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Service‑Level Agreements (SLAs): Build Stronger Business Partnerships

Service‑level agreements can help businesses build stronger relationships with customers and partners. Read this guide to learn more about the importance of SLAs.

Your word is your bond, whether shaking hands or signing contracts. In the business world, fostering strong relationships and building a good reputation directly results from creating, maintaining, and upholding contracts.

There are all sorts of contracts and agreements that can help you build business partnerships and improve operations. One of the most common types of contracts for businesses rendering services is a service-level agreement (SLA).

But what is a service-level agreement, and why is it important for businesses to use them? Keep reading to learn what an SLA is, how to create one, and how your business can benefit from regularly implementing service agreements.

A service-level agreement (SLA) is a type of contract that outlines the level of service expected between a service provider and customers.

A service-level agreement defines the conditions and requirements for deliverables, including metrics, timelines, responsibilities, and standards. This type of contract is a formal agreement implemented to define expectations and mitigate any problems that may arise throughout the course of a business partnership.

SLAs are widely used across industries but especially in the IT and computing sector. An IT service provider uses a service-level agreement to ensure the services provided meet customer expectations. One main reason for using SLAs is to establish a measurable framework for assessing the quality of services delivered.

There are many reasons why companies employ service-level agreements. SLAs are mainly important because they set clear expectations and help manage customer relationships.

Both external and internal SLAs promote accountability, ensuring services rendered match the requirements outlined in the contract. Utilizing a service-level agreement helps businesses with risk management, continuous improvement, and transparency. They are essential tools for maintaining professionalism and fostering successful working relationships.

Key components of service-level agreements

A thorough service-level agreement will include several key components. Most service providers use this basic format to create SLAs that define service levels, key performance indicators, and expectations.

Here are the most important components to include in your service-level agreement template:

Objectives and goals

Most importantly, an SLA should outline the main purpose of the agreement while defining the specific objectives and goals it aims to achieve.

You can include a brief description of the working relationship, services provided, and expected outcomes. This step is crucial for aligning expectations across all invested parties. It also provides clear direction regarding the business objectives and common goals.

Parties involved

Next, the service-level agreement needs to identify all parties involved. Usually, the parties involved in the agreement include the service provider and the customer or client.

Include all relevant details, such as names and contact information. It's important to include relevant legal details regarding the parties involved to establish a formal binding agreement.

Scope of services

One of the most important aspects of an SLA is defining the scope of services provided. The contract should clearly detail specific services, deliverables, or features agreed upon within the agreement.

Including all relevant details about the scope of delivery helps eliminate ambiguity and ensures both parties are on the same page regarding the services offered.

Performance metrics

Along with the scope of services, include performance metrics in the form of quantifiable measures to evaluate the quality of services provided.

It depends on the type of services provided, but listing metrics such as response time, availability, customer satisfaction scores, and more can help improve the overall experience. SLA metrics are designed to increase customer satisfaction and ensure a certain level of quality is met.

Roles and responsibilities

The next section of a service-level agreement outlines the specific roles and responsibilities assigned to each party in the contract.

It's important to establish clear roles and explicitly list responsibilities to manage customer expectations and ensure successful delivery and usability of the services rendered. The main purpose of including this section is to increase accountability and prevent misunderstandings.

Project management and resolution

Lastly, a customer-based SLA should include a section on project management and resolution.

In case any problems arise throughout the duration of the agreement, this section serves to help problem-solve by outlining communication channels, reporting requirements, and escalation guidelines. Setting clear project management expectations is essential to establish communication so you can effectively identify and resolve service-related problems.

Types of service level agreements

There are different types of service agreements you can implement depending on the type of services your business offers. A service-level agreement document can be used in various formats based on whether you work with external customers or internal teams.

Here are the most common types of service-level agreements:

Internal service-level agreement

You can use an internal SLA when working across teams or departments. This type of agreement sets expectations and standards between departments within the same organization, ensuring smooth operations, increased coordination, and timely delivery. It also helps promote team collaboration and accountability.

An internal service-level agreement example would be an agreement between the IT department and HR department, outlining the response times for resolving IT issues for HR team members.

External service-level agreement

The most common type of SLA is established between a service provider and external customers or recipients. In this case, the customer organization and service provider are completely separate entities, so it's crucial to clearly define terms and conditions for the business relationship.

A common example of this is internet service providers.

Service-based service-level agreement

A service-based SLA is designed to specifically address the quality and performance of the defined services rather than focusing on the business relationship at large.

This type of agreement is beneficial when the service performance is of utmost importance, and the service levels need to be clearly and thoroughly defined. Each individual service in this type of SLA will be clearly defined with specific performance metrics and targets.

Customer-based service-level agreement

A customer service-level agreement focuses primarily on the commitment to meet each client's specific wishes and individual needs.

A customer SLA is an effective tool for offering personalized service levels to important customers. They are often more flexible and target each specific customer group with unique terms, measurement tools, and service quality.

Smart businesses use SLAs to improve daily operations, enhance internal and external relationships, and reduce risks. Using a service-level agreement document should be part of your overall strategy due to the following benefits:

Establishes clear communication

When working with multiple vendors, it's vital to establish clear communication and transparency. SLAs are equally important for providers and customers alike.

Transparent communication allows companies to establish expectations upfront and avoid potential problems down the road.

Improves customer satisfaction

Developing clear and useful SLAs is key to improving the customer experience. As a service provider, it's important to develop and maintain positive relationships with new and long-term clients.

A service agreement outlines the service provided and the penalties for missed deadlines, poor quality, etc. These types of details show customers the level of commitment your business upholds in relation to the services rendered, resulting in a higher level of trust and overall satisfaction.

Reduces risks

Formal agreements and contracts provide legal recourse for working relationships, especially when services are involved. Both service providers and customers are protected when a service agreement is put into place.

SLAs can protect both parties from litigation costs, poor service, or failed delivery.

Improves performance monitoring

SLAs provide business process metrics to ensure timely service delivery. They can also increase the quality of services rendered and help sales and marketing teams improve performance metrics by tracking and enhancing service levels. This helps improve your productivity and work smarter.

Enhances business relationships

A customer service level agreement is designed to foster strong business relationships. Customers and service providers are protected when using SLAs.

One common feature of an SLA that can help enhance business relationships is service credits. Service credits are a form of compensation offered when providers fail to meet all performance metrics. This contributes to developing strong business relationships.

Who needs a service-level agreement?

Many business types benefit from using SLAs. Here are a few examples of companies or entities that need SLAs:

  • Service providers such as IT, telecommunications, or cloud services
  • Outsourcing companies and clients
  • Internal departments within a company
  • Managed service providers (MSPs)
  • Business partners and suppliers

Improve your business relationships with service-level agreements

Incorporating service-level agreements into your business strategy can help improve your business relationships, meet or exceed customer expectations, and improve service delivery. Whether a customer SLA or internal SLA, binding agreements are designed to improve productivity and protect all parties involved.

Whether starting a new business or looking for a way to revamp your service offerings, learning how to effectively implement SLAs is key to your success. Your marketing department and sales team should have a concrete understanding of service agreements to ensure all prospects and existing clients get the care and attention they deserve.

If you need help managing your customer or business relationships, Mailchimp is here to help. Mailchimp offers various CRM and business management tools to help you stay on top of your business partnerships. Try Mailchimp today to improve your business relationships.

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