Strategic Management

Objectives

The participants will understand the following-

• Know what are Critical Success Factors

• Identify the key elements of the KRA & KPI method

• Analyze the key differences between KRA & KPI

• Create a KRA & KPI Sheet for a company

What are Critical Success Factors
Critical Success Factors (CSF) are specific elements or action areas
a business, team, or department must focus on and successfully
implement to reach its strategic objectives. Successful execution of
these success factors should generate a positive outcome and
create meaningful value for the business.

CSFs are important because each one works as a guiding compass

for a company. When they are explicitly clarified to everyone at the
company, they function as a reliable point of reference for focus
and for determining success. There are goals to be achieved which
are also known as deliverables.
How Critical Factors Support Strategic
Management

Critical success factors are developed to link and align with the strategic goals
of a company. They are used to determine how a business unit, department, or
function can reach its specific goals and facilitate forward progress toward the
organization’s strategic goals.
These factors also influence how individual employees and teams support and
do their part in contributing to strategic plans and objectives.

Each CSF is identified to support the achievement of a specific strategic goal

and guide the creation and tracking of Key Performance Indicators (KPIs).

The diagram ahead illustrates hoe CSF influences Strategic Management

Critical Success Factors

The following are some of the Key Success factors:

• Key Result Area (KRA)

• Key Performance Indicators (KPI)
Key Result Area (KRA)
• Key result areas or KRAs refer to the general metrics or
parameters which the organisation has fixed for a
specific role.

• Key result areas (KRAs) broadly define the job profile for
the employee and enable them to have better clarity of
their role. KRAs should be well-defined, quantifiable, and
easy to measure. It also helps employees to align their
role with that of the organisation.
KRA Contd…
• Key result areas are those areas in which you have to
take complete ownership. The first step is to list out
daily activities which could be part of the KRAs. In some
organisation even a team meeting everyday is part of a
manager’s KRA.
• KRAs could be vary from organisation to organisation
and from one work profile to another. There are no set
rules to define KRAs, but broadly they sum up the job
profile as well as the key impact areas on which the
employee is expected to deliver.
Characteristics of KRA
Every job can be broken down into a few necessary tasks that contribute
more than other pieces of work towards the functioning of an organisation.
• Departments, employees and even organisations usually have three to
five key result areas. There are seldom more than seven KRAs.
• Key result areas are specific, clear and quantifiable. For example,
‘ensuring the growth of an organisation’ does not fall in the list of a
department’s KRAs, but ‘customer acquisition’ does.
• KRAs comprise the tasks essential to do the work at hand. They don’t
include additional jobs that generate little returns.
• Key result areas should be affected by the actions of the people they are
outlined for. For instance, a software engineer cannot have
advertisement in their KRAs because their work wouldn’t influence the
company’s popularity.
What is KRA & what is not…
Key Result Areas or KRAs are the strategic internal or external sectors where the business strives to
realise strong positive outcomes to achieve its development goals and move towards fulfilling its
vision.Each piece of work comprises three to five critical tasks. These essential jobs on which
employees, departments and, organisations need to focus are the key result areas.
For instance, a management consultant is responsible for several activities. They –
• Coordinate with clients to arrange meetings
• Understand their clients’ problems and decide how to cater to their needs
• Collect and analyse clients and their industries
• Devise an adequate plan of action for the clients’ business
• Communicate and coordinate with their teammates and other departments
• Draft emails and proposals for internal and external communication
• Present solutions and the final plan to the client
• Contribute to the white papers produced by their company
• Contribute to the business development activities of their company
All the above tasks don’t generate equal returns. The ones that are more important than others
demand more resources. They are the Key Result Areas of the consultant.
The Actual KRA
Key Result Areas Not The Key Result Areas

Understand their clients’ problems and decide how to cater to their

Coordinate with clients to arrange meetings
needs

Communicate and coordinate with their teammates and other

Collect and analyse data pertaining to the clients and their industries
departments

Devise an adequate plan of action for the clients’ business Draft mails and proposals for internal and external communication

Present solutions and the final plan to the client

Contribute to the white papers produced by their company

Contribute to the business development activities of their company

Key Performance Indicator (KPI)
Peter Drucker famously said, “What gets measured gets done.”

