No matter what service you offer to consumers – financial, SaaS, IT support, consultancy, etc., you need the right service level agreements (SLAs) to strengthen relationships.
However, despite the proven effectiveness of SLAs, many people say that if people trust each other, why do they need a formal agreement, and who is gonna read it anyway?
“We know service level agreements (SLAs) are boring to read, but they’re a crucial part of contracts. An SLA describes in detail what you’re paying for and establishes how that level of service will be measured.” – Tim Burke
While it is true that nobody likes to read a formal contract before buying your services, it is also true that SLAs can be helpful in case of conflicts. Moreover, they allow managers to gauge their team’s effectiveness in meeting customer expectations.
If you want to educate yourself about service level agreements, then this blog is for you. In this SLA guide, we will understand the various components, benefits, and types of SLAs. We will discuss the role of help desk software in tracking service level agreement metrics and explore the top best practices you need to follow.
What is a Service Level Agreement (SLA)?
A service level agreement or SLA refers to a formal contract that dictates a set of deliverables that the service provider has agreed to provide to an end-user. In simpler terms, a service level agreement is a formal agreement between a business and the end-user (employees or customers) that elaborates the services that will be delivered, how they will be delivered, and the quality that can be expected.
For example, many SaaS-based companies promise their customers 99.9% service uptime. Similarly, a business can create an SLA to respond to a customer’s request within 6 hours. In addition to dictating the quality of services, SLAs determine what actions customers can take when SLAs are not delivered or violated.
What Does Service Level Agreement Include?
Now, that we have explored the service level agreement definition, let’s understand its various components. What exactly an SLA includes can depend on the needs of both parties. However, there are some common components that should be covered.
1. Statement of Objectives
A service level agreement should always begin by stating the objectives of both the parties involved – the service vendor and the service user. It should clearly state what level of service is expected by the user to achieve its objectives. For the vendor, the objective should be to offer uninterrupted, high-quality service and meet expectations.
2. List of Services
As the name suggests, this section includes information related to all the services that are to be delivered. In addition to the list of services, the user might need additional services such as consulting, reporting, support, etc. for smooth operations. Therefore, to create a transparent SLA, you need to involve these additional services as well.
3. Performance Standards
Performance standards dictate the expected quality of services that are determined by the client. It includes certain benchmarks to measure the performance or service quality. The actual service level offered is measured against these benchmarks to ensure the performance standards have been adhered to.
4. Terms & Conditions
For superior service level management, you need to mention certain terms and conditions. For instance, the time period and frequency for which the services are offered must be available to the end-user. It should also involve the minimum and maximum amount of time that a service provider is allotted for responding to a request or resolving an issue.
5. SLA Violations
What happens when the service provider fails to deliver what it promised? This section states all the actions the service user can take when such a situation arises. For instance, the service user might be eligible for special discounts, perks, free services, etc. when the service provider fails to meet expectations. Remember, if service violations are repeated often, they can hamper the relationship between both parties.
Why Service Level Agreement is Important & Benefits of Using SLA
Right from the alignment of expectations to building stronger relationships, the role of SLAs is extremely important for any organization. Here are the top service level agreement benefits that you should know:
1. Improve Communication
Communicating every now and then about service expectations can be challenging. A well-designed SLA helps you formalize communications with your customers or internal employees.
Imagine a customer complaints that your company took more than 4 hours to respond to an issue. In such a case, you can use the service level agreement as a reference and communicate to the customer that they are required to wait at least for 6 hours. (or any other amount of time that is stated in the SLA). This is a great way to enhance the quality of communication with your customers and help them adjust their expectations.
2. Establish a Strong Relationship With Users
For the long-term success of any business, internal and external relationships must be handled with care. When two parties accept an agreement, there are fewer chances of miscommunication or conflicts.
A service level agreement is a great tool to establish trust between the service provider and the service users. After all, you create a transparent document that is agreed upon by both parties and can be easily referred to in case of confusion. SLA is the first important step towards building a transparent, mutually benefitting, and long-lasting relationship.
3. Avoid Conflicts
Whether you sell a ready-to-use product or a service, conflicts are bound to happen. The way you handle these conflicts can make or break your brand and determine your business longevity.
For instance, imagine you are a B2B company that sells consultancy services to other businesses. One of your business clients complains that your team was not available during a holiday. In this case, an SLA (that states service will not be available during national holidays) can help you avoid serious conflicts. However, in case of genuine conflicts, your business must accept that the SLA has been violated and communicate the steps you are taking to fix the problem.
4. Enhance Productivity
Establishing service level agreements give a sense of direction to your team. They can easily organize their tasks, plan their day, and pace their work to meet user expectations.
