Managing SLA and Customer Expectation – Part I

ITIL defines service-level agreement (SLA) as an official commitment that prevails between a service provider and the customer. Particular aspects of the service – quality, availability, responsibilities – are agreed between the service provider and the service user.

In an ideal world scenario, an SLA will, in effect, be an overarching benchmark that defines how a task or service gets executed, within a specified time frame and within the confines of accepted protocols and practices. But the question to ask, in today’s business context is, are SLAs really just guiding principles that keep tasks, people, and management in check? Or is there a deeper meaning that binds businesses and people within the gamut of what SLAs capture in business as usual?

For example, in the consumer space, such as eCommerce, an SLA could be defined by the timeliness, quality, and the overall experience of the service rendered to a consumer. At an emotional level, consumers place their trust on the service even before they receive it. From the perspective of the business, an SLA-based service is measured, largely, in terms of time, and the importance or impact of rendering the service. The overall experience may also perhaps be garnished with a loosely-defined customer experience quotient, being mostly measured by the sum of all online interactions.

In this example of meeting an SLA, 9 out of 10 times that a service gets rendered well within the predefined timeframe is not an earth-shattering achievement. It is rather a bare minimum expectation, something that is table stakes today. However, flip the outcome, don’t meet customer expectations, and it will most definitely cut a sorry figure for any brand today. Consumerization has played a critical role in defining why meeting expectations and consistently improving experiences has a direct impact on revenue and the brand overall. Forrester’s CX IndexTM indicates that companies that lead the way in defining customer experience grew their revenues by 17% compared to 3% by laggards between 2010 – 2015.

When we pivot this framework to within the enterprise, fundamentally, I&O leaders define and map the purpose of IT organizations with the business vision. The translation and execution of this purpose are directly linked to how employees perceive and experience IT services.

The idea of attaching SLAs to any task across any business function is to inculcate a relationship and establish trust. Breaking or not meeting SLAs could result in the breakdown of relationships that, in turn, have far-reaching ripple effects.

The complexities start compounding in multi-channel and multi-touchpoint customer journeys. A study by McKinsey revealed that across industries, the performance on journeys is substantially more strongly correlated with customer satisfaction than performance on touchpoints. Even if at each touchpoint the experience is great, in its entirety, the journey may not reflect highly satisfied customers.

At our recently concluded Refresh:IT conference in London, a holistic perspective of customer satisfaction was a key discussion topic amongst customers and industry analysts. “Don’t limit SLAs to support. Consider end-to-end service,” said Roman Zhuravlev from Axelos. “SLAs are based on requirements. Agreed requirements are always less than expectations behind them. Measuring against SLAs does not, therefore, replace measuring satisfaction. Mind the gap.”

Daniel Breston from Qriosity discussed how SLAs typically have issues such as – no constant review process, no metrics that matter and no owners.

Meeting an SLA is not the alpha and omega of all measurements that defines the effectiveness of IT organizations. They are rudimentary and based on requirements set while defining outcomes of IT services. In isolation, these metrics in today’s context have very little impact on customer satisfaction, as defined in the eCommerce industry example.

SLAs are vital for setting and managing customer expectations. But meeting and exceeding SLAs doesn’t necessarily swing the needle positively in overall customer satisfaction.

More about the correlation between SLA and customer expectation in the next part of this blog. Do add your thoughts about the impact of SLA on customer satisfaction right here.