Key Performance Indicator (KPI) is a measurable value that demonstrates how

effectively a company is achieving key business objectives. Key Performance
Indicator (KPI) is a quantifiable metric that reflects how well an organization is
achieving its stated goals and objectives.

Organizations use KPIs to evaluate their progress and success at reaching

targets. KPIs provide a focus for strategic and operational improvement, create
an analytical basis for decision making and help focus attention on what matters
most.
Bad Key Performance Indicator (KPI)

Let’s take a look at an example of a bad KPI versus a good KPI.

We wish to make a lot of money this year as part of the company’s goal.

Why is this a bad KPI?

To start, it’s incredibly vague. Is “a lot of money” $10K or $1M? There’s no
definitive actions that you can tie to your KPI if you don’t have a specific amount
you’re working towards, there’s no ‘goal post’ (i.e. a defined amount) to know
you’ve hit your target, and there’s no metric to attribute to it so you can track
your progress.
Good Key Performance Indicators
(KPI)
The following are the good indicators of the KPI’s as it-
• Provides objective evidence of progress towards achieving a desired result
• Measures what is intended to be measured to help inform better decision
making
• Offers a comparison that gauges the degree of performance change over time
• Can track efficiency, effectiveness, quality, timeliness, governance,
compliance, behaviors, economics, project performance, personnel
performance or resource utilization
• Is balanced between leading and lagging indicators
Good Key Performance Indicators
(KPI)
A good KPI is realistic, straightforward, and easy to measure. Here are a few tips to keep in mind for setting
good KPIs.
1. KPIs should be aligned with the overall business strategy and outcomes. The overarching business strategy
should be what informs your KPIs. For example, let's say your business has a goal to increase monthly
recurring revenue (MRR) by 20% by the end of the fiscal year (a high-level KPI). Your KPI contributes to the
overall business goal because new leads = revenue potential.

2. KPIs should be actionable. Once you’ve set your KPI, you need to outline the steps you’ll take to reach it
and the metrics you’ll measure along the way. It’s also worth noting that KPIs shouldn’t spur additional
questions, they should do just the opposite: inspire action.

3. KPIs should be realistic. Good advice is to start small. Big, lofty KPIs—while they might look good on paper
—aren’t doing you or your team any favours if they’re unrealistic from the get-go.

4. KPIs should be measurable. When you set KPIs, ask yourself: What are you trying to achieve? What is the
desired end result? What’s the timeline? Remember to add: How am I going to measure my KPIs?
How to Design a Good KRA & KPI
 Summary
Key result areas are those areas in which you
have to take complete ownership.

Critical Success Factors (CSF) are specific elements or action areas a

business, team, or department must focus on and successfully
implement to reach its strategic objectives.

Each CSF is identified to support the achievement of a specific

strategic goal and guide the creation and tracking of Key
Performance Indicators (KPIs)
 Self - Assessment Questions

Q1. True or False - Critical Success Factors

(CSF) are specific elements or action areas a
business, team, or department must focus on
and successfully implement to reach its
strategic objectives.
Select the correct option.
A. True
B. False
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 Self - Assessment Questions

Q2. KPI should be :

Select the correct option.
A. Aligned
B. Actionable
C. Realistic
D. Measurable
E. All of the above

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Reference List
• Taylor, The Principles of Scientific Management, Harper
& Brothers
• Drucker, The Practice of Management, Harper &
Brothers
• McGregor, The Human Side of Enterprise, McGraw-Hill
• Porter, Competitive Advantage: Creating and Sustaining
Superior Performance
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