For instance, if you offer IT services to your employees and internal teams, your support agents will always have a sense of urgency. They will be aware of the minimum and maximum time they have to respond to a request or resolve an issue. Therefore, SLAs ensure your team is always on the right track.
What Are the Different Types of Service Level Agreement?
By understanding the different types of SLAs, you can strengthen your service delivery strategy.
1. Customer Service Level Agreement
A customer service level agreement refers to a formal agreement between a business and its various customers. It is also called an external service agreement. For example, a SaaS business like Netflix can create an SLA for its customers based across the globe. The SLA can involve standards of service, escalation procedures, pricing details, terms for cancellation, and other details.
2. Internal Service Level Agreement
An internal service level agreement involves an organization and its internal employees rather than customers. For example, an organization can have an internal IT support SLA that determines the quality and level of support to be offered to employees. This can prove to be handy when staff members demand support services for their laptops, mouse, printers, software, or other IT assets.
3. Multilevel Service Level Agreement
A multilevel service level agreement usually involves multiple parties. This type of SLA divides the agreement into various levels that are specific to multiple end-users using the service. This is a great option for businesses that have different tiers of customers who are paying for different types of service plans. For instance, you can create a multilevel service level agreement for customers of various plans (Free, Basic, or Premium plan).
Examples of SLAs
How are popular brands managing their SLAs? What do they choose to include or avoid?
Here are some service-level agreement examples that will offer rich insights.
1. Amazon – World’s largest e-commerce platform
Alexa for business is a service by Amazon that helps employees use Alexa (AI-powered intelligent assistant) to get more work done. Amazon offers a monthly uptime percentage of 99.9%.
2. Slack – Business communication platform
Slack is a popular team collaboration platform that helps teams share ideas and track work. Slack’s SLA highlights that a service credit will be offered to users in case of SLA violations.
3. Reynolds – Community college based in Virginia, USA
Reynolds community college clearly describes its help desk operation hours.
What is the Difference Between SLAs and KPIs?
A service level agreement is a formal agreement between a service provider and the service users. Whether the recipient of the service is a customer or an internal employee, it dictates how the relationship will progress in the future. On the other hand, key performance indicators (KPIs), also known as service level agreement performance metrics, are data points that reveal the success of your team in meeting the terms of the SLA.
Let’s understand this better with the help of an example. The customer service department of a business has the responsibility to resolve customer queries and issues as per the service level agreement. The SLA in this case can hold information about the maximum turnaround time for different channels such as the phone, chat, or email. However, the KPIs, in this case, can be CSAT (customer satisfaction score), ticket resolution time, first contact resolution, etc. that measure the success of your team in meeting customer expectations.
Read More: 15 Help Desk Metrics to Improve Customer Support
How to Create SLAs & Measure Performance
How to create service level agreements (SLAs)? Well, this section mentions some key steps you can take to create meaningful SLAs and measure your performance.
1. Understand user expectations
Irrespective of the type of business you run, understanding your service users’ expectations is the first step in creating an SLA. Directly engage with your users and ask them what exactly they expect from your business. Do they want a faster resolution to their problems? Do they expect 24×7 agent availability? Are they looking for more FAQs/articles around common help topics?
2. Decide hours of operation and contact channels
Once the expectations are crystal clear, you can create a list of services that your business can offer – consultancy, support, maintenance, etc. Once the list is ready, determine the prices for the same and decide your hours of operation. To avoid future conflicts, you must also choose the communication channels that customers can use to contact you whenever they need help with something.
3. Select metrics to measure SLA performance
How do know if you are on the right track if you don’t measure performance? Service level agreement metrics can help you measure your team’s performance from time to time. You need to select the metrics that align with your business goals and help you meet user expectations. Some examples of SLA metrics are service availability, service uptime, error rates, security, first response time, resolution time, user satisfaction, and more.
4. Build an SLA draft and seek approval
Once you are through with all the steps mentioned above, it’s time to compile an SLA draft. Remember, your draft does not have to be perfect as there might be frequent updates or changes in the future. Share the draft with the appropriate leaders and ask them to share their valuable inputs. They might wish to remove some services or add more metrics for superior SLA management.
What Are the Challenges of SLAs?
Managing service-level agreements can be a daunting experience for many organizations. Your team might have to juggle between managing specific SLAs designed for customers, internal employees, vendors, investors, and other key stakeholders. Let’s discuss some of the top challenges of SLAs in detail:
- Different SLAs for different users: If you are a SaaS business, you likely have users who have subscribed to different plans. Formulating different SLAs for different plans can be a major challenge. For instance, you might have offered 24×7 premium support to the users of your top-tier plan and not other users. In this case, your support agents have to always keep this information in mind.
