What Is SLA In Business

What Is SLA In Business

As a business person, when asked, “what is SLA in business” do you answer with confidence or skip the question? If you do the former, good job! However, if you do the latter, you still have much to learn. You don’t have to search far to know what SLA is in business, as this discussion will enlighten you.

Keep reading to discover more.

What Is SLA? – What Is SLA in Business

An SLA (service-level agreement) is an agreement between a company and its customers that states and defines the level of service the company offers its customers.

In the agreement, the metrics for measuring your services, remedies, and penalties are to be stated when the level of service is not achieved.

With SLA, your customers know what they can expect from your service quality and the type and remedies to use when you don’t meet the requirement.

Customer service and technology service providers mostly use SLA.

Importance of SLA in Business – What Is SLA in Business

SLAs are vital in businesses as they are the foundation for building trust between customers and a business.

They ensure that customers’ expectations are adequately managed and pinpoint the issues your business can resolve to your team.

With a good SLA, both parties have a mutual understanding of the service expectations.

When you implement SLA in your business, some of the benefits you will enjoy include the following:

Strengthened Relationship Between Your Customers and Your Team – What Is SLA in Business

When doing business, people often consider the risk of it falling apart.

In cases where the terms of the business transaction are not clearly defined, the trust a person has for the customer or company will reduce.

This will consequently increase the concerns over the risks they might have to bear.

SLAs help to ease these concerns and improve trust between the parties involved in a business transaction.

This is because the services, remedies, and penalties will be clearly defined for both parties.

You are ultimately strengthening the relationship between customers and your team business.

Formalizes Communication

Having a conversation about issues with stakeholders can take a lot of work.

Listening to customers constantly complain when a  business service performance does not meet their unspoken or unwritten expectations is draining.

Having an SLA ensures that communication is formalised for you and your stakeholder to discuss agreed-upon conditions and terms.

Improves Morale and Productivity – What Is SLA in Business

SLA also defines incoming requests level of urgency.

This will help your IT team focus on the more important and urgent requests.

As a result, their morale and productivity will be high as they will know what to do and focus on at all times.

Types of SLA – What Is SLA in Business

SLA, service-level agreements are of different types.

Each of these types sets up contracts for different business relationships.

Customer-based SLA – What Is SLA in Business

This type of SLA is usually for a specific or single customer.

It comprises all the essential services that the customer will need.

The quality and type of service agreed upon by the customer and the vendor or company will be clearly stated.

For example, a manufacturing company signs an SLA with their customer (a t-shirt store).

In the SLA, the manufacturing company will state the services it will offer to the T-shirt store.

The agreement will include material quality, numbers and sizes of t-shirts expected to be produced, timeframes for production, and delivery dates.

Service-based SLA

Service-based SLA is made for all customers requiring the same service type.

It is a standard agreement for all customers.

As a result of it being for all customers, this type of SLA is more straightforward.

It is also more convenient for the service suppliers.

For example, the IT helpdesk usually has a service-based SLA.

This means that all end-users who have signed the service-based SLA are valid for the same services.

Multi-level SLA – What Is SLA in Business

This type of SLA allows the adjustment or combination of different SLA types to meet customers’ needs.

In other words, with a multi-level SLA, you and your customers can pick different conditions from different SLAs to create the most convenient service.

SLAs Challenges – What Is SLA in Business

SLA sounds very simple in theory.

After all, all you need to do is draft or write an agreement stating your level of service, right?

Yes, it entails that.

However, when it is time to make one and follow through with it, you will likely encounter one or all of the following challenges:

Difficulty in Tracking and Changing SLA

To know how well you are performing in your SLA, you will need to gather several raw data, draft and write queries, and build complex Excel reports and formulas.

All of this takes time and a lot of effort to do.

But you need to do them to track your performance against your SLA effectively.

Furthermore, you might need to change SLA when modifying them for a multi-level SLA or when you need to change your service-level SLA.

SLAs are often hard-coded or customised into several service desks.

