Service Level Agreement: If it fits.

Definition: A service level agreement (SLA) is a contract between a service provider (either internal or external) and an end user that defines the level of service expected from the service provider. SLAs are output-based in that their purpose is specifically to define what the customer will receive.

Background

The application of SLAs is widespread, they are used across all sectors of industry, commerce and public services.  My personal experience is limited to the public sector where they have been commonplace since the early 1990s in various and evolving forms.  Initially they had been used as a form of “internal contract” when the public sector first started to tinker with the concept of internal markets and “soft charging”.

Thankfully they are now utilised in more appropriate and meaningful purpose, and there is a better basic understanding of what the benefits are.  However, still there is room for improvement especially so in the most basic of challenges – is this an appropriate vehicle? And, are we properly engaging with the supplier in drafting and introducing the SLA?

SLAs can form part of a commercial contract with a specific focus on outputs but will rarely be used outside of a contract between organisations but rather increasingly seen as an effective tool to formalise internal relationships within larger organisations.  In particular there is an attraction to use it as a means to cement formal relationships between internal hived call centres and hubs supporting HR, IT and finance for example to business areas.

Although the SLA can provide the benefit of tracking service delivery across multiple sites it should not be determined as the most suitable vehicle until a proper assessment has been completed to ensure this is indeed the best option for the required outcome.  However, it might be seen as a way to provide detailed assessment of the quality of service; to benchmark service  across multiple locations or between different business units. This internal benchmarking might be used to market test and provide a value comparison between an in-house department and an external service provider.

SLAs are, by their nature, “output” based – the result of the service as received by the customer is the subject of the “agreement.” The (expert) service provider can demonstrate their value by organizing themselves with ingenuity, capability, and knowledge to deliver the service required, perhaps in an innovative way. Organizations can also specify the way the service is to be delivered, through a specification (a service level specification) and using subordinate “objectives” other than those related to the level of service

This solution can provide the architecture to describe the requirements of the service required, the means by which the supplier’s performance will be measured, and an AGREED explanation of how parties will review and assess outcomes.  A good SLA will also accommodate a description of incentives to drive performance up, and also detail the rectification process to address any and all failures.

The How

A good SLA encourages regular joint consideration and discussion of performance.  It will provide opportunity to identify trends and initiate early enquiries in any areas where there is significant good or poor delivery.  Any mechanism which supports transparency, and encourages joint enterprise is a positive – it will support relationships at personal and incrementally to corporate level.  It is within such environments that there is a degree of more willingness to propose innovation, openness to describe risk or even incident.

Drafting of the agreement should be a joint enterprise.  That all both parties are present during the development of the document will ensure “buy in” and as the agreement evolves, and like all good contracts it should grow with the business, each side will have optimum understanding of what is being required.  Today there are a multitude of templates which are available, and many organisations also hold internal pattern documents but it is essential that the SLA fits the specific needs of the business – and the final iteration is agreed this is the case.

It is critical whatever a contract is applied that practitioners and users understand what is being asked of them.  The SLA must be constructed using terms which are widely accessible, and where there are technical references these are properly referenced and explained.   By illustration, any person within your organisation should be able to understand what is being asked of them and how their performance will be measured.  All this seems intuitive yet still many if not most agreements remain under a fog of legalisms and technical language which are largely indecipherable except to the original authors.

Benefits

A good SLA will ensure that all parties know and accept their responsibilities.  It will illustrate how the service provider can earn credits for exceptional performance, and what the consequences will be if service fails.  A contract which is written and reviewed jointly will cement a relationship, and provide a better foundation to respond to both threats and opportunities.  A SLA will detail how risk and performance will be measured, and describe the tests and reviews which will be undertaken.  This removes the need for discussion, debate and negotiated enquiry, it should encourage greater transparency but certainly it removes a possible cause of regular challenge and debate.

The Pitfalls

Is there a robust relationship management process in place?  As I have written in my other Contract Management posts a positive and engaging relationship between partners is key to success.  Although SLAs are common place internal processes this should not diminish the importance of setting up, promoting and developing relationships.  If an organisation is not committed or even convinced of the value should question whether there is therefor any point at all in having the SLA at all.

Drafting the SLA can become complicated, and focus should remain on keeping the document clear, concise and “usable”.  If any User cannot readily identify their responsibilities or risks then your document is failing.  Ensure there is agreement to hold regular review of not just performance as detailed within the SLA but also the terms of the SLA to ensure that the document remains relevant and productive.

There is a risk that the SLA becomes the focus of the business rather thhan the required outcomes.  If management and delivery of the SLA becomes a burden then this again should be a warning with regard to either the requirements of your agreement or else a fundamental question as to whether an SLA is the correct approach at all.

Keep it live, keep it current

Start as you mean to go on.  Engage with your partner in the drafting of the agreement, ensure there is a joint understanding of what is required (standard), how performance will be measured (metrics), and what needs to be done to increase benefits.  It is a critical part of your relationship that everyone is encouraged to open reporting and risk-taking, and as your journey moves so this document should be changed to reflect changes in relationship, environment and contract cycle.

The SLA should reflect your relationship.  This is a living document and requires constant referral, routine review and agreed change process.  This will allow both parties to consider positive changes to targets and standards, detail how problems might be resolved and remove areas where there might otherwise be grounds for dispute or continuous negotiation.

Start the process off with informal meetings but it is essential that once the relationship and review processes have been established that this includes formal opportunities to review the SLA.  Best practice would be to keep these meetings outside of any related to performance, and might include a wider set of stakeholders from both parties.  The best SLA will meet needs, motivate innovation, and provide assurance to both organisations.  Create a document which might be readily understood by any person within your organisation – this is the ultimate test of quality.

A successful service level agreement helps parties to manage expectations, present certainty of operations, and produce best outcomes.  Invest the time and resources, and the SLA will provide the focus for a winning relationship.

 

 

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