What Is Service Level Agreement (SLA)? All You Need To Know!

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Service Level Agreement

SLA stands for “Service Level Agreement”. A service level agreement (SLA) is a consensus between a client and a service provider. SLA agreement encapsulates roles & responsibilities, exceptions, accountability & penalties for both parties. In this blog post, we share valuable insights about what a good SLA must include and how to lay the foundation of a successful outsourcing relationship.

Without an SLA, your business process is doomed to fail. Let’s have a look at how SLAs can be set up to succeed.

Failed projects or business process outsourcing (BPO) can cost you not only millions in wasted revenue, it can also cost you the most vital thing your company has: the loyalty of your customers. And as you well know, getting that loyalty back is incredibly hard and time-consuming.

The most common reason that projects like this fail is because expectations were not set correctly at the beginning of the process. When that happens, costs escalate, service delays increase, and quality suffers.
This is why from the very start, a healthy set of SLAs can serve as a rigid backbone and guidance throughout the project to ensure every party is on the same page and knows what is expected of them.

In addition to creating that important set of expectations and setting those ground rules, SLAs can serve to identify and clarify responsibilities, facilitate communications to ensure a streamlined workflow, and reduce the potential for conflicts. They can even serve to provide a better customer relationship by allowing a streamlined and homogenized customer experience throughout every part of your business. SLAs will ensure that your customers can expect the same level of service whether they call, chat, or use email and they can expect the same kind of resolution rate no matter at which time of the day or year they contact you.

Most importantly, they serve as a way to measure whether your provider is doing the job you need them to do for you.

What is an SLA and how can you set it?

An SLA is any agreed upon level of service. The process of creating a level of service can come from many starting points, but the industry standard is, that you already have a number in mind that you want to achieve, and have some Key Performance Indicators (KPIs) that will allow you to measure if your provider is doing a good job.

In most customer service call centers, an example of that would be the 80/20 rule: 80 percent of customers should leave the experience feeling at least somewhat satisfied. Other examples could be that emails must be answered or addressed within 24 hours, or that chat interactions cannot sit idle for more than 30 seconds.

Which SLAs you set, and which specific Key Performance Indicators you decide to measure are completely dependent on your specific business. You may not care too much about a quick turnaround time of ticket closure, but you’re absolutely adamant about having a 95% customer satisfaction rating. You might not care too much for the satisfaction score, but you want everything resolved in 3 hours or less.

These are the things you will need to carefully consider and think about before you embark upon any outsourcing venture, as it will be among the first questions that come up when you are provided with a quote.

Here at 31West, we work closely with managers, CFOs, customer service reps and other important players to define each individual SLA in a way that leaves no room for interpretation and makes it very clear to all parties what is expected.
Of course, sometimes SLAs will need to be amended or changed.

For call centers in the field of customer service, 3 standard SLAs are common. As with any approach, you need to find a perfect balance for these three, as you can never have all of them at once. You may have a very quick turnaround time, but then you need to compromise on customer satisfaction. Or you may focus a lot of attention on a 100% resolution, but then you cannot expect every issue to be resolved in a matter of minutes. It all depends on which SLA makes the most sense for you, your customers, and your specific business model.

The kind of product that is being supported is also a huge factor. A highly technical support for engine parts may never work the same as a support for a games platform.
Let’s have a look at the most common SLAs:

Turnaround Time

Turnaround time is very much varied when it comes to different support channels. A social media outreach must be handled very quickly to avoid a public negative experience, while emails are often considered less fast channels (and customers are often aware of this and choose email deliberately for that reason). Chat idle times should also be kept very low, and phone call wait times can vary anywhere between 30 seconds up to 3 minutes without causing too much damage (especially if you utilize messages within your hold music, which has been shown to even increase sales!).

