Smart Sl As 9.15.09 Combined

2009 Global Workforce 2009 Global Workforce SymposiumSymposium

Presenters:Richard North, Manager, ZS AssociatesGreg Koehlinger, Executive Vice President, Nelson Westerberg, Inc. Sandy Shipley, Director Global Supply Chain Management, Primacy Relocation

Get Smart on Service Level Agreements (SLA)

Thursday, October 8, 20091:00 – 3:30

Business to Business service providers are facing significant changes in the relationship we have with our clients

• Hard won personal contacts used to secure new business are being replaced with across the table negotiations where procurement or purchasing specialists lead the process

• RFIs and RFPs are now playing a more important role in allowing procurement and purchasing to compare proposals from multiple vendors

• Procurement and purchasing typically stays involved after the contract or statement of work is signed. They are interested in making sure the services are delivered as described in the RFI or RFP response.

• Procurement and purchasing use SLAs as the basis for evaluating on-going performance levels associated with the work completed by the service providers

Procurement and purchasing can be very sophisticated in the design and management of SLAs

What typical challenges do you face when working with SLAs?

• There are too many….– Industry norms state that to be effective you should have between 3 – 5 SLAs

• The weighting of an SLA should reflect it’s importance• No SLA should be weighted more than 50%

• They are too hard to achieve…– Service Level Agreements, by definition are agreed upon by both the client and

the service provider• SLA performance thresholds should be set at a minimally acceptable level

• They are too complicated…– SLAs should be so straight forward that everyone should understand if current

performance levels are acceptable• No black-box calculations

• They are too expensive…– Procurement and purchasing will typically ask for 10-20% of contract value at risk

• Earn-backs show client is focused on performance not recovering fees

What typical challenges do you face when working with SLAs?

• There are too many….– Industry norms state that to be effective you should have between 3 – 5 SLAs

• The weighting of an SLA should reflect it’s importance• No SLA should be weighted more than 50%

• They are too hard to achieve…– Service Level Agreements, by definition are agreed upon by both the client and

the service provider• SLA performance thresholds should be set at a minimally acceptable level

• They are too complicated…– SLAs should be so straight forward that everyone should understand if current

performance levels are acceptable• No black-box calculations

• They are too expensive…– Procurement and purchasing will typically ask for 10-20% of contract value at risk

• Earn-backs show client is focused on performance not recovering fees

What typical challenges do you face when working with SLAs?

• There are too many….– Industry norms state that to be effective you should have between 3 – 5 SLAs

• The weighting of an SLA should reflect it’s importance• No SLA should be weighted more than 50%

• They are too hard to achieve…– Service Level Agreements, by definition are agreed upon by both the client and

the service provider• SLA performance thresholds should be set at a minimally acceptable level

• They are too complicated…– SLAs should be so straight forward that everyone should understand if current

performance levels are acceptable• No black-box calculations

• They are too expensive…– Procurement and purchasing will typically ask for 10-20% of contract value at risk

• Earn-backs show client is focused on performance not recovering fees

What typical challenges do you face when working with SLAs?

• There are too many….– Industry norms state that to be effective you should have between 3 – 5 SLAs

• The weighting of an SLA should reflect it’s importance• No SLA should be weighted more than 50%

• They are too hard to achieve…– Service Level Agreements, by definition are agreed upon by both the client and

the service provider• SLA performance thresholds should be set at a minimally acceptable level

• They are too complicated…– SLAs should be so straight forward that everyone should understand if current

performance levels are acceptable• No black-box calculations

• They are too expensive…– Procurement and purchasing will typically ask for 10-20% of contract value at risk

• Earn-backs show client is focused on performance not recovering fees

What typical challenges do you face when working with SLAs?

