No matter what service you offer to consumers—financial, customer support, SaaS, consultancy, etc., you need the right service level agreements (SLAs) to strengthen relationships.
Despite the proven effectiveness of SLA management, many people say that if people trust each other, why do they need a formal agreement, and who’s gonna read it anyway?
While it is true that not everyone likes to read a formal contract before buying your services, it is also true that SLAs can be helpful in case of conflicts. Also, they allow managers to gauge their team’s effectiveness in meeting customer expectations.
If you want to educate yourself about service-level agreements, this blog is for you. In this SLA guide, we will explore everything from SLA benefits to challenges to best practices.
What Is a Service Level Agreement (SLA)?
A service level agreement (SLA) is a formal contract that dictates a set of deliverables that the service provider has agreed to provide to an end user.
In simpler terms, an SLA is a formal agreement between a business and the end-user (employees or customers) that elaborates on 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.
When it comes to customer service, most businesses use help desk software to generate detailed reports and track performance against SLAs. Watch this short video to learn more:
Why Is SLA Management Important?
Effective SLA management is the backbone of any successful service delivery model. Let’s explore its benefits in detail.
1. Improve Communication
Frequent communication about service expectations can be challenging. A well-crafted SLA formalizes these communications with customers or internal employees.
For example, if a customer complains that your company took more than 4 hours to respond to an issue, you can refer to the SLA and inform the customer that the expected response time is 6 hours (or any other time frame stated in the SLA). This approach improves communication quality and helps set clear expectations for customers.
Read More: What Is Customer Communication Management? [Benefits, Types & Tools]
2. Establish a Strong Relationship with Users
For long-term business success, it’s crucial to manage both internal and external relationships carefully. When both parties agree to an SLA, the chances of miscommunication or conflict are significantly reduced.
A service level agreement is a powerful tool for building trust between the service provider and users. It creates a transparent, mutually agreed-upon document that can be easily referenced in case of any confusion. An SLA is the first critical step toward fostering a transparent, mutually beneficial, and long-lasting relationship.
3. Avoid Conflicts
Conflicts are inevitable, whether you offer a product or a service. How you handle these conflicts can significantly impact your brand and determine your business’s longevity.
For example, if you are a B2B company providing consultancy services and a client complains that your team was unavailable during a holiday, an SLA that specifies service unavailability on national holidays can help avoid serious conflicts. However, in legitimate conflicts, your business must acknowledge the SLA breach and communicate the corrective actions being taken.
4. Enhance Productivity
Establishing SLAs gives your team a clear direction. It allows them to organize tasks, plan their day, and pace their work to meet user expectations.
For instance, if you provide IT services to your employees and internal teams, your support agents will have a sense of urgency. They will be aware of the response and resolution timeframes defined in the SLA. As a result, SLAs help ensure your team stays on track and meets expectations.
Read More: 10 Tips to Increase Your Customer Service Team’s Productivity
What Is the Difference Between an SLA and a KPI?
SLAs (Service Level Agreements) and KPIs (Key Performance Indicators) differ in purpose, scope, nature, and usage.
SLAs are contractual agreements that set specific service expectations between a provider and a client, ensuring that predefined standards are met. They are legally binding and focus on the client-provider relationship.
In contrast, KPIs are measurable metrics used internally by organizations to track performance against business objectives, identify areas for improvement, and monitor progress over time.
While SLAs are external and specific to service levels, KPIs are broader, used internally, and serve as performance management tools. Let’s understand the difference better with the help of examples.
Examples of SLAs:
A company offers exclusive support services to its premium customers. Their SLA might include:
- Response Time: The support team will respond to critical issues within 30 minutes.
- Resolution Time: Issues will be resolved within 4 hours.
Examples of KPIs:
For a customer support team, relevant KPIs might include:
- First Call Resolution Rate: The percentage of issues resolved on the first call.
- Customer Satisfaction Score: The average satisfaction rating provided by customers after service interactions.
Read More: 11 Help Desk Metrics to Improve Customer Support
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:
1. You Need 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 but not to other users. In this case, your support agents must always keep this information in mind.
2. SLAs Have to be Updated Often
As your business grows and you expand your service offerings to end-users, you need to update your service level agreement frequently.
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.