Turnaround time can be split two ways: the time it takes until a customer service rep gets to the call, chat, email, or social media post and the time it takes to resolve the issue. Turnaround time for resolution depends greatly on how complex the issues and problems are that your customers are dealing with. If your product is a very straightforward and simple one, the SLA for turnaround time until a resolution can be kept quite low, which will allow for a sharp and crisp workflow. However, if your customer service is dealing with complex issues that take a lot of analysing or technical troubleshooting, a more relaxed timeframe is more appropriate, in order to keep customer satisfaction and resolution rates high. Especially after-hours services can help tremendously here, as a 24/7 availability can make sure you meet any time-based SLAs.

Customer Satisfaction

Customer satisfaction is probably the most important SLA and Key Performance Indicator in today’s business world. Without satisfied customers, you cannot run a successful business. But this also means that you need to find a way to make and keep your customers happy, while maintaining a balance of how much cost you sink into getting there. Business process outsourcing has been a wonderful solution to align those two – seemingly contradictory – ends of the spectrum.

With a healthy training, a good balance of other SLAs, enough material, stable and customer focussed policies, and a team of well-informed customer service agents, achieving a high rate of customer satisfaction should be no problem at all.

The industry standard varies anywhere from 80% to 95%. Most companies understand that it is very hard to achieve 100% customer satisfaction, as the act of measuring itself (most done through exit surveys) can create some statistical “noise”.

Ticket Resolution

Ticket or incident resolution is another SLA that gets a lot of attention and heat. This SLA measures how many customer queries were actually resolved. This can be measured either through ticket closure rates, customer surveys or through a technical indicator (such as how many repair orders were put in or completed).

As with the other SLAs, it is important to remember exactly where you need your customer service to put their most delicate focus on. For very technical issues, or big business clients ticket resolution rates can be more important than for example in subscription services (How do you “resolve” a ticket where it was just a service complaint and not something you can actually fix?). Ticket resolution also depends on what you consider resolved, as this measurement can also vary from industry to industry.

Creating an idea of how you want your customer service and after-hours service to run can smooth things down the line and create an environment where your vendors, providers, and customers can thrive.

Why are SLAs so important?

SLAs are the cornerstone, foundation, blueprint and guidelines to any successful business venture, and create a framework to any process. Without a clear set of rules in place, you cannot expect your vendors to know what to do, and your vendors cannot expect to perform as well as they can and are built to do.

Another reason for a good set of SLAs is, that you can analyse where your service is lacking and where improvements can be made. If you do not measure your SLAs and Key Performance Indicators, you may never find out where exactly your business model is showing room for improvement.

With a well structured SLA system in place, you and your provider can have complete peace of mind, because all parties know exactly what is agreed upon and what kind of service needs to be delivered.

6 Key Elements of every SLA

Naomi Karten’s book “Establishing Service Level Agreements” explains the six key elements of an SLA. Among them are

1.Context Setting Information

Make sure your table is set right. Context setting information provides your vendor and provider with enough of the right kind of information as to WHY any specific SLA is important to you and why it needs to be kept in a specific way. It explains the purpose and scope of the underlying agreement.

2.Description of Services

When you set out to create meaningful SLAs, describing exactly which services you need, and which services can be provided can help avoid a lot of conflict down the line. This can range from the most basic assumptions (such as needing chat facilities, but not specifically outlining that need at the start) to the more detailed information (such as underestimating a line’s volume).

3.Service Standards

Service standards provide a solid framework for both parties to understand under which conditions the agreed-upon services are provided.

4.Service Tracking/Reporting

Service tracking and reporting will showcase the Key Performance Indicators and SLAs that have been kept and missed and will allow you to make adjustments, and redefine what will fit your needs best.

5.Periodic Review
It is recommended, that you review the SLAs and KPI you’ve set out at the start regularly to ensure your customers are receiving the best possible outcome.As your business grows, your needs may change and keep on top of that can ensure you provide high-quality service.

