Every organization has got their goals, missions, and certain objectives to achieve. These objectives could be the short-term goals that need to be fulfilled in a given period. To determine if these strategies will achieve their goals and take the organization in the right way or not, the company makes use of dedicated metrics. And those are KRA and KPI. The primary relationship between KRA and KPI is that goals are made using KRAs, and realization will be measured by KPIs. Now, let us see the difference between KRA and KPI!
What is KRA?
KRA is a key result area and is one important success factor to the company no matter internal or external where superior performance should be achieved for an organization to attain their strategic goals and the vision and mission. The main result areas are the ‘critical success factors’ and ‘key drivers for success’.
KRAs can be developed for the employees in a company linked to the job roles and performance objectives. Normally, key result areas will be around 3 to 5 major responsibilities, which are included in the employee’s job specification and indicate the main value of a person to the company. The analysis of such areas will help the employees to develop the personal strategic program for career development as well as serve basis for the employee performance analysis valuation.
What is KPI?
KPI is a key performance indicator made to assess the achievement of the objectives. For every objective out there, there is a dedicated KPI that can be set at the beginning of their performance period. At the end of this performance period, as per KPI, management will determine if the organization will attain a particular goal.
Management must evaluate the following questions if deciding over KPIs
- Can the KPI achievement be controlled?
- Are KPIs linked with strategic objectives?
- Can KPIs explain easily?
- Is KPI simple to manipulate?
- Are proper actions taken for improving the KPI performance?
This balanced scorecard is the management tool made with heavy use of the KPIs and used to know KPIs efficiently. The balanced scorecard functions with 4 perspectives; goals are set for every perspective, and KPIs are used for measuring whether these goals are accomplished or not and to what extent they are realized.
Difference between KRA and KPI
The primary objective of this post is to offer you an overview of what KPIs & KRAs are –and clear up a few misconceptions – and shed some light on why it’s important to separate both the metrics. We will run through a few definitions, and clear up what’s a KRA or KPI, dive into the importance of both, and offer some examples too.
Your metrics can easily be broken down into two categories:
Performance Indicators – PI’s are nonfinancial. They are measured on the regular cadence (every day, every week, every month, and so on.) and are the result of a person’s activity. PIs offer information over what action should be taken for improvement and are highly useful for creating proper strategies and aligning the goals. The indicators are:
- Understood by employees
- Leading and forward-looking
Result Area – One of the important goals for setting KRA is improving business communication and enhances productivity because everybody is aware of what winning is in their respective role. The areas are:
- It’s specific, clear, and measurable
- It is under your control
- It is an important business activity
Now, you have got your KPIs and KRAs. The major difference between the Indicator and Result Areas lies in their importance and value to you. So, whichever metric you consider is dependent upon your business’ priorities. For this reason, no tangible list of the indicators (i.e., Performance and Result) exists – and they are fluid & change depending on their business. Important to note that: If a metric impacts your business directly, it is ‘KEY’ for your business success
Importance of KRAs and KPIs
Key Result Areas is a strategic factor, implied to an organization where most favorable results are achieved, and reach its goal and take ahead the vision of the organization.
KPIs aren’t much flashy as KRAs, but more focused on actions, leading to positive results. Key performance indicators are the foundation from where successful strategies are made, and they are some steps, which take us to KRAs.
Most of the businesses mistakenly rely on KRAs for offering insight into the overall performance of the business & direction over which activities are successful and what steps you must take next. Just KPIs can track down the steps taken (those that have to be taken) to make sure the success.
Based on the above information, some major differences between KRA and KPI are:
|KPI is the performance metric that aims to evaluate the progress and achievement of the specific goal.||KRA looks after the strategic area where the best performance is needed|
|It’s the metric that checks the level at which the business goal is accomplished.||It’s the metric that defines areas where employees are liable to produce positive results.|
|It’s the quantifiable metric that gauges the performance of the product, service, in a market.||It’s the qualitative metric and defines areas that will help to achieve the goals of an organization.|
|Measures how successfully the organization achieves its goals at different levels.||Helps to find out the scope of the job and product.|
As we can see, the major difference between KPI & KRA depends predominantly on the way that they are employed for organizational success. Each business has a pre-determined set of objectives that they wish to achieve that must be assessed against the dedicated metrics.