What is an SLA?

A service-level agreement (SLA) is a contract that outlines the level of service between a vendor and a client. SLAs often use numerical metrics to measure success or failure, and they typically include consequences for failing to meet service standards.

• SLAs are commonly used by technology and customer service providers.
• For customer service, SLAs often include metrics such as response time, customer satisfaction, and resolution time.
• SLAs can be internal (for internal teams) or public-facing (for clients).

Types of SLAs

There are three main types of SLAs:

• Customer-based SLAs: These agreements focus on a single customer. For example, an e-commerce store might have an SLA with a manufacturer for producing their t-shirts.
• Service-based SLAs: These agreements apply to all customers. A SaaS business might have a service-based SLA guaranteeing 99.9% uptime for its software.
• Multi-level SLAs: These agreements combine different types of SLAs to meet varying customer needs. This is common in freemium software, where higher tiers might offer dedicated support or account managers.

Setting SLA Metrics and KPIs

The key to effective SLAs lies in their metrics. These metrics hold both the service provider and the client accountable to specific measurements. The metrics should be objective and often automated, ensuring fairness for both parties.

• Common SLA metrics for customer service include:
• Response time
• Resolution time
• Customer satisfaction (CSAT)
• First contact resolution (FCR)
• Net Promoter Score (NPS)
• SLAs and KPIs are distinct concepts, but they often share metrics.
• SLAs are contractual obligations with consequences for failure, while KPIs are used for goal setting and motivation.

Why SLAs are Important for Businesses

SLAs are crucial for businesses because they provide clear goals for customer service, build trust with clients, and signal when it's time to grow.

• Establish clear-cut goals for customer service: Track customer support needs and demands just like you track revenue and costs for your product.
• Clients respect the idea of SLAs, even without a contract: Use metrics to set expectations and address client questions about response time or satisfaction.
• Signal when it's time to grow: Consistently missing your desired metrics might indicate a need for hiring or outsourcing support.

SLA Best Practices for Growing Businesses

Even if your business is small, SLAs can be beneficial. Here are some tips for implementing SLAs effectively:

• Make your SLAs flexible: Small businesses often experience volatility, so adjust metrics and goals as needed.
• Set aspirational but attainable metrics: Focus on gradual improvements rather than setting unrealistic goals.
• Use internal SLAs for better team communication: Establish clear expectations between departments, such as marketing, development, and customer success.

Internal SLAs for Team Communication

Internal SLAs are vital for improving communication and collaboration within your business. By setting expectations for different departments, you can ensure smooth operations and avoid bottlenecks.

• Example: Set an internal SLA with your marketing team outlining the time frame for providing marketing materials to your customer success team. This will help manage expectations and avoid delays in customer support.
• Consider using a formal SLA template or simply a list of expectations. The key is to establish clear guidelines and ensure all parties involved are aware of their responsibilities.

Conclusion

SLAs are an important tool for businesses of all sizes, regardless of whether they are formalized contracts or simply internal guidelines. By setting clear expectations, using objective metrics, and promoting consistent improvement, SLAs can help you achieve customer service excellence and drive your business forward.