Global Knowledge Management and Economy - Nik Zafri

THE KPI AND KRA ANECDOTE

I suppose most of us nationwide is aware of the KPI and KRA especially those who have heard about YAB PM recently announced.

So I like you all to take a bit of time to read the following and be alert on my 'cooking of management phrases'

Let's go to the Key Results Areas first (KRA). KRA was born from Management by Objective (MBO) concept introduced by Peter Drucker in 1954. I think KRA is not really part from MBO but rather an evolution to clarify Objectives and Goals better.

(Via a consulting firm in 1997, I was one of the accredited MBO consultant for few Banking and Financial Institutions)

To make it simple - I will explain briefly what to expect from MBO.

It has a Mission Statement then Objectives, Goals and finally Key Result Areas (KRA). Hmm how to put it huh? Ok...input and output hence Productivity was born together with Benchmarking.

The then PM, Honourable Tun Dr. Mahathir introduced the 'Participative Management Concept' via the Look East Policy somewhere around 1982 and the rest is history (Malaysian Incorporated, Privatization, Proton Saga and so on) The participative management is part of what we commonly know as Total Quality Management (TQM) where among others it promote teamwork, bottom-up management, QCC Tools, Small Group Activities (SGA), Six Sigma, human capital, PLAN-DO-CHECK-ACT (PDCA) etc.

The participative management concept has evolutionized MBO further which I also believe the reason for KRA to exist so that it would be on 'mutual consent' basis between the 'setter' and the 'implementer'.

Back to MBO, conceptually speaking, the only thing that may not be measurable is the Mission Statement (although some put 'to become 'x' in 'x' years' while the rest are ALL measurable - be it Objective, Goals and KRA. 'Objectives' in MBO are key strategies to achieve the Mission Statement. Goals in MBO are 'short term objectives' to achieve Main 'Objectives'.

At the micro level (immediately after Goals) KRA is the output expected within a certain period of time.

The art of measuring is also known as 'Benchmarking' (get it?)

In Human Resources, MBO/KRA facilitates the formation of Job Descriptions, Performance Indicators (also related to KPI) and Responsibilities/Authorities.

Objectives and Goals are measured using % where they are being prioritized by a 'brainstorming' session (SGA/QCC) But the numbers of Objectives and Goals may not be the same. Example - One Objective may require two different goals. KRA is considered as the output which will determine the success implementation and continual improvment of Goals and Objectives (cascading principle)

ISO 9000 also has a similar concept known as Department/Unit Objectives which are also 'measureable'.

However most people argued with me that it should also be 'achievable' (although it does not SAY "achievable" in the ISO clause) I disagreed because the 'achievable' may also depend on the scope of work of a business entity.

Say for example, the Department Objective of a 'construction division' is

"to reduce 'x' wastages to...say...3% per 6 months"

What arguers don't see is that :

a) this relates to the value and magnitude of the project itself and
b) the quantity surveyor/purchaser buying 'buffer stock' - just in case

I asked the 'arguers' - what if the contractor gained a bigger project?

The 3% need to be reviewed as it may be TOO MUCH to achieve (for a bigger project) - it should be reduced to 2% but the implementers must justify why it is being reduced. Agreed? (so the arguers now are now my supporters)

So this reviewal or adjustment or ALIGNMENT is also known as BALANCE SCORECARD. (more confused you are all I guess - not to worry - I'm almost finished) Balance Scorecard is part of Strategic Planning and Management popularized by Kaplan (of Harvard) and David Norton. The purpose is to ALIGN activities to the organizational 'vision and strategy', improve communication breakdowns (also in ISO as well), and monitor organization performance against strategic goals (also in Objectives & Goals of MBO) It is to give the implementers a more 'balanced' view of organizational performance. (see ISO's Data Analysis + Quality Cost below)

Again, ISO 9000 concept of Objectives are also based on MBO/KRA as well. But the good thing that we can adopt from ISO is that there is an activity call the 'Data Analysis' for Action Plans/Continual Improvement (not only having statistics and do not know what to do with it) Here's something for all the readers/decision makers to think before you leap :

In Data Analysis, you have number of non-conformances (NCR) per product and you will compare them with other products range (or services). Sometimes, on screen, you see the NCR is high (be it major or minor) on the system (which require minor amendment in certain documentation) and you also see certain NCR is low.

Be careful, go further by 3rd level analysis (by cost - or - Quality Cost) You will find that the 'high NCR' may only cost you about RM1.00 or less!! Why? Because the NCR is about amending documentation - papers or perhaps 'online documentation'. But you'll be shocked to find that the 'lower NCR' are major defects on your product that may cost you MILLIONS although the NCR is only 1 -2. So be careful during an analysis especially when you're doing ISO 9000. And also, don't focus at the 'bad numbers' but also the 'good numbers' (conformity) - as the latter will help you in BRANDING yourself - how do you want your customers to view you....so don't forget your strengths as well (SWOT)

But at least you can learn two things :

a) An objective or goals or KRA may not be 'ACHIEVABLE' if properly justified, (but they should be MEASURABLE of course)
b) You must have a THOROUGH data analysis and find out 'what went wrong' before you make decision.

Hey..wait a sec...where's KPI?

Huh, don't you see? KPI + KRA = BALANCE SCORECARD!! Gotcha!! (That's why I highlighted Balance Scorecard in BOLD)

So don't worry guys, just learn Balance Scorecard and you will learn everything that I've said here now. I'm sure the YAB Prime Minister would agree with me...I'm sure a lot 'thinkers' are telling him 'this and that' and he says...NO WAY...make it simple not complex...so the KPI + KRA are born - one is input, the other is output.

What do you think NIK?

I think that everything I've mentioned here is KNOWLEDGE MANAGEMENT...tadaaaah

The End