As a result, it will take many days of effort towards development before you change them, making it quite difficult to change an SLA.

Unalignment with Business Goals or Priorities – What Is SLA in Business

Often, SLA, especially service-based, doesn’t evolve or change as the company does.

Most business SLAs were made a while ago, and people in the company just go along with them because it was there from the beginning of the business.

As a result, it doesn’t often align with businesses changing goals or priorities.

Rigid Reporting  

Although several circumstances and factors influence SLA (such as the time frame it took a customer or client to reply), they don’t give an account for this in SLA reports.

The only thing the report takes into account is if you meet the SLA or not.

There is nothing in an SLA report that help pinpoint issues and that can help you to improve continually.

However, if you set up metrics for SLA, you will be able to overcome this challenge.

Steps to Set SLAs – What Is SLA in Business

In all honesty, setting up an SLA is quite tasking, especially when you want to measure things that will enable you to know your customers’ expectations.

However, it can be easier for you if you follow these steps:

Set Your Baseline

You need a starting point when setting up an SLA, whether customer-based, service-level-based, or multi-level-based.

That baseline should be your existing SLA.

What you need to do is to assess those existing SLAs and your performance against them.

For example, you can have an SLA to manufacture and deliver products in one week.

Now, look at that agreement and how well you were able to deliver.

Still, with your existing SLA, check if what you offer aligns with your business goals and that of your customers.

Directly Ask Your Customers – What Is SLA in Business

Another thing that can help you set SLA that meets customers’ expectations is to ask your customers directly.

Speak to your customers about how well you are doing and allow them to provide you with constructive feedback.

They will tell you those things that are good the way they are, the ones that need changes, and if you are providing the best services.

You cannot set up an SLA without your customers, so ask them for feedback.

Draft Your New SLA

The next step is to draft or build your new SLA.

This new one should be based on your results from the earlier steps.

That means you might need to do away with those services that are no longer useful or needed.

It can also mean adding new services that will please your customers and add better value to your business.

Get Your Management/Employees Support – What Is SLA in Business

You’ll also need the support of your management team.

So, let your different team leaders know about it.

You should also let the other staff members know about the new change.

SLA versus KPIs – What Is SLA in Business

KPIs Key Performance Indicators, also known as metrics, are tools used to measure the performance level of businesses and teams in businesses.

SLA is often confused with KPI.

One reason for this is that they both provide valuable information for a business.

SLA provides businesses with information about customers’ performance expectations and sets agreements to meet those expectations.

Meanwhile, KPIs provide businesses with information on their efficiency and performance toward achieving organisational expectations or goals.

Factors to Consider When Selecting and Setting Metrics for SLA – What Is SLA in Business

SLAs cannot effectively work alone in measuring their performance level because they are just agreements set to ensure that businesses meet their customers’ performance expectations.

In other words, they cannot effectively tell if they are doing the work of meeting their service level or customers’ performance expectations.

This is where KPIs come in.

KPIs measure how well service-level agreements meet their customers’ expectations and service levels.

You need to improve your performance in business to grow and succeed.

Knowing how well you are performing and what you are failing will help you improve.

Metrics make sure of this.

Your SLA performance should not be excluded from the needed improvement.

So, you need to set KPIs for your SLAs.

It can be tasking to decide on the best KPIs to utilise due to the numerous types.

However, the following can help you to decide the right metrics for your SLA

Check if the Metrics Motivate The Appropriate Behavior – What Is SLA in Business

When selecting KPIs for your business, checking if a metric motivates the appropriate behaviour for your business and your clients is the first thing to consider.

Metrics define performance objectives.

As a result, both parties (customer and vendor) involved in a service-level agreement will endeavour to optimise their actions to achieve those objectives.

So, before picking any metrics, identify those behaviours you would like to see in your business.

After that, put yourself in your customers’ shoes and test the metrics you have in mind.

Do the metrics motivate the appropriate behaviour?

Check if the Metrics Data is easily collected

You might desire to use specific metrics but need help to use them effectively because of the difficulty in data collection.