- SLAs have to be updated often: As your business grows and you expand your service offerings to end-users, you need to frequently update your service level agreement. There can be changes due to tax laws, government regulations, new business strategies, the cost of raw materials, etc. A lot of times SLA features in help desk software can take days of development effort to change them
- Reporting can be challenging: Although there are a lot of metrics to measure SLA performance, analyzing reports can be challenging. For example, you might promise 99.9% uptime for your service. However, even when a client complains about downtime, there can be several other reasons behind it such as low internet speed, a faulty device, etc. So reports might show that SLA has been violated but you can’t really blame your team for this.
SLA Best Practices You Should Follow
Take a look at your company’s current SLAs and how you manage them. Are you happy with what you have or do you see room for improvement?
Here are the top five service level agreement best practices that you can implement today:
1. Establish Different SLAs for Different Services
When you have multiple services on offer in your service catalog, having the same terms for every service is not possible.
Do not treat a service level agreement like an umbrella that can encompass all the services offered by your organization. Instead, you must look to create separate SLAs for different services.
If you offer IT support services to internal employees, this is what different SLAs can look like:
- All issues and requests will receive an appropriate response before 24 hours
- Requests for hardware will be fulfilled within 3 days of receiving approval for the same
- Office laptops will be issued to new employees within one week of request
The above example clearly shows why it is important to carefully establish SLAs for different services. This can help your business avoid unnecessary conflicts in the future.
2. Use Help Desk Software to Track SLA Performance
Even if you are a product-based company, you need to offer customer service to your audience. Among all the different types of services, the demand for customer service is always on top. But how do you meet the rising customer service expectations?
Around 54% of all customers around the world say they have higher customer service expectations than they did just one year ago. – Microsoft
A dedicated help desk software can hold the right answer. You can monitor the top metrics for service level agreement such as average first response time, average ticket rating, open tickets, and more.
Moreover, customer service managers can generate insightful reports, gauge agent performance, and ensure SLAs are always met. The tool even allows you to share surveys with end-users and capture their valuable feedback.
Read More: Top Benefits of Customer Service Reports
3. Consistently Monitor the User Experience
There is no point in creating SLAs if it does not have a positive impact on the people who use your service. Encourage every new customer to read the service level agreement terms carefully and raise questions if they have any confusion.
For a better user experience, keep the language of your SLAs simple and jargon-free. Do not expect the users to understand each and everything you mention.
You can share surveys with your users to understand how happy they are with your service quality. You can ask questions such as, “Overall how satisfied are you with our current service?”, “Do you agree that our company is able to meet our SLA terms?” Consistently monitoring the service user’s experience will help you identify bottlenecks and retain them for a long period of time.
4. Review & Update SLAs From Time to Time
As your organization expands to new markets and you enhance your services, you must review the SLA terms. After all, your SLAs can get rusty if not updated regularly.
A lot of businesses fail to meet their SLA targets and as a result, lose the trust of their valuable clients. What can be the reason? They are stuck with old SLAs that don’t do justice to their current operations.
For example, suppose you had promised a response to a customer email within 6 hours. However, to fulfill this SLA target you had to increase the number of your email support agents. Soon you realize that a majority of customers prefer live chat over email. Now, does keeping the same email SLA make sense anymore? Not really!
Therefore, for continual improvement, service level agreements should be reviewed and updated whenever there is any significant change in the demand for services.
5. Sometimes it’s Okay to Ditch SLAs
Service level agreement serves a very important purpose – it does the job of aligning the interests of two parties together. It is important to respect this formal document but you need to remember that SLAs are not set in stone.
Sometimes it’s okay to ditch SLAs based on the situation you are in. For example, during the ongoing COVID-19 pandemic it has not been possible for many businesses to fulfill SLA terms due to a shortage of workers, lack of communication, and other reasons.
In such a situation, rather than feeling guilty, you must try to proactively communicate with your audience. Send proactive emails, chats, or SMS notifications to update customers about the interruption in service. In case, there is any change in operating hours or service quality, inform the same. To keep things transparent with your audience, tell them the reason behind service interruption (COVID-19 or any other reason) and thank them for their cooperation.
Build Trust With Service Level Management
Service Level Agreements set the right foundation for long-term relationships between companies and service users. They help you build trust, avoid conflicts with customers or employees, and improve service quality.
Spend some time to understand how well your existing SLAs are working. Do you need additional SLAs? Do the existing ones need to be updated? Do you need to track more SLA metrics?
Remember that your service level terms do not have to be complicated. Keep it simple, establish different SLAs for different services, monitor team performance, and proactively communicate with end-users in case services are violated.
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