Please read and understand the discussion of Key Results Are

Please read and understand the discussion of Key Results Area (KRA) and Key Performance Inidicators (KPIs). I seek your comments about how you might construct and use results for your company or a company you are familiar with.

One of the great challenges for management is seeking segments of operations to improve that yield the most results. Some managers prefer to use a SWOT analysis or a KRA analysis.  A SWOT analysis (strengths, weaknesses, opportunities, threats) looks at the internal strengths and weaknesses of the organization and then also takes an outward view towards opportunities and threats.  With those in view, management then is able to develop strategies for growth. My observation in industry is that many people struggle with the SWOT analysis because it requires a level of strategic thinking—a world view—that most new managers do not possess.  A Key Results Area (KRA) analysis is a seemingly more simplistic approach, yet it can often yield powerful and actionable insights.  My experience has shown that managers at almost any level in an organization are able to contribute to the KRA analysis; and it can become the more useful tool.    A note about KRA versus KPI.  Key Results Area (KPI) is the identification of “what” can be changed and improved. A Key Performance Indicator (KPI) is a measure of that improvement.  In that regard, a KRA    Is the process you have identified for improvement, and KPI are the measures of that process over time.   For example, an online retailer might have a KRA of shipping to customers within one day of the order being placed. The KPI would be the measure of speed of order processing over time.  KRAs and their metrics (KPIs) normally have some dimension of customer complaints, late shipments, employee turnover, and so forth. However, the metrics can also be used in the larger sense of “state of being”.   Numbers vs. Words:  KRAs tend to be qualitative; however, it is possible to assign numeric values which enable unambiguous decisions. KPIs may be qualitative in nature, an example being customer satisfaction. That can be stated in words (qualitative) or as a numerical index (quantitative).       Ultimately, you will identify a process that needs improvement and that improvement will most likely have a cost and you will need to be able to assess the financial impact. With that knowledge, you can state that you have identified a process that needs improvement, the cost of that improvement, and the earnings.   In a perfect world, the earnings are greater than the costs; however, life is not always so simple and you may have processes that need to change yet do not yield improved earnings.  For example, a regulation may change that governs your process. You must change the process but it yields no improvement in earnings.    BEST PROCESS IMPROVEMENT: Get rid of the process if that is possible.  Typical thinking is to accept the current process and try to improve it.  That is not the correct approach.  Keep in mind that processes add cost and time to your operations. Only 25% of all processes are valueadding for the customer; all the rest are cost burdens you impose on the customer.  Your goal as a manager is to understand those that add value and those that add cost and time.  Once you are able to do that, then the list of processes to improve is simple: Start by looking at the ones that add cost.    A KRA analysis has the customer at its core. It asks the questions: Do we delivering what the customer wants?  And do we deliver the value they expect?  We might use this to map both our own organization against who we perceive is the competition or it might be a purely internal mapping. We might look at many aspects and use one map, or we might create many maps, one for each process. Start by drawing a simple quadrant map as shown below.  In most organizations, customer perception of value is critical so that is where we typically start.     We ask the simple question: How well do we perform a process and how important is it to the customer?  Put a dot in the quadrant that answers that question. Now evaluate the quadrants and where that dot is placed.  I can also color code this for presentation to management. It says the same thing, but sometimes the “traffic light” colors speak volumes. IMPORTANCE: QUADRANT #1: If you are in quadrant #1, the process is important to the customer; however, you are not good at delivery. In that You can use the same quadrant analysis but this time with a view towards financial efficiency. Note that the management actions change depending on quadrant.  You can use this quadrant for INCOME or for COSTS.  I am using it for COSTS.  If you use it for INCOME, then what actions you take will change. For example, if you have high income and lost human resources, the quadrant #1 becomes “maintain”.    QUADRANT #1: If you are in quadrant #1, that means the process has a high cost but not too many human resources. For improvement, consider what is driving the costs.  Can those costs be reduced.   QUADRANT #2: If you are in quadrant #2, the process has high cost and is laborintensive. Improvement would be to reallocate labor and also try to reduce costs. Human resources might be reallocated to other processes.    QUADRANT #3: If you are in quadrant #3, the process is costefficient and does not use many human resources. Maintain.  This assumes the process has already been vetted through the first KPI analysis; meaning, the customers see value in the process and you are good at it.    QUADRANT #4: If you are in quadrant #4, the process takes a lot of human resources but does not have too much cost.   Evaluate how essential this is to customers and consider discontinuing the process.      KRA Income 1Fix 2Delete 3Maintain 4Reallocate People 3 =  Low monetary and labor requirements 1 =  High monetary and low labor requirements 4 =  Low monetary and high labor requirements 2 =  High monetary and high labor requirements RISK: This uses the same quadrant analysis but with a view towards risk.    QUADRANT #1: The chance of failure is not too high but it consequences of failure are very high.  You need to mitigate the risk.  This is an important KPI  for your organization.   QUADRANT #2: High probability of failure and high consequences of failure. Your organization needs to be keenly aware of risk mitigation; ultimately discontinue the process if possible.   QUADRANT #3: The process is stable and has low risk. Maintain.   