You will need more than this.

So, to avoid stress, go for SLA metrics that can automatically collect data.

Avoid investing in metrics that will require manual data collection.

Check If the Metrics Can Reflect Different Factors – What Is SLA in Business

One major reason service-level agreement cannot measure performance is its rigid reporting.

This means the reporting only focuses on whether a service is met, neglecting other factors that can pinpoint why and how to improve.

Sometimes, service levels are not met because of a customer or client’s fault.

Yet, the vendor or provider is punished because there is no detailed report.

As a result, this cannot foster improvement.

So, check if the metrics you have in mind reflect different factors from both ends.

SLA is an agreement, so its metrics have to measure both the customer’s performance and the service provider’s.

Corrective measures have to evolve if the customer or supplier is in the wrong to ensure that mistakes don’t happen again.

Less than Excessive

Another thing to consider when selecting and setting up KPIs for your SLA is the number.

Having several metrics to measure your SLA can be tempting because you might think it is better to have more than less.

However, the reverse is the case.

This is because excessive metrics provide you with several data that will consume time to analyse and possibly confuse you.

So, rather than several metrics, go for fewer ones so that you can easily analyse and compile your reports in the shortest time possible.

Nonetheless, try not to have too few, as you might miss out on some factors that can help you pinpoint areas of improvement.

The best thing to do is to go for relevant important ones that are easy to gather data and analyse.

Set Proper Baselines – What Is SLA in Business 

SLA metrics performance level should be attainable and reasonable.

This way, it can be functional in measuring SLA performance.

If not, it will calculate an SLA performance based on a level not attainable.

Unless you have strong historical measurement data available, you should be ready to readjust and revisit metrics settings through predefined processes as stipulated in the agreement.

Example of Metrics You Can Monitor – What Is SLA in Business

You can monitor several aspects of your SLAs.

However, you should keep it simple to avoid excessive costs and confusion.

Depending on your services, here are some kinds of metrics you may want to monitor

  • Service availability
  • Technical quality
  • Defect rates
  • Security
  • Business results

Best SLA Practices for Small Business – What Is SLA in Business

Regardless of your business type or size, using the finest practices for SLA can enable you to succeed in customer service.

The following are tips that will help you as a small business owner to utilise service-level agreements in the best way:

Add Flexibility to Your SLAs

Your business might face more changes compared to established businesses.

For instance, you can have a peak in your order in a month, and the next unplanned issues with your suppliers or manufacturers could cause a throwback.

Or you can have an instant change in your delivery service, making it impossible for you to achieve the original goals.

In situations like this, you just need to redefine the expected services.

So, you need to ensure that your SLA is flexible.

However, don’t let go of your key performance indicators while doing this.

Rather, you should realign your SLA metrics and make your goals more realistic to match the chaotic time and effective strategies for future happenings or incidents.

Set Attainable and Aspirational Metrics – What Is SLA in Business

To please your customers, you would need to improve your SLA performance.

So, your focus should be on traceable and incremental improvements.

As you consistently work to hit your goal for a while, build it to become higher, slowly and steadily.

Utilise Internal SLA for Your Team Communication

You can improve communication in your company with internal SLAs.

Internal SLAs are just agreements that establish expectations between you, employees, and the employees themselves.

For example, you can establish realistic expectations for your customer service team to get supplies from your supply teams.

Or you can set a timeframe for your developers to handle bugs in your software.

Depending on your company culture, you can opt for a formal SLA outline or simply draft lists of expectations where the people involved get to sign in.

Conclusion on What Is SLA in Business

SLA (service-level agreement) ensures that yoou and your customers know what to expect from your services.

When you cannot meet your service level, there are penalties and remedies stipulated in the agreement for it.

SLA comes with amazing benefits.

However, it can also come with downsides if you fail to meet your customer performance expectation.

Therefore, measuring and working to improve your SLA is essential.

Setting up SLA metrics helps you to make those needed improvements.

This discussion has covered everything you need to know about SLA.

So, ensure that you take advantage of it.