Key result areas or KRA is a concept on which the individual and organizational performance is measured on the critical activities which have an impact on the bottom line of the business. In general, it is very difficult to measure however a basic model explaining the KRA can be discussed as follows.
Suppose a Company’s CEO has a goal of making a profit of say 2 million dollars in the next financial year. So he will break this into earnings through selling activity of financial investments etc. based on this the CMO and the CFO would set further goals for their subordinates. These subordinates may further sell goals like no of units to be sold etc. for further employees down the hierarchy.
To measure the Key Result Areas, proper KPI (Key performance indicator) should be aligned with the each area to see if the desired outcomes are being achieved.
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Key Result Areas are very important for defining and measuring critical areas of growth which are aligned with the strategic vision and goals of the company. A company can have many employees and many departments but to align them together with the vision of the organization, key areas have to defined objectively. KRAs help simplify the link between the activities and goals of a company. e.g. if goal of the company is to increase revenue then the sales and marketing department need clear KRAs like Sales should have KRA like increase in number of partners or vendors. Marketing department can have KPIs aligned with brand equity which can help increase sales.
For HR department, the KPI may be increase in number of new hires and talent retention. It would also have well defined learning programs to make sure the sales force can sell in a better way to align with overall targets.
An example of KRA can be of a Training employee - providing training of adequate quality can be a KRA where the feedback should be more than 80%.
Getting certain number of units sold e.g. in units or in terms of revenue could be another example from Salesperson perspective. The result of failure of a lower level employee is reflected in the KRA of the higher level employees.
Hence, this concludes the definition of Key Result Areas (KRA) along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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