Not all business relationships require a service-level agreement (SLA). Use a risk-based approach – how much damage can be done to your company if this third-party vendor doesn’t do its job? You want to protect your brand and reputation while ensuring that what needs to be outsourced gets done and gets done properly.
If an SLA is needed, many companies have a library of performance standards (such as website uptime or customer support response time) and metrics to capture performance data against. That allows a repeatable benchmark for gathering needed information. Often a company will start with the vendor’s standards – tell me what you’re going to promise to do. If a particular element to a standard agreement needs to be added or adjusted, it can.
Once a baseline standard is in place, the company needs to develop metrics that can be used to measure performance against the agreement. Employees in the organization closest to the vendor’s performance are usually charged with ongoing measurement.
The biggest issue for most companies is they don’t have an advanced warning system in place when performance is sub-optimal. They can’t see a negative trend or ongoing issue until suddenly there is a serious problem. Using the proper technology lets you know well in advance that there’s an impending event before you get stuck in it. It also helps make this ongoing performance evaluation process more efficient.
Depending on your number of vendor relationships, performance management can be unwieldy. The right technology can make sure you contact the correct people at the right time to get the needed data. This is really the impetus of most of the things we do at ProcessUnity – use technology to ensure that business processes are running effectively and efficiently.
If you’re using a calendar in your email client to remind you to go ask the guy in billing if the bills are going out on time, you’re going to miss a lot. You’re not going to have the needed information and make use of it. The right technology sets up a regular solicitation for information and efficient way to relay that data. It allows people to stop spending time on maintaining the process and actually use the data to respond in a proactive fashion on key performance indicators.
It can also help your relationship with the vendor. You don’t want things to get contentious. You didn’t hire these people just so you can turn around 60 days later and fine them $1000 a day for not doing the job properly. You want to partner with them, help things run smoothly, alert them when you see something going wrong and work with them to rectify the situation.
While it is important to be legally protected, an efficient process that provides ongoing performance management hopefully keeps everyone on track and out of the lawyer’s office. If it gets that far, however, a good SLA combined with the technology that has properly documented performance issues gives the lawyers the information they need to do their jobs and protect your company.
To learn more about Vendor Service Level Agreements, download our 4 Keys to Managing Third-Party Performance ebook.