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SLAs and KPIs are different. Split them in your contract

For many years, I have seen organizations send out requests for proposals (RFPs) or other contracts with pages of service-levels agreements (SLAs) and key performance indicators (KPIs) — sometimes with the two elements intermixed.

While there’s not necessarily anything wrong with doing so, it does underscore the fact that many organizations don’t understand the difference between the two.

SLAs and KPIs are very different and each has an important role in ensuring excellent service within your staffing program.

So let’s start with some basic definitions.

Service level agreement: A document describing the minimum levels of service quality a supplier should comply with.

Key performance indicator: A set of quantifiable measures to gauge or compare performance in terms of meeting their (the buying organization) strategic and operational goals.

Think of the SLA (which incidentally should form part of the contract), as being a set of standards, the purpose of which is to define what minimum levels of service the customer should expect to receive. Any significant contract without an associated SLA is open to misinterpretation (deliberate or otherwise), and this needs to be avoided.

By documenting SLAs, both parties will be in no doubt as to the service levels required, the metrics by which that service is measured and any remedies and/or penalties that might be applied as a result of agreed-upon SLAs not being achieved.

My advice is to include SLAs within RFP documentation so that bidders can structure and price their solutions accordingly to deliver the required service. SLAs may also be the catalyst for no-bid decisions, and it is surely better that you know this in advance, rather than being surprised later during discussions as these SLAs are revealed.

Manage it. Unfortunately, many organizations insist on SLAs but then don’t pay attention after they are established.

There is a common saying that “if you can’t measure it, then you can’t manage it.” All items within an SLA should:

Key performance indicators, on the other hand, are exactly that, key performance indicators. Separate from statements made within the SLA, there should be a finite number of KPIs (I recommend three to seven) that ultimately define the measure of health of the service provision.

Even if certain SLAs are not being achieved, if the KPIs are being met, you should consider the service delivery as being satisfactory and meeting your overall strategic objectives.

Imagine the SLA provides for timings of submittals of resumes, arranging interviews and making offers. If the KPI (say, for example, 98% of requirements are filled within 10 days of receipt of requisition), then so long as this KPI is met, does it really matter that the resume submission was half a day late or that interviews are being conducted two days later than stated in the SLA? The SLA itself or performance against the SLA can be used to fine-tune service delivery and to improve satisfaction, but achievement of all KPIs ultimately defines the success of the program.

This is why your KPIs need to be thought of very carefully. They should track the operational objectives within your program that contribute toward your organization’s strategic goals. For example:

One important thing to remember is that for your staffing provider to deliver high performance against SLAs and KPIs, there should also be SLAs committed to on behalf of your program.

These may be items such as turnaround times for reviewing candidates, arranging interviews, providing feedback and making offers. You should be prepared to take out of scope those situations where a staffing provider has failed to meet an SLA because your own organization hasn’t met its part of the agreement.