QUADRANT #4: The process has a high chance of failure and even though the consequences might be minor, organizationally you might want to mitigate risk by reassigning resources.          Chance of Failure KRA Key Results Area Consequence of Failure   1Fix 2Delete 3Maintain 4Reallocate So which evaluating approach ranking.  T maintain. over all ot company    “Fix” has well. “Ma    There mig process a process do w g; you can us this; howeve The simplest   Think about thers, becaus can have. monetary im intain” gets t ght be many p nd the highes we concentrat e this step to er, this starts approach is t t why those n se it consume pact but migh the lowest sco processes we st score “wins te on?  Presum quantify you to put some to assign a va umbers are u es cash and do ht take longe ore because i e look at, but t s”.   ming you hav u actions.  The numbers on t lue of 100 to used. If you ca oes add value r. Likewise “r t is working w the scoring p ve more than ere is no “righ the words so delete, 75 to an delete a p e. That is the reallocate” ha well and effic rocess might one process ht” or “wrong that we can o fix, 50 to rea rocess, then t worst possib as a time com iently.   look like this you are g” way to arrive at a allocate, and that takes pri le process a mponent to it s. Do this for e 25 to iority as each APPENDIX Here is a short slide presentation that gives you one more view of this process.    1 How Good Are You? Action Mission and Responsibilities Identify Customers Customer Requirements Performance Gaps 2 STEP 4: Identify Performance Gaps Purpose: To assess the current status of the function’s performance Payoff: To target KEY RESULT AREAS requiring improvement    Uni-set May 2012 ©2012 James E. Skibo, Ph.D. 2 Customer Ratings Map Used to identify priority improvement areas Each point on the map: Represents a specific customer requirement Has been rated on two things: 1. Importance: How important is it to you? 2. Effectiveness: How are we doing? Key Result Areas are derived from those requirements rated as: 1. High importance 2. Low Effectiveness 2 Customer Ratings Map    2 Customer Ratings Map    KPI Key Performance Indicator   Importance Fix Maintain Delete Reallocate Effectiveness 2 Customer Ratings Map Quadrant Rating Interpretation Action 1 High Importance Low Effectiveness Ineffective performance In area your customer considers Important Key Result Area 2 High Importance High Effectlveness Effective In areas considered Important by the customer Continuous Improvement 3 Low Importance Low Effectiveness Ineffective In areas not considered important by the customer Discontinue Efforts 4 Low Importance High Effectiveness Effective In areas not considered important by the customer Shift Resources High Low High Importance Effectiveness 12 34    2 Do not accept overly optimistic statements Identifying Key Result Areas Key Result Areas can be focused: Externally (i.e., service) Internally (i.e., long cycle-times) From the Customer Ratings Map: Make a blunt and critical analysis of your current position How good are you. . .how well do you perform? Insist on Realism Uni-set May 2012 ©2012 James E. Skibo, Ph.D. 2 STEP 5: Develop Improvement Plan Purpose: Identifies “what” has to occur Payoff: Sets up the function for change 2 Accomplishment Factor 2 Proficiency Factor How Effective and Efficient is the Process? Effectiveness Efficiency 2 43 1 1 = Highly effective (gets results) and very efficient (done with minimum of resources) 2 = Effective but minimally efficient 3 = Efficient, but minimally effective 4 = Minimally effective and efficient 2 Resource Factor What type of resources does the process use? Money Low--------High Low-----------High Labor 2 13 4 1 = Low monetary and labor requirements 2 = High monetary and low labor requirements 3 = Low monetary and high labor requirements 4 = High monetary and high labor requirements 2 Risk How vulnerableis the process? Consequence of Failure Low--------High Low-----------High Chance of Failure 2 13 4 1 = Low chance and low consequences of failure 2 = Low chance but high consequence of failure 3 = High chance but low consequence of failure 4 = High chance and high consequence of failure 2 Calculations High Number = NOT Good Low Number = Good 2 Criteria for Selecting Improvement Projects The project is: Of highest common concern Greatest potential gain Frequently executed The Project has: Direct and perceptible customer impact Resources needed to carry out the improvement The project is: Stable…not undergoing change A rework system for another process 2 Common Errors in Selecting Projects Predetermined remedies bias the entire effort and often lead to poor solutions. 2 Common Errors in Operational Management Poor Choice Communications Hiring New Employees Accounting System Better Choice How changes in priorities are communicated from Group X to Group Y Recruiting candidates for entry-level clerical positions Petty Cash Control Don’t solve for “World Peace” 2 Why Efforts at Improvement Fail Because: one group (small) tries to change

Solution

Since the question mentioned is very vague and does not specify what are the requirements. As per my understanding whith th few begginning line they need to know about KPI\'s and KRA\'s and their relevance.

KPI are financial as well as no financial in nature and are used to gauge the performance of the organization. They are usually used to know the current position of an organization and to know what course of action that needs to be taken. They are more useful while quantifying the activities which are otherwise difficult to measure such as services, leadership, satisfaction etc.

Based on the kind and nature of an organization the KPI’s will differ. It indicates the measure in terms of quantify for a predefined set of quantities.

There are quantitative indicators, which present values in the terms of numbers. Practical indicators values are being used to interface with the values in the organization whereas actionable indicators are used to initiate the change

KRA’s are used to assign work and task in the organization to its employees. Every employees has been assigned with the KRA’s and he/she is exclusively responsible for those areas. These Kra’s are then being reviewed to access and know the results and performance of an individual. Even the security guard of an organization has a KRA to allow and restrict the entry.

They are useful for the individuals as they clarify their goals and roles. They focus more on the results as compared to the process. They are useful to set priorities and assign task to an individual based on their skill set