6.Change Process

The change process provides a valuable tool for modifying the agreement to address changing service needs and priorities. Accordingly, a good SLA provides a mechanism for periodic reviews and modifications as needed.

These 6 elements will give you a healthy framework against which you can create your own individual needs and requirements.
The first three (setting information, describing your services and needs, setting your service standards) are what we see as the key service elements of an SLA. They describe the service context and the terms and conditions of service delivery you need or expect.
The next three (tracking and reporting of the delivered service, reviewing the delivered service, facilitating changes where needed), are the key management elements of an SLA. These describe how service effectiveness will be measured and problems will be resolved.

Both these sets of key elements will be needed to create and sustain a well functioning and effective SLA.

How to create SLAs for Marketing and Sales

When it comes to sales and marketing, SLAs work slightly differently from regular customer service. The comparison can be made like this: customer service knows what the company really looks like, marketing paints a picture of what you hope your company will look like.

Sales and Marketing often have very different needs than customer service does. Where customer service aims to please, retain, and help existing customers, marketing is very much an idealised world, where problems ought not to show.

Given this discrepancy, you need to create SLAs that fit the needs of marketing and sales reps.

The first step is to understand your buyer’s persona. Who is your customer going to be? You need policies in place that will target those specific people. Are they going to want in-depth contact and do they need sales reps to “hold their hand” throughout the process or is your target audience a more on-the-go type buyer? Your SLAs can be set up to meet each expectation.

Also, you need to define what a “sale” actually is. Is it enough for your reps to create a lead that will find its way towards a purchase on their own, or do you need a sale to be a hard, fixed, invoice-in-hand kind of process?
This plays into targets and sales goals as well. Targets need to be set in a way that makes them achievable and most companies opt to provide incentives to their sales teams to drive excellence.

When it comes to creating an effective and long lasting team effort, SLAs need to be reviewed and well maintained.

How to measure Performance Metrics

So, once you’ve created SLAs that are meaningful and work on a broad variety of processes, and you’ve agreed on them with your vendor and provider, what’s next? How can you stay on top of all the numbers and what do they mean exactly?
Here is a video to delve deeper into this context:

What are the Impacts of Service Level

Penalties: Repercussions for breaking Terms

It is important to set the correct amount of expectations from the very start. If a good structure is in place, SLAs will be successful and customers will be happy.
However, as with any process, there needs to be a review system in place that penalizes missed opportunities and creates a structure that will facilitate improvement.

Most of these problems can be avoided, however, if there is good communication from the start and both parties create a good and continuous dialogue about the SLAs, expectations and needs.

Most service contracts can be broken down into two service agreements: service availability and service quality.
The importance of service availability in today’s connected world cannot be
overstated. This is why a good amount of planning and availing of an after-hours service can help tremendously to improve your score of availability among your customers.

However, when these agreements are not met – for whatever reason – penalties ought to be put into place.

These can range from financial penalties to service credits that get taken away, all the way to loss of a license or contract.
It is important, that all penalties and their point of implementation are set out at the very start of any contract, and are clearly stated within the language of the service contract.

We here are 31West are proud to provide a service where we strive to create as little friction as possible and we will always strive to create a perfect service for our customers.

Creating and including clear SLAs in your service contracts with outsourcers, vendors, service providers, and customer care teams can help determine not only the quality of the service that is delivered to you and your customers but also the success or failure of your project.

Always keep in mind that the SLA is a living document, subject to advancement in technology, scaling your business up or down, a change in customer behaviour, a new avenue of business. We can help you modify your needs at the drop of a hat, as services, expectations, circumstances, and responsibilities change.

Outsourced call centers need a detailed, well-thought-out SLA structure to be successful. Getting outsourcing right can help improve customer satisfaction significantly. And that, in turn can boost sales and revenue.

Let us put our proven experience in providing help-desk, after-hours, and customer service solutions for small – to medium sized companies to work for you. Request a quote from our sales team now.

Posted in SLA


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