Organizations – Dutch Uncles

What is KRA – Key Responsibility Area?

Roopali Kotwal — Wed, 02 Jun 2021 06:05:03 +0000

Imagine, you have a new recruit in your start-up business and he/she has spent just a couple of weeks in the new organisation. The new employee is unclear on the expectations you as an employer have from him/her. With no clarity on the goals and job responsibilities, you may envision the state of mind of the newly hired employee. The ambiguity may cause needless stress and result in demotivation and a feel of being directionless before the actual start of the journey. In such a scenario, clarity on the goals, better known as KRAs (Key Responsibility/Result Areas) shall bring stability of thoughts for the new employee. The KRA setting shall help to regain the confidence of the employee in the employer and validate his/her decision of joining the particular organisation. Thus, we can say that clarity on work/task responsibility will make provision to organise the work better for each and every employee.

KRAs: Definition

KRAs stands for ‘Key Result Areas’ or Key ‘Responsibility Areas.’ And, both these terms are used interchangeably. KRAs are the parameters that an organisation fixes/sets for a specific role. It defines the Job profile of the employee. Thus, providing a better clarity to employees as in what is expected from him or her in their respective role.

Who sets the KRAs?

An employee hires the employer as much as the employer hires the employee. This statement is very much true as having a role clarity is crucial for an employee as well as for the organisation the individual is employed in. The need for clear goals and expectations from the employee is not different in small than in large organisations. Even a small business or start-up will have a Sales, Finance, Human Resources and Information technology department and setting KRAs means setting goals or responsibility to each and every employee in these various areas/departments.
The Human Resources Management (HRM) takes the initiative of setting up a process around the ‘Key Result/Responsibility Areas. They share an initial outline with the respective department heads or managers who in-turn discuss and support the individuals in the team to set up the KRAs. KRAs in some organisations may also be known by a different name called ‘Objective Key Responsibilities’ i.e. the OKRs.

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Just like SMART Key Performance Indicators (KPIs), the Key Results/responsibility Areas (KRAs) or goals should also be SMART.

How do you define or write KRAs?

One size does not fit all! The saying is true for KRAs as well. Every company is unique and each role and reasonability will differ as the role demands. Being aware of the goals to achieve is very different from converting them into a written form. Just like SMART Key Performance Indicators (KPIs), the Key Results/Responsibility Areas (KRAs) or goals should also be SMART. Let us understand what SMART shall comprise of, in this context:

Specific: KRAs should be clearly stated as in what and how to do the job?

Measurable: Clarity on how the performance for a particular goal shall be measured.

Achievable: Ensure the set KRAs/goals are achievable, a discussion with the employee or manager shall take place.

Relevant: The selected KRA must be relevant to the job.

Time Bound: The KRAs to be achieved shall be time bound to attain the desired goal. Therefore, making the KRAs relevant and resulting in the improved productivity and efficiency of the employee.

Now, how to write them means following specific steps to document them effectively:

Step 1: Go through the Job description for a particular role or designation of an employee.

Step 2: In case, the job description for a particular employee is not updated, the Human Resources (HR) Personnel must discuss the same with the respective team managers.

Step 3: Figure out what the employee has to achieve. What is expected from the employee in that particular role?

Step 4: Based on the above stated points, list the critical functions and responsibilities in the Job role.

Step 5: Divide the responsibilities or functions into further two categories. For instance, what all can be measured either in numbers or in percentages? Also, what all cannot be measured in numbers or cannot be calculated?

Step 6: Based on the categorisation, the critical responsibilities or functions that can be measured in numbers or percentages shall be converted into the KRAs/goals.

Step 7: Write the self-explanatory definition of each goal or KRA.

Step 8: KRAs/goals can also be categorised into the various sections like customer, financial, business process, learning or growth.

Step 9: Define each KRA and ensure to mention a measurable target to be achieved and attach a realistic timeline to the defined KRA/goal.

Step 10: Review the set KRAs at regular intervals with the employee.

Please note it is important the employee and his/her manager are aligned with the decided KRAs before employees get a review on them for their performance.

What are the KRAs for Human Resources (HR)?

The KRAs of the HR department can be divided under various headings. Let us take a look at some of them in the below section:

Employee Relations, Training and Development: It is one of the primary roles and responsibilities of an HR personnel to train or facilitate the training and mentoring sessions for the employees in various departments on periodic intervals to improve their skill set with changing business requirements. Also, addressing any people management issues or concerns regarding any policies and culture code of the organisation.

Performance Management: Setting up simple and performance drive compensation strategies and policies. It is one of the primary goals of the HR team to ensure the performance of each and every employee is assessed as per the performance review cycle set in the organisation and its timely closure with the respective managers and the employees.

Financial Resources: The budget allocation of different activities and for different departments is handled by the HR team.

Strategic Goal: Driving strategic planning, Leadership Quality System and Employees’ Competences, Organisational Development and Increasing Technology and Information System.

Functional Goals: Customer Satisfaction, Communication (timely response, understanding and perceiving things correctly). Build friendly corporate culture and drive employee engagement. Also, creating an environment to recognise top talents and top performers in an organisation.

