This is the first in a series of lectures given at London University – the title of this one is focus on customers and looks at the psychology of buying behaviour and demographics. This is a particularly good lecture and many of the ideas included are valuable in the context of emarketing and on-line business.
Service Credits in a SLA good or bad idea?
In terms of a general principle it is not recommended to build into an SLA a so-called ‘service credit’ process. In such schemes, when the service measure falls below the agreed levels, a form of credit to the buyer is given.
As an example, a payment schedule is defined for, say, a 98 per cent service level and, should service be 95 per cent, a lower price band becomes applicable – I have also seen SLAs with performance credits, with increased revenue for a supplier should the ‘standard’ performance be exceeded. There are several reasons why this is old-fashioned and bad practice.
* First, the point of a service level is to define the required levels needed to support the business and no more. Improvement levels over time can be defined but the service needed is what the business should pay for – if it is exceeded you may have to increase your targets, but certainly not pay more for just doing the job.
* Second, with a service credit clause you have no leverage over the supplier to fix the problem. The focus should be to restore the service to the agreed levels as soon as possible.
Rather than a service credit clause, it is far better to put in place governance that forces the supplier to act to fix the issue, perhaps to the extent of the customer being able to call in independent consulting advice at the supplier’s expense to support service resolution. This use of an ‘independent’ adviser can be useful in monitoring the overall value of the outsource deal as it matures through its stages. It is important to include this in the SLA and agree the principles and ground rules for such an ‘independent’ with the outsource partner.
Your staff will often see the problems much later down the line if you get it wrong, as one of our research participants said:
“Because the company have these people, they’ve got professionals who only write contracts, and they know how to work them, and the client haven’t got a clue, eventually they tried using some outside firm of solicitors, to read through the contract, but it’s too late then, and even they might not have been professional contract people. And they still got screwed in the end, and they still don’t understand, nobody, I haven’t met anybody who understands what the hell outsourcing is all about, has it saved them a lot of money, no it’s cost them more, have they got an improved service, no it’s much worse, why? Why have they done it? They say ‘oh well we are saving money on pensions’, you are not, you’ve transferred the pension money over, ‘we’re saving money on accommodation’ well you’re not really, ‘we’re saving money on pay’ well you might be saving money on some aspects of pay but look at how much money you are paying the outsourced companies to run these things, and of course the classic mistake they made is, they’re paying for a fixed sum of money, millions of pounds a year, for maintenance of the existing system, nobody mentioned, changes to the system, like, I don’t want the machine here any more I want it in the room next door or in the new building, ah that’s a change to the contract, it will cost you an extra x hundred thousand pounds, and I think the contract in the first six months was something like thirty million over the estimate because they are moving things all the time, closing buildings, building new ones, every time you get a change of hierarchy, it’s new broom, right we will change all this we’ll have the (Dept.) over here and that group over there, we’ll swap those two over, and they do it regularly and it all gets charged!”
Royston
An assurance policy is a high level statement of objectives and approaches that are further worked out in the Quality Plan – shown here in this post is an example of the main clauses in the policy statement typically signed off by senior management.
AnyCo’s Management Ltd.’s quality assurance policy is based on principles and values provided for in the Company Mission, strategy and goals.
Quality Management System (QMS) creation is a major strategic direction of the business activities. The QMS is regarded as a useful tool for creation and management of effective business processes. The system formation will result in provision of services of consistently high quality, fully meeting customers’ expectations.
The company pursues the following goals in the field of quality assurance:
1. Strict compliance of the company’s services with international, national, and corporate standards and requirements.
2. Professional and technical level of the services must correspond to or exceed that of the leading enterprises and companies operating in the UK market.
3. Responsibility to customers for the quality of the services rendered.
4. Cost efficiency of the services as compared with other companies operating in the market.
5. Development and implementation of new services that fully satisfy our customers’ needs.
6. Continuous monitoring of complaints and claims from customers, and aim to maintain these at zero.
7. Positioning of the company as employing professional staff educated to at least Masters level, and providing services of high quality.
The strategy for achieving the goals is the following:
1. Focus on the process management model and continuous improvement of the company services (in accordance with the market requirements).
2. The QMS development, implementation, and maintenance in conformity with ISO 9001 international standards. Certification to 9001 will be applied for by 2008.
3. Satisfaction of customers’ requirements to all services. Fulfilment of the customers’ requirements within the shortest periods of time, ensuring highest quality. The services can be provided under Service Level Agreements (SLA).
4. Understanding of the customer needs, their present and future specific requirements.
5. Continuous cooperation with customers in order to understand their needs.
6. Transparency – customers obtain access to information on the quality of the services.
7. Priority of quality issues in “personnel – technology – organization” chain.
8. Strict quality assurance procedures at all stages of the services life cycle, well-defined personnel responsibility for quality assurance.
9. Primary focus on prevention of a possible decrease in quality rather than on measures to restore the quality level.
10. Consistent training of all personnel in the sphere of quality, each employee’s participation in services improvement, rewards for quality improvement.