• There are too many….– Industry norms state that to be effective you should have between 3 – 5 SLAs

• The weighting of an SLA should reflect it’s importance• No SLA should be weighted more than 50%

• They are too hard to achieve…– Service Level Agreements, by definition are agreed upon by both the client and

the service provider• SLA performance thresholds should be set at a minimally acceptable level

• They are too complicated…– SLAs should be so straight forward that everyone should understand if current

performance levels are acceptable• No black-box calculations

• They are too expensive…– Procurement and purchasing will typically ask for 10-20% of contract value at risk

• Earn-backs show client is focused on performance not recovering fees

SLAs can be used to drive continuous improvement

By using this model with your clients, you can actually develop a more collaborative relationship by working together to make the process better

Source: Gartner

Define Measure Examine Correct Guide

Measure CriticalActivities

Examine MeasuredResults

Correct Any Deficiencies

Guide Process Improvements

On-going evaluation of the SLAs will help to keep them relevant

Define Key Processes

Different types of SLAs are used for different situations

• Cost improvement and efficiency based models– Focus is on lowering costs and reducing cycle times

• System Availability• Response time• Resolution time

• Operational improvement and enhancement models– Focus is on work processes and activities

• Inquiries processed• Items produced• Cases closed

• Business performance improvement and transformation– Focus is on key or strategic business measurements

• Revenue• Profit• Market Share

Technical/System

SLAs

Process and People

SLAs

Organizational Level

SLAs

IT Managers

Business Unit Leaders

Senior Executives

What are the most important business measurements you work with?

Source: Gartner

The top 5 ZS SLA Learnings

1. Create a Win-Win situation with your clients– Show your expertise and confidence by using SLAs in your agreements. If you

don’t your competitors will.

2. Including a standard set of SLAs in RFP responses allows you to show what you’ve incorporated into your assumptions and pricing

3. Every SLA should have these components:– Measurement name– Threshold metric– Weight of measurement– Frequency of measurement

4. Plan the end-to-end SLA process starting with the inputs required for the SLA through the tracking and reporting of SLA performance

5. Ensure your success by keeping it simple, don’t over-engineer

Consistently meeting SLAs shows how well you are supporting your client

Greg Koehlinger begins presentation

• Define what a SLA is and what it is not

• Benefits of a Service Level Agreement

• Elements of Service Level Agreements

• Common Mistakes in Developing and

Implementing SLA’s and Vision

Define What a Service Level Agreement Is:

• Legally binding contract or informal agreement mutually developed or negotiated by a corporate customer and supplier.

• The SLA has input from the supplier and customer-it is not one sided.

Define What a Service Level Agreement Is:

• Formal definition of service levels by: Baseline (current experience)

Establish agreed to & quantifiable

performance objectives Formulate corresponding metrics that

evaluate service received and performance gaps

– Customer Satisfaction– Profit: Operating Efficiency-Spend Reduction &

Innovation

Benefits of a Service Level Agreement

• Foundation for SLA is continuous improvement

• All about managing to client expectations and alignment of resources around client’s strategies

• Improves/institutes communication flow between customer and supplier-opens channels for consistent reviews

Benefits of a Service Level Agreement

• Participation and Engagement: Process for internal/external communication,

alignment of goals, team building, action plans, measurement and individual contribution to goals

What do customers want and how do they think from

Sr Leadership to transactional?

• SLA’s are outwardly (customer) focused, but done correctly, they can drive supplier operating efficiency, compliance to quality standards, retention and performance based growth

Elements of Service Level Agreements

• Services Defined

• Collaborative Objectives

• Strategic Alignment

• Team Engagement-Business units-HR-Shared Services-Procurement . . .

• Target Process Improvement

• Key Performance Indicators (KPI’s) Established

Elements of Service Level Agreements

• Action Plans Developed to Support Desired Outcome

• Metrics and Review Process Determined

• Raise the Bar Culture Instituted

• Innovation is Ongoing Part of Process

• Seamless Supply Chain Management- Lessons Learned Environment

• Competitive Advantage Created

Common Mistakes in Developing-Implementing SLA’s

• Failure to develop communication flow-review process. Who owns responsibility from corporate and supply side?

• Goals are not well thought out, not mutually agreed to and/or not measurable

• Lack of buy in and understanding to SLA process from corporate and/or supplier

Common Mistakes in Developing-Implementing SLA’s

• Failure to develop action plans for process improvement

• Some suppliers enter into agreements without understanding what they can actually deliver

• Objectives are not measured. How do you know if it is not measured? Rates become the focal point vs efficiency and value created.

