This blog will provide insight into why SLA consultants say that a Service Level Agreement is a way to go when there is a need for procuring deliverables of the required quality and are delivered on time.
SLA recommended by Consultants, When an organisation works with a service provider, whether internal or external, often, the two parties do not clearly document expectations, and when an unspecified expectation goes unmet, there is blame and animosity, while both the parties involved suffer losses in various ways. This can happen in simple, small tasks or for tasks on a larger scale.
Operations that are functionalised have multiple handoffs in a single process itself. This will require that different business units complete specific deliverables with a specific quality by a specific deadline. If operations are outsourced, the external provider of services must meet the same quality and deadline. This will need a strong governance structure that can prevent sub-standard deliverables and/ or missed deadlines. It becomes essential to define expectations and processes clearly. The processes and expectations should also be measurable, lend themselves to tracking and data collection, and enable satisfaction with the service delivered.
According to SLA consultants, the best way to achieve this is via service level agreements (SLAs).
An SLA is an informal or formal agreement arrived at between two parties. It contains the scope of work, and the key responsibilities are for both the party getting into the agreement. The SLA may be between an external service provider and a client and be contractually binding, or it could be between an internal one between two departments in an organisation.
Value of a Service Level Agreement
An SLA is not just meant to pull up and punish the party that fails to keep up its end of the promise as laid down in the SLA. The key purpose is to provide clarity, processes, methodologies, redressal mechanisms, etc., to make the path smooth for both parties of the agreement and achieve quality deliverables on time. But, punishment for SLA is a very real thing that applies to both involved parties. There are several reasons why SLAs are a go-to for ensuring perfect service outcomes.
SLA consultants recommend SLAs as they:
- define the standard of service to be provided
- identify service-level issues
- identify the impact of all service level issues on company operations
- identify corrective measures
- define the means to measure the standard
- define the penalties for failure to meet standards
- define incentives to exceed the defined standards
- define the responsibility of both parties
- specify mutual accountability.
Importance of an Service level Agreement
Prior to implementing the SLA, it is imperative that key criteria for evaluation criteria (metrics) are defined. Tools for tracking these metrics also need to be defined and put into place.
An SLA can be used for performance monitoring with the help of accountability and transparency. Build-in reporting cycles and formats, and this will also enable the service provider to know its own performance compared with the required standards. This will let the service provider take immediate corrective action.
When dealing with outsourcing, it is essential to identify those aspects that, when missed, will be considered major or minor SLA violations. Consequences for these violations also need to be identified and defined. If there is a minor violation of the SLA, the consequence could be, for example, service or fee credits, and a major violation could be considered an SLA breach.
It is important for the two parties to review the various scenarios that are possible, define the penalty each scenario warrants, and identify the possible ramifications of the penalties. Where the SLA is being drawn up between two departments within an organisation, the penalties might differ, yet there must be consequences for any violation that happens. For example, use can be made of management reporting to highlight issues when they arise and make the violating department take corrective action and be warned in the future.
What to Include in an Service Level Agreement for Clarity?
An SLA is a great document for the service provider and the customer. It can provide full clarity to both the parties as far as the deliverable, goals, expectations, breach, agreement violation, penalties, etc., regarding the service is concerned. Putting the following items into the agreement will provide a good SLA that will help both parties sail through the task much more easily and with greater awareness.
Summary
Provide a summary of what the agreement is about. List down what will be the deliverable services. Specify who is delivering the service and to whom, and how the delivery will be measured for success.
Expected Goals of Both the Parties
For SLAs between customers and a business, generally, the goals specified in the SLA apply to the customer. If this is the requirement, then the service provider and the customer must work together to set up measurable goals that are feasible to meet by the service provider and the customer.
Is this an internal SLA between your marketing and sales departments? In that case, both teams should have their goals outlined in this section of the contract while ensuring that when marketing hits its goal, sales can reach its own goal as a result.
Clarity of Expectations
All the expectations of both parties must be put down in the SLA. For example, besides the final deliverable, the customer might want daily reporting, a weekly meeting, work-in-progress documents, and such from the service provider. This must be specified in the service agreement.
Point-of-Contact
Point-of-contact or POC is a person assigned by the customer at their end and by the service provider at their end. This person is responsible for ensuring that goals are met, and this person will be contacted by the other party for updates, redressal, raising of issues, etc. Roles need to be assigned, and there has to be complete clarity regarding the involvement of different persons in the SLA.
Plans for SLA Breach
If there is a slippage in meeting goals specified in the SLA, there must be a penalty of some sort imposed on the erring party. The penalties and consequences must form part of the SLA.
When to Cancel the Service Level Agreement
It is essential to define and specify the conditions under which the SLA will stand defunct in the SLA itself. It is also essential to specify the consequences for both parties under the different contract termination circumstances. While with external service providers, the conditions will be harsher as there generally is much more at stake, with internal customers in a company, these consequences for termination of the SLA will generally be much more lenient.
Conclusion
A well-formulated SLA provides various benefits to both the service provider and the client. For an SLA to be effective, it has to be implementable, enforceable, and measurable. An SLA adds great value to a working relationship.
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