Creating Effective Service Level Agreements for Shared Services

Service Level Agreements (SLAs) are a common tool used during the implementation of Shared Services to set service and performance expectations with operating units.  Over time, the focus and structure of SLAs may change or, in some cases, the use of SLAs may be discontinued. Many factors influence the best type of SLA to use within a Shared Services operation, including company culture, maturity of the process area, and the type of relationship that exists with internal customers and stakeholders.

A number of Peercasts^TM in the Shared Services Leadership research area ^[1] have featured member companies sharing their approach to designing and implementing Service Level Agreements.  One of these discussions highlighted their efforts to create simple, straightforward SLAs with the participation of the stakeholders of each operating unit.  Here is the sequence of steps that were followed:

• Set up a face-to-face meeting with key stakeholders ^[2].
• Explain what was being requested, with a focus on the benefits to the stakeholders to participate in the creation of the SLAs.
• Identify services that were critical to the operating unit.
• Make suggestions for what to measure and agree on a short list of key measures for each critical service identified.
• Have the stakeholders identify a primary contact for their operating unit to coordinate the completion of the SLA.
• Complete the SLA and create a simple escalation process for the operating unit to follow if their expectations for service aren’t being met.
• Get started and revise as necessary.

Another Peercast^TM discussion focused on efforts to use SLAs to guide continuous improvement efforts ^[3], using reporting tools that supported drill-downs by business units, with monthly meetings conducted to discuss SLA results with service providers and business units, as needed.  Because much of the Shared Service work had been outsourced to multiple providers, SLAs are a critical control mechanism.   The company also uses a formal corrective action board to review the root cause analysis of critical issues, using an RRCA (Relentless Root Cause Analysis) process.

One of the iPolling^TM questions that supported the Peercast^TM asked members to comment on their company’s approach to SLAs, with 11% reporting that for all customers they have detailed, formal service agreements that have experienced few changes over time.  For an additional 37% of companies that utilize SLAs, their approach is to use detailed, formal service agreements that are modified and improved over time.  The same percentage of companies, 37%, have transitioned from detailed, formal service agreements to SLAs that have less complexity and are less formal.  Of the remaining 15% of responding companies, 5% have always favored brief, less formal agreements, with 10% reporting that the amount of detail in SLAs varies significantly between process areas.

Another question asked member companies to comment on whether or not the company includes customer service level requirements in their SLAs, with 88% of member companies indicating that they do so.  The challenge with including these measures within the actual agreement is the increased need to keep the SLA updated with the appropriate measures and related performance targets.  This is especially true in dealing with multiple business units that have varied levels of complexity in their operations.  This can often result in the need to tailor the SLA to the specific needs of each business unit.

While 88% have implemented SLAs that include customer service level requirements, only 27% report that they are effective at helping to set expectations and responsibilities, with an additional 46% reporting that SLAs are somewhat effective, but do not address all of the issues.  27% of respondents indicate that their SLAs are ineffective.

One of the challenges is ensuring SLAs stay current as work processes, provided services, and business relationships change.  Fortunately, 60% of responding companies have completed a formal SLA review during the past 2 years, which is an important step toward establishing a service level measurement process that is meaningful. 

Regardless of the approach, your company prefers as it relates to the use of Service Level Agreements in Shared Services, at the appropriate stage in the Shared Services lifecycle they can be a powerful tool to help key customers and stakeholders develop confidence in the support they are receiving ^[4] and to avoid often costly and time-consuming conflicts and disagreements.  As the relationship matures, the need for a formal agreement of this type can, in many cases, be reduced or even eliminated.

Does your company use SLAs and, if yes, how have SLAs evolved over time?  If you have SLAs, do they include expectations for customer service levels?

Who are your peers and how are you collaborating with them?

“Peercasts^TM” are private, professionally facilitated webcasts that feature leading member company experiences on specific topics as a catalyst for broader discussion.  Access is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from attending or accessing discussion content.  Members can see who is registered to attend in advance, with discussion recordings, supporting polls, and presentation materials online and available whenever convenient for the member.  Using Peeriosity’s integrated email system, Peer Mail^TM, attendees can easily communicate at any time with other attending peers by selecting them from the list of registered attendees. 

 “iPolling^TM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility of all respondents and their comments. Using Peeriosity’s integrated email system, Peer Mail^TM, members can easily communicate at any time with others who participated in iPolling.