SLA VISION-OUTLOOK

• Focus on Zero Defect Quality-seamless supply chain

• Eliminate Service Gaps in Entire Delivery System- From policy management, order entry, exceptions reporting, billing . . .

• CYCLE TIME REDUCTION- Better, faster, more efficient

• Small Shipment Containerization- Expedited Transportation: Lump Sums, Temp Assignments, Increased Renters . . . tied to policy benefits

SLA VISION-OUTLOOK

• 24/7/365 Global Customer Service

• Quality Surveys- 100.0% Compliance

• Technological Capabilities Aligned With Clients

• Human Capital Accountability-Talent Acquisition

• Asset Control, Utilization & Tracking=Yield

Sandy Shipley begins presentation

• Use of S.M.A.R.T. concept to develop your SLA

• Selecting SLA Metrics

• Importance of Good Metrics

• Why Service Level Metrics Fail

Use of S.M.A.R.T concept to develop your SLA

• Specific

• Measurable

• Attainable

• Realistic

• Timely

Use of S.M.A.R.T. concept to develop your SLA

• Specific – goal must be specific rather than general and answer:

• Who• What• When• Which• Why

Use of S.M.A.R.T. concept to develop your SLA

• Measurable – establish criteria for measuring progress

• Attainable – identify goals that are reasonable and leave room for improvement. Use a baseline from historic data

• Realistic – set an objective that both parties are able to accomplish

• Timely – include timeframes to meet the goals set

Selecting SLA Metrics

Performance metrics are the key to an effective SLA. If chosen properly, they will:

1. Measure the right characteristics

2. Be collected easily with appropriate detail

3. Tie commitments to reasonable, attainable performance levels

Selecting SLA Metrics

• Poor choice of metrics will result in SLAs that are difficult to enforce and could motivate the wrong behavior.

• Selection process is complicated by the number of potential metrics, the type of behavior to motivate, and the cost of collection.

• The goal is to collaborate to ensure a positive working relationship between the client and the supplier.

Selecting SLA Metrics

1. Choose measurements that motivate the right behavior. Are they objective or subjective and leave room for interpretation?

2. Ensure metrics are within the service provider’s control.

3. Choose metrics that are easily collected with minimal overhead.

4. Less is more. Choose metrics that will provide information which can be easily analyzed to manage the service.

5. Set a proper baseline drawn from historic data.

Selecting SLA Metrics

• For relocation, group them into reasonable categories, for example:

Service satisfaction

Costs to deliver home sale programs

Expense processing time

Gross up accuracy

Timely reporting

Selecting SLA Metrics

• Decide how the information will be reported and in what timeframe

• Set target and minimum levels of service

• Penalties and rewards can be determined

Importance of Good Metrics

• Good metrics describe performance standards and develop a framework to monitor ongoing delivery of service.

• If chosen wisely and implemented correctly, they can provide:

Delivery standards for quality, responsiveness, and efficiency.Determine if performance meets expectationsProvide trend and operational data for identifying and correcting issues.Provide a foundation for informed adjustments in service delivery.

Why Service Level Metrics Fail

1. Wrong metrics used – typical mistakes are:• Going for ease of measurement first• Not considering collection and analysis

effort• Not identifying how metric will be used• Measuring things outside of provider’s

control• Not clearly defining the metric• Using the supplier’s metrics by default

Why Service Level Metrics Fail

2. Wrong target settings – use both metrics and targets.

3. Insufficient metrics for sound decision making.

4. Improper set up to support metric use – monitor and adjust through life of contract.

5. Misused penalties or incentives – could motivate the wrong behaviors or set up a contentious relationship.

6. Overemphasis on cost – make sure whether cost cutting is the primary objective or service satisfaction.

Why Service Level Metrics Fail

Conclusion• Choose the right metrics early in the

process • Verify the metrics against past

performance• Determine the best collection method• Include the use of metrics and targets• Don’t rush• Revisit goals and targets after experience

is gained.

2009 Global Workforce 2009 Global Workforce SymposiumSymposium

Thank you!