‘What does KPI Mean? And What is a KRA?’ is about helping you to understand these terms from a Time Management perspective.
Plus, why they are important for you, your team, and how they can help you & your team to achieve a lot more.
What Does KPI Mean?
KPI stands for ‘Key Performance Indicator’. It is a term that has been around in business for many years and has become more popular in the last decade. The term is useful when discussing targets in business. For example, a KPI would be sales, and to achieve £xm next month. Normally a business has a number of KPIs, about 5. By reviewing these KPIs regularly, e.g. weekly, we can understand how the business is performing. By achieving the KPIs the business knows that it is on it’s way to achieving its vision, or goals, or mission statement.
What Does KRA mean?
KRA stands for ‘Key Result Area’. This term is less known in business, yet it is as important. A business that clearly identifies and buys its people into KPIs and KRAs will perform better because everyone will be very clear on what is trying to be achieved, job satisfaction will increase, and ambiguity will decrease. Brian Tracy, the Time Management guru from the States, uses the KRA phrase a lot in his Time Management teachings.
KPI and KRA Explained Using a Football Metaphor
In this diagram below you can read how the KPIs and the KRAs fit together:
Using the KPIs and the KRAs with Your Team
The next step is to have a 121 with each member of your team and ask them to identify ‘those things’, that, if they get them right, are most likely to achieve the KPIs. For an Account Manager, that is likely to be their account sales, for a Supply Chain team member, their account’s availability, and for an NPD team member, the value of the launches.
Example of KRAs in the UK Grocery Industry
For example in the UK Grocery Industry:
1, A KRA for an Account Manager might be sales, or profit, or waste.
2, A KRA for a Technical Manager might be BRC Green, CPMU less than x, or a number of quality rejections.
3, A KRA for a Category Manager might be a number of opportunities identified, or number landed.
4, A KRA for an NPD Manager might be the sales value added through new products after cannibalisation.
The challenge of identifying ‘good’ KRA’s is for them to be SMART. In my experience of teaching Time Management for over a decade, most people have heard of SMART, yet few understand how to apply it to a target.
In our People Development Programme we share on the Time Management training course the importance of KPIs and KRAs and that without them it is only possible to achieve 60% of being an effective and efficient Time Manager.
If you have not agreed on a KPI and bought your team into that KPI you will struggle to unite them. The competency framework on teamwork will help explain this further. A single page showing KPI performance that is reviewed each week is perfect for keeping a team focussed. Agree with each individual their KRAs, review them regularly and sense check that if all KRAs are achieved, then there is a huge likelihood that the KPIs will be achieved.
Being Clear About Your Key Result Areas
A Key Result Area can be defined by these 3 checks:
- Is it S.M.A.R.T.? Specific – Yes? Measurable – Yes? Achievable – Yes? Realistic – Yes? Time-bound – Yes?
- Is it mostly under your control? If you do it and do it well it can significantly contribute to your business and your career.
- Is it an essential activity of the business? A key result area has an important output that has a positive effect on the KPI’s.
The 3 Main Problems with KRAs
- Blurred measures – Trying to combine two measures into one ultimately makes the measure immeasurable. Better to choose fewer KRAs and measure them effectively than choose more and measure them badly. Like Jack Black, the motivational guru and founder of Mindstore said about goal setting, ‘Choose a few and the rest will come anyway’. KRAs are the same.
- SMART – Everyone seems to understand it on an intellectual level. Yet applying it is more challenging. Particularly measurable. Measuring a KRA properly means that there is no ambiguity about whether it was achieved or not. It is black and white.
- Pairing-up – KRAs come in pairs; The measure and the target. If you write the measure correctly the target is normally very simple. For example, ‘Measure: The percentage of category opportunities landed per quarter, Target: 1′.
If you would like some help discussing identifying KRAs for your team please Contact Us and we’ll happily share some of our expertise without charge to help you.