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Avoiding Service-Level Agreement Pitfalls

by Alexandra Palmer


In simple terms, a Service Level Agreement (SLA) is a commitment between a service provider and a customer. SLAs may be internal or external but in any case, they are important aspects of running an efficient business. Effectively utilizing SLAs goes well beyond simply establishing service metrics and articulating them to customers. To avoid some common mishaps, the below steps should be considered when establishing SLAs.

1) Evaluate Competitors Offerings

Before setting SLAs, an organization should complete due diligence on what their competitors currently offer and what their customers truly value. Setting SLAs that do not meet market standards may result in lost business. On the other hand, setting overly tight SLAs may be quite costly, and may not drive substantial benefits if the SLAs do not align to market offerings or customers’ priorities.

2) Align Internal Business Units

Quite often, various business units within an organization end up developing their own key performance indicators (KPIs) and SLAs independently. This type of siloed approach results in multiple SLAs across an organization that are not end-to-end and lack customer centricity. Internal SLAs should be developed collaboratively within an organization, to facilitate overall external SLA attainment.

3) One Size Does Not Always Fit All

Some service providers have a one-size fits all SLA that they provide to all customers (eg. 48-hour turnaround on insurance policy applications); however, to more effectively provide service and manage costs, following a customized approach to SLAs may be beneficial. For example, tiered SLAs can be set based on various customer groups, with key customers being offered the best SLAs. The decision should be driven by a cost/benefit analysis and should align with the organization’s strategic goals.

4) Link Performance Evaluations to SLA Attainment

Too frequently, organizations wonder why they are not hitting their SLAs, especially when they feel that they are clearly defined. It seems evident, but oftentimes employee productivity metrics are not tied to activities that will help achieve the organization’s SLAs. Employees will typically prioritize work that is tracked against their productivity, resulting in anything else taking a backseat. A re-evaluation of employee productivity measurement can often provide a boost to SLA attainment.

5) Measurement

SLA attainment should be actively measured, on a daily or weekly basis, by business unit or individual. Furthermore, it is important to measure against set, fixed targets, and to re-evaluate the cost/benefit of the targets at established intervals (eg. annually).

6) Plan for Escalations

Escalation management is an important aspect of service, for when SLAs are missed. A clearly defined escalation process should exist to a) ensure SLA attainment does not continue to be impacted, and b) to communicate to inform the customer on the SLA breach and delivery expectation. Having real-time visibility into SLA attainment can improve the turnaround time on resolving an SLA breach.