Slices Of SIAM: The Service Level Agreement Trilogy, Part 1
In our latest “Slice of SIAM” Michelle Major- Goldsmith & Simon Dorst look at the relationship between SLA’s, KPI’s & SIAM when outsourcing with multiple providers. Read the previous slice, Dear SIAM meet OCM here.
Part 1 – The basic terms and challenges.
If you work in a service based environment you are most likely aware of the terms Service Level Agreement (SLA) and Key Performance Indicator (KPI).
For the avoidance of doubt, an SLA is an agreement between a service provider (either internal or external) and their customer that defines the level of service expected from the provider it(typically includes a mutually agreed state of a service, boundaries of a service scope and agreed and guaranteed minimal service performance). SLA’s are output based in that their purpose is specifically to define what the customer will receive as well as detailing the obligations of both parties denoted within the agreement.
Note that in practice SLA’s are often also used as a term to identify the agreement with an external service provider (whereas in most theory this is referred to as an underpinning agreement or contract). The distinction is important though as a ‘true’ SLA (with the customer) is focused on the business needs and its required outcomes (or rather the value of the services needed to achieve those), whereas an underpinning agreement is more focused on the performance of an individual provider. Particularly in a SIAM environment (with multiple providers) this is a significant distinction, but more on that later.
A KPI is a metric that provides a quantifiable measure of what can be monitored. But unlike ‘straightforward’ metrics or measurements, a KPI indicates performance of the efficiency and effectiveness of a service and its operational status. Thus, a KPI is often expressed in a %, in relation to a target (for instance: 98% of incident resolved within SLA target) or as an increase\decrease (like: a 25% reduction of incidents after the release of the patch).
All the above is born from a necessity to control delivery and performance. After all you cannot manage what you cannot measure. But even a simple statement like that is fraught with danger.
Firstly, a KPI is an indicator, but often targets, numbers and reports are taken at face value, without analysing what it indicates. For instance: a recently insourced service desk, saw an increase in the number of incidents compared to the old, outsourced service desk. In itself, it appears negative (more incidents per week), but when further investigated it turned out that the old service desk didn’t always log all incidents received, and secondly the service desk had such a bad reputation, users often didn’t bother contacting them. So, there were more recorded incidents, and that is, in fact, a good thing.
Secondly, a single KPI can be easy enough to achieve in isolation, without (positively) impacting on the service quality. Take for instance ‘call pickup time’, a common KPI for service desks.
“I could achieve a target of ‘95% of calls are answered within 30 seconds’, by simply picking up a phone call and then disconnecting: a 100% of calls are actually answered within 10 seconds!”
However, KPI’S should ‘hunt in packs’ and by combining the above example, with a KPI around ‘first call resolution’ and I can no longer disconnect, nor can I spend hours on the phone trying to resolve each (answered) phone call.
Throw in a KPI around satisfaction (NPS*), and these three KPI’s together measure the balance of speed & quality on a service desk.
*NPS – Net Promoter Score
The moral here is that with a better understanding of SLA’s (agreement with the Customer) and KPI’s (a measurable target, indicating quality), we can start to focus on measurement of the business needs and its required outcomes.
In future ‘SIAM slices’ we will continue to share some other critical success factors for defining SLA’s.