3. Reporting Can be Challenging
Although there are many metrics for measuring 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, several other reasons can be behind it, such as low internet speed or a faulty device. So, reports might show that the SLA has been violated, but you can’t really blame your team for this.
SLA Best Practices to Maximize Performance & Service Delivery
When managing SLAs, following best practices is essential to ensure both parties benefit from a clear, transparent, and effective agreement. Here are five SLA best practices that can help you achieve consistent success.
1. Establish Different SLAs for Different Services
When you have multiple services in your service catalog, it is not possible to have the same terms for every service.
Do not treat a service level agreement like an umbrella encompassing all your organization’s services. Instead, 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 within 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 establish SLAs for different services carefully. This can help your business avoid unnecessary conflicts in the future.
2. Regularly Review, Monitor and Update SLAs
SLAs should not be static documents. Regularly review and update the SLA as part of your service level agreement monitoring process to reflect changes in business needs, technology, or customer expectations.
Schedule periodic reviews with stakeholders to assess whether the SLA terms are still relevant and whether any adjustments are necessary to maintain alignment with business objectives.
For example, help desk software allows customer service teams to measure performance against SLAs using various KPIs. Let’s explore some KPIs in detail:
- Response Times: Help desk software can track the time it takes for support agents to respond to a customer’s initial inquiry. By monitoring this metric, teams can ensure they meet the response time targets set in the SLA, helping to improve customer satisfaction.
- Resolution Times: The software can also track the total time taken to resolve customer issues from the moment they are reported to when they are fully resolved. This KPI is critical for meeting resolution time commitments in the SLA, ensuring customers receive timely solutions to their problems.
- Overdue Tickets: Help desk systems can automatically flag overdue tickets, which are those that have not been resolved within the SLA’s specified timeframe. By identifying these tickets, support teams can prioritize and escalate them to prevent SLA breaches and maintain service quality.
3. Ensure Mutual Agreement and Buy-In
Before finalizing the SLA, it’s crucial to engage all relevant stakeholders in the review process to ensure they fully understand and agree to the terms.
This involves not only the top management but also the operational teams, who will be directly responsible for meeting the SLA commitments. Hold workshops or meetings to walk through the SLA, clarify any ambiguous language, and ensure that everyone understands their roles and responsibilities.
Additionally, consider the use of a trial period or a pilot phase for the SLA, where both parties can test the terms and make adjustments based on real-world scenarios. This allows for a smoother implementation and ensures that the SLA is both practical and achievable.
4. Include a Dispute Resolution Process
It’s important to have a clear and structured dispute resolution process outlined within the SLA. This process should specify the steps that both parties must take if there is a disagreement or if one party believes the SLA terms have not been met.
Start by identifying the key contacts responsible for handling disputes and clearly define the escalation path—such as moving from frontline support to management and then to senior leadership if necessary.
The SLA should also detail how evidence and data will be shared between parties to support the resolution of the dispute. For instance, if the dispute is related to a missed response time, the service provider should be prepared to present logs or reports that document the incident.
Finally, consider incorporating alternative dispute resolution methods, such as mediation or arbitration, to resolve conflicts that cannot be settled through internal processes. This helps avoid lengthy legal battles and maintains a positive working relationship.
5. Sometimes, it’s Okay to Ditch SLAs
Service level agreements serve a very important purpose – they align the interests of two parties and set clear expectations. It is important to respect this formal document, but it’s also crucial to remember that SLAs are not set in stone.
Sometimes, it’s okay to adjust or temporarily set aside SLAs based on the situation you are in. For example, consider a scenario where a company is undergoing a major software upgrade that impacts service availability. During this period, it may be challenging to meet SLA terms due to system downtimes, technical issues, and other unforeseen complications.
In such a situation, rather than feeling guilty, you should proactively communicate with your audience. Send proactive emails, chats, or SMS notifications to update customers about service interruptions.
If there are any changes in operating hours or service quality, inform them. To maintain transparency with your audience, explain the reason behind the service interruption (such as the software upgrade) and thank them for their cooperation.
Build Trust & Improve Relations with SLA Management
Service Level Agreements set the 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.
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.
To streamline your SLA management and improve customer service delivery, consider using ProProfs Help Desk. This AI-powered tool allows you to track performance against SLAs using KPIs like response times, resolution time, and more. By automating SLA monitoring and notifications, you can focus on delivering exceptional customer experiences.
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