforts from the employees to achieve the desired success.
These are qualitative as they identify the range that can help the organization achieve the goals. The importance of KRA cannot be overstated as all the businesses in all the industries set themselves KRA to be more effective and efficient.
What is Key Performance Indicator KPI
KPI stands for Key Performance Indicator which is a high-level metric that gauges the development or the fulfillment of specific objectives.
All the objectives have their separate KPI that is determined at the beginning of the period.
The evaluation of KPI is done either during the period or after the fulfillment of the period. This is done to ensure whether the organization will match the set objectives or not.
The organization has a set mission and specific objectives. The sole purpose of the organization is to fulfill these missions and objectives. The method of setting KPI provides valuable assistance to the entire process.
KPIs are utilized at various levels to keep an eye on the organization’s development in achieving its targets. KPIs can be compared to that of a compass as they guide the organization towards the right path.
Key Performance Indicator can be both or one of the two financial and non-financial metrics.
This gauges and solidifies the success towards the fulfillment of the goals of the organization. Initially, the organization’s goals and objectives are determined, then they identify the critical stakeholders for the organization. After that, they identify the goals and objectives of the organization.
The progress is always monitored using a key performance indicator.
They are used at various levels of the organizations to keep track of the progress in the realization of targets. Key Performance Indicator can also be seen as the compass to measure if the company is on the right track or not.
If they are not on the right path, then it never too late to turn things around and make things right.
Key Result Areas vs Key Performance Indicator
1. Basic Difference
KRA
This is the primary area of concern for that a department or an employee is in charge.
Key Result Area gives a reference to the sector of results inside the organization, for the unit or department is responsible for.
The key Result area is considered a metric to measure the success level obtained in fulfilling the organizational goals.
KPI
It is a metric that is utilized to gauge the development towards a specific target.
Key Performance Indicator refers to the mechanism that signifies how well an organization is adhering to the set’s business goals.
The level of success while measuring the Key Performance Indicator depends on how accurately the goals set are fulfilled in the long run.
2. Roles
KRA
Key Result Area is a metric to understand how well the organization has done in achieving the objectives and goals of the organization.
Key Result Area KRAs outline the scope of the product and the services which are on offer by the organization to their respective customers and consumers.
The scope of the job can be established using KRAs.
KPI
Key Performance Indicator is a strategic factor that is utilized by the organization. This strategic factor helps the organization to achieve the goals and objectives that were set by the organization at the start of the period.
Key Performance Indicator is the best business metric to judge success concerning objectives and goals at different levels of the organization.
KPI gauges how well the firm has fulfilled its objectives.
3. Progress towards employee goals
KRA
This clearly outlines the particular areas of results that the employees are expected to produce results in.
KRAs are qualitative, as they identify the range that can help the organization achieve the goals.
KPI
KPI metric checks the level or the degree of fulfillment that the employees have achieved towards the set objective.
KPIs are quantitative meaning they measure the performance of services and products.
KRA & KPI Examples
The different organizations have various KRAs and KPIs.
They vary starting from the nature of the business to different departments under the organizations. They are also different for the employees working under organizations.
They are highly customizable as they are tailor-made for different departments and employees.
For instance, the percentage of increment in the profit for a business, the pass-fail ratio of a school are all KPIs. The customer base, revenue, profits, employee attrition, are all examples of KRAs of a business.
The percentage of increase in profit margins will indicate exactly how much the CAGR (Compounded Annual Growth Rate) has increased for the organization.
The pass and fail ratio for a school will help them in a better selection of students. The revenue, profits, employee attrition numbers are qualitative. They will help the organization in improving the quality of their service.
Example 1
Goal- Hiring 10 Sales Executives in this quarter.
KRAs-Recruitment and onboarding of right candidates
KPIs –Top-line growth
Example 2
Goal- Develop an employee feedback program
KRAs – Respond to common employee problems and concerns
KPIs – People Development and engagement
Conclusion!
On the concluding note, it is clear that KRAs directly follow the job description of the employees and they are described in the Employees Job Description document.
While KPIs include indicators for gauging how well an organization or business unit is doing such as customer satisfaction, revenue, employee engagement, etc.
How would you differentiate KRAs and KPIs?