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Key Performance Indicator (KPI) indicates the performance whereas KRA indicates target value in a set timeline.

How are KRAs different from KPIs?

Just like KPIs, KRAs play an equal and an important role in an organisation. Key Performance Indicator (KPI) indicates the performance whereas KRA indicates target value in a set timeline.

An effective KPI is quantifiable i.e. it is expressed in numbers, aligned with the goal of an organisation. It indicates the performance with the time in number effectively, and confirms the direction of the movement towards the goal. KPIs are created at Organisational level and Departmental level. Organisational KPIs are created by the CEO or executive team and they reflect the goal achievement. Whereas Departmental KPIs are established by the Head of the departments or managers of concerned departments and they are aligned with the organisational KPIs. KPI depends on the KRA and measures it.

KRA means a set target that has to be achieved to a certain extent or percentage in a given or set time frame. For instance, the target is to increase the revenue of an organisation by 15 per cent by the end of 2021 can be understood by the below statements:

What: To increase the revenue
How Much: 15 per cent of the current value
Time Frame: by the end of 2021

All these factors combined together form the KRA.

Why are KRAs required?

Key Result Areas (KRAs) are critical for the success of any organisation. They are essential areas of business that require exceptional performance to obtain the desired result/outcome. KRAs set for a particular employee means the employee takes the complete ownership to complete the tasks basis which his/her performance shall be measured.

The employee should have a clear understanding of his/her role in an organisation. Thus, KRAs is a way to provide that clarity to an individual employee or a group of employees in the organisation and finally meet the key objectives and goals of the organisation.

Employee’s KRAs shall be aligned with the department’s objectives. Thus, finally aligning entire team’s or groups KRAs with the organisational objectives and that further need to be achieved as a part of the organisational goals. For instance, KRA for a team leader or business manager would be:

Managing day-to-day- operations/activities
Develop and implement a timeline to achieve targets
Motivate team to achieve departmental and organisational goals
Organise and conduct trainings relevant for the process/department to maximise potential of the employees
Delegate tasks to the team members as in when required

Conclusion: How do KRAs decide the success of an organisation?

Start-up entrepreneurs or small business owners must understand the importance of engaging and define clear and smart goals/KRAs for its newly hired employees. You would not like to imagine a state where the employees are disengaged or disinterred in their role before they actually start their journey. This would be detrimental for growth of both the employee and the employer. KRAs are important in any business or start-up because the clarity of Job role and responsibility will add productivity and performance of the hired employee in a defined time frame and it would not be a point of contention during the performance review of the employee.

KRAs are the major missions. They shall save a lot of time to revisit every-time one needs to know what all tasks have to be completed by the employee or team. Thus, with the structured and targeted approach, the employer shall keep the workforce motivated and focused to make the employee, the team, department and the entire organisation successful.

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What are the Types of Legal Entities?

Smruthi Krishnan — Fri, 26 Mar 2021 04:30:30 +0000

Legal entity includes any individual, company or organisation that has legal rights or obligations which include tax filings. Any business that can enter into contracts either as a vendor or a supplier and can sue or be sued in a court of law comes under the ambit of legal entities. These entities are structures in such a way that they permeate a higher level of protection for strictly personal assets from lawsuits or penalties. Different types of legal entities provide different types of protectionist measures and also vary in terms of tax burdens.

About Legal Entities

Legal entities can also enter into contracts, assume the obligations of said contracts, borrow and pay debts, file suits and be named by other parties in suits. They can also be held accountable in the court of law for these lawsuits. Legal entity forms and types of legal entity can look different and have varying compliance and governance implications. These entities are issued a Legal Entity Identifier (LEI) which serves as a reference to connect companies with financial information. The laws and regulations that govern legal entities fluctuate drastically across jurisdictions therefore they are still not entirely fixed and keep changing over time.

There are several legal structures you can go for when setting up a business. For instance, sole proprietorship involves a person who owns an unincorporated business by herself and makes all the decisions while taking all of the risks. Partnership on the other hand allows business owners to share the responsibilities and profits of a company while clearly demonstrating the professional relationship between the partners from the outset. Limited Liability Company (LLC) is a hybrid between a general partnership and a corporation that offers the limited liability assurances without the penalty of double taxation.

How Do Legal Entities Affect Personal Liabilities?

You can always do business without forming a legal entity but the issue lies around liability. On who does the burden fall when things go wrong? When you are not registered as a legal entity, the line between business finances and personal finances and liabilities fades away. In other words, given a situation where your company is being sued or it falls into a debt, you can be held personally liable for it, seizing your personal assets to repay the debt or you’ll be sued in the court of law in place of your company.

If you are a simple handicraft artist selling simple crafts on sites like Etsy, you do not need to get into the complexities of legal entities. However, if you are a proper startup trying to scale and expand in the future, it is necessary for you to figure out the entity that suits your business the best in order to be safe in the future.

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The laws and regulations that govern legal entities fluctuate drastically across jurisdictions therefore they are still not entirely fixed and keep changing over time.

