5 service level agreement (SLA) best practices for better business outcomes

Industry expert Stephen Mann is back with another blog! Today, he shares what makes or breaks your Service Level Agreements (SLAs). Discover how to use SLAs in your organization with Stephen’s five SLA best practices for better business outcomes.

Why follow SLA best practices?

Has your organization put its employees through ITIL training, resulting in a frenzied amount of ITIL best practice adoption? If so, introducing service level management best practices and creating multiple Service Level Agreements (SLAs) was probably part of this frenzy.

What happened to those SLAs after that? Were they “put on a shelf” and then forgotten about? Perhaps only to be pulled down to point out that some party isn’t doing or delivering what they should? Or maybe those SLAs have been consistently used, but never updated to reflect the changing times in terms of service construction, industry benchmarks, or – most importantly – customer needs?

If you step back and look at your organization’s SLAs and how service level management is conducted, are you pleased with what you see? Or is there room for improvement? In particular in how you create, use, and continually improve SLAs? Incorporating ITIL SLA best practices can significantly enhance your approach to service level management.

If you’ve nodded yes to the last two questions, the following five Service Level Agreement (SLA) best practices are great for you.

1. Ensure that everyone understands the purpose of SLAs (and service level management)

Why did your organization introduce service level management and SLAs in the first place? Just because it’s an industry best practice or simply “a good thing to do”? Or did you have a specific reason? Even if you’re planning to introduce SLAs in the future, the same questions apply.

Go on, ask yourself: “What’s the purpose of your SLAs and the service level management activity that surrounds them?” Please stop and think about this for a bit before reading the following ITIL 4 definition:

The purpose of the service level management practice is to set clear business-based targets for service levels, and to ensure that delivery of services is properly assessed, monitored, and managed against these targets.

Source: AXELOS, ITIL Foundation: ITIL 4 Edition (2019)

For me, the key phrase in this ITIL 4 definition is “business-based.” Any SLA targets that you directly lift from industry best practice benchmarks, or simply think of as appropriate measures of quality levels, aren’t necessarily what business stakeholders deem the expected level of service delivery.

SLAs must be aligned with business needs as part of their purpose. A key opportunity here is using regular service (level management) reviews to do more than simply report how service level targets are consistently met. This is too much like steering your car while looking in the rearview mirror. Instead, look at the road ahead and the opportunities and challenges these reviews bring. Focus your reviews on improvements and necessary changes, including how you can better meet your customer’s needs.

2. Recognize that the agreement of SLAs is multidimensional

ITIL 4 provides the following definition for SLAs:

A documented agreement between a service provider and a customer that identifies both services required and the expected level of service.

Source: AXELOS, ITIL Foundation: ITIL 4 Edition (2019)

For me, the key phrase here is “agreement between.” Without the agreement, and the engagement needed to deliver it, your SLAs will likely end up “not worth the paper they’re printed on.”

The agreement between a service provider and a customer needs to include many things. As mentioned before, everyone needs to understand the purpose of your organization’s SLAs. But there’s more to agree on. An SLA should focus on the things that matter most to your organization. For instance: which services are most important to your customers, and which SLA targets should go with them? But an SLA should also be about what’s most important to a service provider.

One key aspect to consider here is the relationship between service levels (and targets) and costs. Take the delivery of a business application or service that’s offered with a high level of availability and high-priority support. Here, an open conversation with your customer on what they actually need rather than what IT assumes they need might yield significant savings with only a minimal drop in the service provider’s availability and support promises.

3. Operate “in the spirit of,” rather than to the letter of, your SLA

SLAs have a defined purpose. It’s a purpose that should be bigger than simply ensuring that all contractual and service-based targets are consistently met. You might have heard the phrase “honor the spirit of the contract” before – well, the same applies to SLAs.

Let me give you an example. As we all struggle during the COVID-19 crisis, the SLA and support targets related to a business-critical system and service such as the corporate human resources (HR) system might need to take a back seat to other issues. Why? Because remote worker connectivity issues are now much more urgent than they ever were before. So even if you haven’t adjusted your SLAs according to these new priorities, you should still act on exceptions like this.

Discover how to make your SLAs more flexible in this blog

4. Consider the use of eXperience level agreements (XLAs) over traditional SLAs

Before jumping into what eXperience level agreements are, I need to call out what the industry calls “watermelon SLAs.” This is when the performance reports and dashboards that inform key business stakeholders about service performance don’t adequately reflect the real-world position. Like a watermelon, the SLAs look green. But once you cut them open, you’ll find that the green exterior hides a wealth of red: the services are actually underperforming – or even failing – in the context of stakeholder expectations.

These “watermelon SLAs” occur due to a number of reasons, including:

• Measuring the wrong things
• Measuring performance or satisfaction at the wrong points (there’s an example below)
• Not enough input on what’s important from the service customer or consumers
• No periodical review of what’s important, what needs to be measured, and what “good looks like” in terms of service level targets.

Measuring performance or success at the wrong points – either in time or during the service value chain – is a common mistake. Here’s an example I used before that still rings true today:

Compare IT operations to pizza delivery operations. The pizza company has a palatial store and has invested in the best catering equipment (read state-of-the-art data center). It employs highly qualified chefs who take pride in creating culinary masterpieces. When the pizza leaves the store, it scores ten out of ten on the internal measurement system. But this is measuring at the point of creation rather than at the point of consumption. Now consider the customer view of the pizza when it arrives: it’s late, cold, has too much cheese, the wrong toppings, and it costs more than the customer expected (and wanted) to pay.

A common IT version of this is the measurement of availability – where components might be reported as “available,” but the end user can’t actually use the service the way they need to. So, for the end user, the service isn’t available no matter what the IT reporting says.

As an alternative to operationally focused SLAs, XLAs look at the desired outcomes and the delivered value. They measure and report on what’s really important to customers and consumers, whereas traditional SLAs usually focus on availability, numbers, and speed.

Rather than measuring and reporting on IT’s view of service availability and support performance, an XLA target relates to what’s actually important for your customer. This might be business performance, customer satisfaction, the corporate bottom line, product innovation, employee experience and productivity, or something else that your organization values.

5. Don’t allow SLAs to drive the wrong decisions

Yes, there are agreed service level targets for a particular service, but is it always right to adhere to them? In every circumstance? The answer has to be “no.” Especially in times of extreme disruption such as now with COVID-19.

It’s similar to the concept of “intelligent disobedience,” promoted by industry luminary Ivor Macfarlane. Employees are empowered to make informed decisions on what to do next based on what they think is best for the customer and the organization. This concept is also used to train guide dogs. It’s based on the premise that the dog, or person, with the most up-to-date information can best judge if the normal rules apply or not.

Say a visually impaired person wants to cross a road. The green light signal sounds and all looks safe, but their guide dog doesn’t move. The dog has likely seen a speeding car that’s not going to stop in time, so it chooses to wait. This “intelligent disobedience” from the guide dog has likely saved a life. Maybe more than one.

Similar to best practice number three, you need to recognize that sometimes it’s better for everyone if an informed and empowered employee overrules an SLA in favor of doing what’s right “in the moment.”

Hopefully, these five service level agreement best practices help form your thinking about how SLAs should be used within your organization to achieve better business outcomes. If you have thoughts to share or any questions, please let me know in the comment section below!

In Stephen’s next blog, he’ll talk about the next evolution of Enterprise Service Management: shared services. Subscribe to our blog to be sure you don’t miss it!