7 Reasons Why You Need Key Result Areas

What is your role in an organization? This is one of the most important questions you ever ask and answer, over and over again, throughout your career.

As it happens, most people are not sure exactly what their role is? But if you are not crystal clear about your role and what results you have been hired to accomplish, it is very hard for you to perform at your best and get paid more and promoted faster.

Key Results Area or KRAs are essentially job descriptions. A key result area is defined as something for which you are completely responsible. This means that if you don’t do it, it doesn’t get done. A key result area is an activity that is under your control. It is an output of your work that becomes an input or a contributing factor to the work of others.

Each job can be broken down into about five to seven key result areas, seldom more. These are the results that you absolutely, positively have to get to fulfill your responsibilities and make your maximum contribution to your organization.

Your failure to perform in a critical result area of your work can lead to failure at your job. There is essential knowledge and skill that you must have for your job. These demands are constantly changing. There are core competencies that you have developed that make it possible for you to do your job in the first place. But there are always key results that are central to your work and which determine your success or failure in your job.

Here are seven reasons why KRAs are important to your organization:  

This is perhaps the most important aspect of KRAs. They provide clearly defined boundaries and clearly states what winning at their job looks like. In other words, if they can meet the objectives listed in their KRA, they will be rock stars within your organization.  

2. Align Their Roles: Everyone on the team must be marching to the same drum beat. This means that everyone should have objectives that align with the overall vision of the organization. Having KRAs is paramount in creating alignment in every job function.  

3. Focus on Results, Not Activities: KRAs help us focus on the result of the activity, not the activity itself. We want our team to be doing the activity, but we want them achieving at a certain level. Anyone can answer the phone, but we want to make sure it is answered in two rings, not three.  

4. Communicates Their Roles To Others: Having KRAs for each and every team member means that everyone knows their role. They also know what everyone else is doing, or supposed to be doing. This is helpful in establishing boundaries. It is also helpful in that team members will keep each other on point and on task.  

5. Sets Goals and Objectives: We want the team members to focus on an end goal for each objective within their job function. We don’t want mindless drones just completing job activities without thought to the result of that objective.  

6. Prioritizes Work: KRAs help to prioritize your team member’s workloads. Since they know what winning out their job looks like because of KRAs, they know what objective is most important. They also know what is second, third, and fourth most important.  

7. Hiring Process: This is an equally important reason for KRAs. Complete a KRA before you do the hiring process, especially if the hire is for a brand new position. Even if the hire is just to fill an old position, go through the exercise. Maybe something changed, or the job needs to be adjusted. By having a completed KRA before you head into the hiring process, you know exactly what you are looking for. Too many times it happens, where someone was hired for a position, and then quit because the actual job was nothing like what was described in the hiring process. It is also been seen that the wrong person was hired and was not capable of doing the job. Save yourself the headache and cost of a bad hire…do a KRA beforehand!

The hard part is introducing the KRAs into your organization. KRAs implement accountability to the different job functions within your organization. This could run counter to your current culture, thus making buy-in difficult. You must remain adamant and enforce the use of KRAs.

One of the best uses of your time is to increase your competence in your key result areas.

Is Budgeting Only Arithmetic?

Budgets are not merely affairs of arithmetic, but in a thousand ways go to the root of prosperity of individuals, corporates and institutions.

Today most businesses, especially small businesses follow an earn-and-spend as-you-go strategy, which clearly lack financial discipline. Most businesses do not keep their focus on accounting or profit or loss; they just are run by the feeling either they are profiting or losing. A good budget covering most company activities can take your business to new direction.  

A good company budget can,

 Tell you from where money is coming and to where it is going.
 Tell you how much profit/loss is expected at the year/term end.
 Lets you to bring all company things under one roof; including those concerned with money, products, employees, systems, customers, etc.
 Helps you in figuring out your liabilities, prioritizing and paying off them.
 Helps you to focus on profitable opportunities and to reduce/eliminate money wasting.
 Gives an opportunity to rethink on various business practices .
 Provides you information about where you can find money for a process/task and information about expected spending on each task.
 Lets you to understand factors resulting in big differences such as taxes, loan interests, wages, advanced system requirements etc.
 Lets you to figure out the net asset of company, capital in hand, growth rate, compatibility, etc.

Budgeting provides you more power when negotiating dealings or managing various business tasks.

Here are the four key steps to budgeting:  

1. Step One - What are your costs?
The first step is to separate all fixed costs from all variable costs. Why does this mean? In short, any expenditure that is set in stone because it's a business necessity and is fairly predictable (property leasing, insurance, utility bills, etc), is a fixed cost. Variable costs cover all other expenses, including employee costs, marketing, raw materials and all other changing or optional expenses.  

2. Step Two - Predicting your sales
The second step is to try and accurately establish what your monthly and annual sales volume will be over the course of a year. Clearly if your business has been operating for several years, this will be a much easier process. If you don't have that luxury however, talk to your existing and prospective customers. Find out what times they'll most likely be looking to buy your goods or services, in what quantities, and then try to estimate your revenue that way. Obviously this process involves some guesswork so it's important to build in an allowance to account for uncertainties or unpredictable events; even the banks sometimes get this one wrong. A 10-20 percent margin is typically considered safe, though some businesses prefer a slightly larger safety zone during a recession.  

3. Step Three - Your budget, line by line
The third and most crucial step is to then work out what the likely impacts are of either reducing or increasing certain expenses, on revenue. If marketing costs are high, but you're not seeing additional customers as a result, now's the time to consider reducing the expense or changing your advertising strategy. Similarly if demand is high, maybe adding an extra salesperson that’ll bring in additional sales (that exceeds the cost of hiring them) is an option worth considering.  

4. Step Four - Flexibility
Finally, the real secret to any business budget is its (and your) ability to be flexible. This means that having cash reserves or ways to reduce expenses following a particularly rough sales month are ready to go if necessary. If revenue falls below target, you need to know what changes can be made to the budget to help bring it back on track quickly. While an initially well structured budget is the key to achieving your financial goals for the year, the reality is that they require constant tinkering at regular intervals, as revenue and expenses fluctuate.

Having the flexibility, through spare cash and an ability to cut or increase spending as needed, along with a determination to stick to your budget, are the best moves you can make to ensure your company reaches its profit goals, continues to grow even during changing economic conditions, and most importantly remains viable well beyond the current financial year.

Budgeting is an easy but essential process that business owners use to forecast (and then match) current and future revenue to expenses. The goal is to make sure that enough money is available to keep the business up and running, to grow the business, to compete, and to ensure a solid emergency fund.