What is KPI & KRA? How Setting Right KPI & KRA Can Help Measure Team Performance?

What is KPI and KRA

When it comes to measuring success, then KPI and KRA are two key measurable values that help business owners to gauge their success and progress. 

Measuring growth and goals is considered one of the most important activities of a business. Measuring and tracking success is important because it gives you a clear picture of your journey: Where you are right now, where you are going, how soon can you reach it, and who will help you reach your destination.

Businesses that don’t measure the growth and performance of their employees are often diverted from their primary goals and end up wasting time and resources which could otherwise have been utilized for their success. When it comes to measuring success, then KPI and KRA are two key measurable values that help business owners to gauge their success and progress. KRA is Key Result Area or also known as the Key Responsibility Area and KPI is Key Performance Indicators.

We will share the key performance indicators for employees, and the difference between KPI and KRA, which every business owner should be aware of.

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But first, let’s understand these terms: What is KPI and KRA?

What is KPI or Key Performance Indicators?

KPIs are quantifiable and measurable values, which are used to evaluate and measure the success of a company or employees. Depending upon the business objectives, KPIs for different companies and organizations can be different, and unique.

For example, KPIs for a manufacturing firm can be daily production count and utilization resources. At the same time, KPIs for a cinema theatre can be customer satisfaction and the number of non-empty seats in the auditorium at any given time.

What is KRA or Key Responsibility Area?

KRA or Key Responsibility Area are quantifiable and measurable tasks and responsibilities for employees in an organization. Depending on the job profile, experience and expectations, different employees can have different KRAs within the same company.

For example, KRA for a sales manager can be the total number of sales in a quarter, while KRA for an HR Manager can be attrition rate and employee satisfaction.

Learn more about – What Is KRA? Explore 3 Key Parameters To Create And Assign An Effective KRA To Employees

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Difference Between KPI and KRA

While KPIs focus on the performance metrics of the entire organization and employees, KRAs focus on the key activities and responsibilities of the employees and teams.

KPI and KRA are interlinked and heavily dependent on each other: By defining and measuring KRAs for all employees, they get better clarity about their roles and responsibilities, which in turn help the organization to achieve their KPIs.

At the same time, by defining and documenting KPIs for the organization, the employees can understand their roles and expectations in a better way. Higher KPI and KRA translate to success and growth for the organization.

Types of Key Performance Indicators

When it comes to an organization, then profit is the most critical metric to gauge the success or failure, over a period of time.

Against this backdrop, the key performance indicators for an organization are:

  1. Revenue Growth: Tracking revenues from one period of time to the other is an important metric to monitor, and thus, included in the list of key performance indicators for the company. A negative growth means something is very wrong and needs immediate attention.
  2. Income Sources: What are the revenue sources, and over a period of time, what is the performance of each revenue stream? Companies can calculate revenue per client, revenues per unit of product sold, and more to find out the true picture of the growth of a company.
  3. Profitability Over Time: This is probably the most critical KPI for any company: What is the profitability ratio over time, vis-a-vis revenues and expenses. If profitability is reduced, then how can you increase it? Should cost-cutting be a solution?
  4. Working Capital: Working capital is the funds needed to carry on the day-to-day activities and business operations of a company. Tracking these metrics is an important step to ensure that the organization is well funded and self-sufficient to survive.

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Learn more about – 5 Proven Techniques of Performance Management System for Early-stage Companies

Key Performance Indicators for Employees

When it comes to finding out the key performance indicators for employees, then these factors can be considered, depending on the business objectives and goals:

  • Teamwork
  • Communication
  • Customer Service
  • Job Functions

Is the employee a team player, and empowers the team to set new benchmarks in performance? Is the employee able to communicate his/her thoughts, opinions in an efficient manner? Is the employee polite and attentive to the issues faced by customers? Does he/she have empathy, care, and patience? Is the employee performing the tasks given effectively? Is he/she able to manage time, and fulfill all professional obligations on time, and without external supervision?

KPI Metrics such as the revenue generated per employee, employee billable percentage, average task completion rate, overtime per employee, etc. can be calculated and monitored to find out the financial aspects related to the workforce.

KPI for Different Business Process

In fact, for optimized business operations, and to ensure consistent performance across all business divisions, the management can set KPI for different business processes. There are certain KPI project management should have, so does manufacturing, HR, IT, workflow, Finance, and other business processes.

For example, project management key KPIs include project schedule, estimated time for project completion, development backlogs, resource availability, and more. If it’s a manufacturing unit, then KPIs can be asset utilization, availability, costs per unit, employee expenses, capacity utilization, and more.

To find out the right metrics, and to start monitoring them, you need expert guidance from someone who has managed employees, organizations, projects and optimized them as well.

This is where MSMEx comes into the picture and provides you with expert assistance. MSMEx is a micro-advisory platform, wherein experts from various business verticals have come together to help entrepreneurs, MSMEs, and startups to deal with business challenges.



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