Legal Entity Names

The legal entity name you choose for your business is what will build your reputation and make you known in the marketplace. It is very important to select a name that is compliant with laws governing business entity names. It is a huge responsibility and must be decided carefully after seeking legal advice.

Make sure you choose an original legal name before a business entity can be formed. This legal name may be changed later on however your business can have only one legal name at any given time. Make wise decisions to avoid unnecessary hassles and difficulties later on when you need to focus on other aspects of your business.

Types of Legal Entities:

Joint-Venture Company

A Joint Venture (JV) is a new business entity created via a partnership between foreign and Indian investors. In a joint venture, the partners jointly share the profits, losses, management responsibilities, and operation expenses. The main advantage of joint ventures is that the foreign company is able to utilize their well-established contact network, marketing channels and distribution channels along with the available financial resources of the Indian partner. Joint ventures also offer the investors to jointly manage the risks involved with the new business. This reduces individual risk exposure as investors are able to share their liabilities. Thus if something happens, they do not lose their entire investments and are not in the position to be in debt traps.

Examples of Joint Ventures in India:

Hindustan Aeronautics Ltd
Vistara
Tata Global Beverages
Fratelli Wines

Partnership Firm in India

A partnership firm forms a relation between people or investors who agree to share the profits of the business. They either carry out all operations together or one person acts in place of all while the others just invest. A partnership business requires a minimum of two people to start a business. The maximum cap limit on the number of partners is ten. A Partnership Firm is a type of Joint-Venture Company. The owners of a partnership firm are individually known as partners and collectively known as a firm. Within the business, the partners have unlimited liability and can share profits in any mutually agreed ratio.

Examples of Partnership Firms in India

Red Bull and GoPro.
Spotify and Uber.
Levi’s & Pinterest.
Maruti Suzuki.

One Person Company in India

A One Person Company (OPC) was introduced recently in India in 2013 and it is a new type of business entity in India. Incorporating an OPC is only permitted to a resident of India. No foreigner can incorporate an OPC. One person company can be owned only by a single individual. The concept was introduced so as to incentivise individual entrepreneurs to start their own business ventures. It falls under the category of a private company. But it can also be featured as a separate legal entity. The liability of the owner is limited in a one person company to avoid huge investment risks in case the ventures fail. Examples:

R.H. AGRI INDUSTRIES (OPC) PRIVATE LIMITED
AGRIFIRST FARM INDUSTRIES (OPC) PRIVATE LIMITED

Public Limited Company in India

Though the incorporation of Public Limited Companies in India can be difficult as well as time-consuming, several business investors and entrepreneurs go ahead with it. A Public Limited Company in India can have a minimum of three directors, a minimum of seven shareholders, and can have a maximum of unlimited shareholders. They can be listed in a stock exchange or remain unlisted. If the company is listed as a Public Limited Company in a stock exchange then its shareholders can freely trade the company’s shares. Being a separate legal entity, the company’s existence remains completely unaffected by retirement, death, or insolvency of its shareholders.

Examples:

Bharat Heavy Electricals Ltd.
Bharat Petroleum Corporation Ltd (BPCL)
Indian Oil Corporation Ltd.
Oil and Natural Gas Corporation Ltd (ONGC)

Private Limited Company in India

A Private Limited Company in India is a privately held small business entity which is considered as an independent legal entity on incorporation. Private limited companies can have a minimum of one and a maximum of fifty shareholders. Unlike Public Limited Companies, these companies cannot publicly trade their shares. They can have a minimum of two and a maximum of fifteen directors.

Examples of Pvt Ltd Companies:

Hindustan Coca-Cola Beverages Pvt Ltd.
Malabar Gold Pvt Ltd.
Mother Dairy Fruit & Vegetable Pvt Ltd.
Parle Products Pvt Ltd.

Sole Proprietorship in India

A form of a business entity where a single individual handles the entire business organization is called Sole Proprietorship. The individual who handles the business will be the sole recipient of all profits and bearer of all losses to the business. The liability of the owner is unlimited. Such entities are suitable where the market is limited, localized, and customers need individual attention. If your business requires limited capital and risk factor is not that much then this type of company is the most appropriate for you. They involve less legal formalities as they do not have any legal existence. Coca-Cola, Apple, Hewlett-Packards, Amazon, Google, Mattel and Walt Disney all started out as Sole Proprietorships initially.

Branch Office in India

Branch offices in India involve foreign companies who are engaged in manufacturing and trading activities abroad that set up their offices in India. These companies are not allowed to carry out manufacturing activities on their own in their Branch Office. Commercial activities of any nature are not allowed for a Branch Office. However, they are allowed to subcontract manufacturing to any Indian manufacturer. Branch offices of foreign companies require approval from the Reserve Bank of India (RBI) before they begin operating at any part of the country.

Non-Government Organization (NGO) in India

Non-Government Organization (NGO) or Nonprofit Company is a citizen-based association that operates to serve some particular social purpose and they work independently of the government. The main thing that differentiates them from other organizations is that they are not focused towards gaining profits. Their main aim is to work for promoting a cause that leads to the betterment of society.

Examples of NGOs in India:

Child Rights and You
GiveIndia
Goonj

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