Establishing mutual understanding – Service Level Agreement

From my time spent working over two decades with a myriad of Japanese companies, I learned many valuable lessons.  One key lesson is around promising and delivering.  It's deeply rooted in Japanese culture.  Whether you are in the role of the service provider or consumer, a clear understanding of deliverables instilled a level of confidence which can be unparalleled in other areas of the world.  It is well known that one Japanese business mantra is to under-promise and over-deliver.  When first encountered, a non-Japanese can find the level of detail and planning used to achieve this promise to be infuriating.  Gradually, one becomes accustomed to the process and appreciative of the trust that the agreed conditions will happen within the expected time frame, at least to the anticipated or agreed quality standard and the agreed price or project budget. 

A powerful position in the market can be achieved for small business by clarifying what the mutual expectations are between the provision of your products and services and the client.  It is usually a big company, big contract, standard operating procedures and processes which require significant legal oversight.

A common misunderstanding of a service level agreement (SLA) is that it is one-sided.  i.e. the service level is guaranteed by the service provider.  However, in my experience of implementing SLAs, the degree of response and support being provided by the client is equally as important.

In clarifying both sides of the equation, a level of respect can be expected from the client.  This is because the agreement reached is consultative, mutual and respectful.  I have always found clients appreciate understanding what is expected of them in the process of delivery. 

On the service provider’s side (you), it is important to establish the specific KPIs and service levels being guaranteed to the client.  On the client’s side, they agree to provide levels of access and support, which will allow your company to deliver the contracted requirements with the highest service level.  Once agreed, then you should have a situation optimised to deliver the highest quality products and service within the expected time and budget.

In contemporary business, service level agreements are usually associated with Telco’s and IT service providers.  These businesses are B2C, and B2B and the service provided is objective and measurable.  However, mostly, they are used as a sales and marketing tool which elaborate on the service level guaranteed or expected from the service provider.  Very little is specified on expectations from the client-side.

But I already have a contract in place.  Why bother with an SLA?

Of course, a properly constructed legal contract between your company and the client is the standard way of covering business expectations and process.  Key items like confidentiality, intellectual property, payment terms, service severance conditions and other high-level conditions can be specified in a contract.  If the service you are provisioning is the same and consistent, then an SLA can be embedded in the contract.

Consider this: An SLA can be an informal document used to improve the understanding and commitment between the Service provider and the client.  The SLA can be soft marketing or sales tool. It does not have to be a heavy, legally binding agreement.

The power of an SLA comes in on specific projects or with more detail.  Depending on the products and services you are offering, you will usually benefit from clarifying and specifying the service levels.

From your company’s perspective, what are the important service level KPIs you would aspire to guarantee to the client?  Each of these KPIs needs to be objective with specific measurements.  Consider:

·         Product or service quality

·         Product or service specifications

·         Timeliness in delivery

·         Response time

·         Support availability

·         Communication channels

·         Contact members and contact details.

·         Availability

·         Agreed budget and payment for each project stage

From the client’s perspective, what are the service level KPIs you require from them to be successful?  Consider:

·         Timeliness in response

·         Internal sponsor access

·         Project contact members and contact details

·         Scheduled project reviews

·         Decision-making scheduling

·         Communication channels – phone, email, SMS

·         Availability

·         Facilities prepared and available

·         Service or product testing

·         Availability for training

·         Changes to schedule

For optimal results, each SLA needs to be specific for a client.  One size does not fit all.

In conclusion, if you are interested in differentiation yourself in the market place, establishing an SLA with a client is one way to do this. The benefits of agreeing, project by project or for standard product delivery on the expectations form both sides can instil a higher level of confidence in the relationship and help to ensure an optimised outcome — all leading to a longer and more successful business partnership.


Wikipedia: Service-Level Agreement