7 Reasons You Need a Service Level Agreement

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Customer service always changes. Therefore, as companies become more sophisticated, the services they provide are more complex. To provide great service, companies can’t just wing it.

Customer service professionals must perform well to ensure business relationships last. Also, in order for end-users to have a good experience.

This is where a Service Level Agreement (SLA) enters the picture. An SLA sets expectations between a company and service providers. They also provide peace of mind for a business owner to know customers are protected.

Finally, an SLA ensures employees are held to high standards.

🚀Read Customer Service: A Guide for Successful Business Growth🚀

There’s nothing static about a good SLA, especially for small businesses. It’s a living document and one that changes as the relationship between a company and its service providers changes. A small business is never done working with contractors who can fulfill particular needs.

SLAs make building a stable of good contractors much easier than trying to patchwork solutions that ensure quality work and positive relationships.

That said, there are several elements of an SLA which are consistent across industries, and especially in the customer service industry.

Elements of Service Level Agreements 

Most SLAs include four elements:

  1. A statement of objectives
  2. A services list
  3. The conflict resolution process
  4. Remedies for poor provider performance

Let’s take a look at each of these elements.

Statement of Service Level Objectives 

First, the statement of service level objectives (SLO). SLOs make up the core of an SLA and provide a backbone for companies who have to file disputes and claim remedies for poor service provider performance.

More on that later.

A statement of service level objectives outlines the service provider’s scope of work. In customer service, typical service level objectives can include:

  • Call answer speed
  • Wait times
  • Call completion time
  • Complaint percentage
  • First-call resolution, and
  • Call quality scores

SLOs like these can vary depending on the urgency of the company’s needs, the resources available, and the budget. The objectives fluctuate depending on where the emphasis needs to be placed for the provider’s services.

Also, the statement of objectives outlines performance measurement plans. The client provides goals the service provider must reach. These goals make it easier to measure the service provider’s performance.

Read Customer Service Evolution: 7 Key Points

Statement of service level objectives

Picture 1. Setting SLOs is the core of an SLA

The SLA Services List

All SLAs include a services list. This list explains what the client expects of the service provider each day they work on a project. The client’s primary responsibility to the service provider is to communicate expectations clearly and measure the provider’s success.

For example, a company may expect call times under four minutes, call wait times of less than five minutes, and a quality score of 92% or better to be in SLA compliance.

These are examples of more specific SLOs, as we discussed previously.

Conflict Resolution: Means and Mechanisms

Sometimes miscommunication happens. Miscommunication can lead to conflict. Conflict is why it’s vital to have systems in place to resolve disputes.

The dispute resolution process follows a six-step method:

  1. First, clarify why there is a disagreement. Why do the two parties not see eye-to-eye?
  2. Next, establish a common goal. What is a common goal both parties can agree would be a positive outcome?
  3. Thirdly, discuss ways to meet the common goal. How can everyone involved in dispute resolution reach this positive outcome?
  4. Then determine the barriers to the common goal. What is standing in the way of a resolution?
  5. Fifthly, agree on the best way to solve the conflict. What is a solution both parties can live with, and how do they get there?
  6. Last, acknowledge the solution and determine resolution responsibilities. Acknowledge common ground has been reached, and accept responsibility to do the work needed towards resolution.

The dispute resolution process gives everyone peace of mind that conflict can still result in a positive outcome. Unfortunately disputes cannot always be resolved if the culprit is poor performance.

Remedies for poor performance are also sometimes necessary.

Remedies for Poor Provider Performance

Unfortunately, there are times when a service provider fails to meet expectations. Consequences for a service provider falling short include:

  • Fines – Sometimes, companies can require providers to pay penalties. These fines are typically on a sliding scale.
  • Service Credits – In other cases, providers lend service credits to clients to offset underperformance. Credits can lessen what the provider is paid or can shorten the contract length.

SLAs are a valuable organizational and relationship-building tool.

Let’s take a look at some reasons why your company needs one.

Reasons Why You Need a Service Level Agreement

Here are seven reasons why your company needs an SLA:

  1. To align expectations and requirements with service providers
  2. Measuring service quality
  3. Documentation of procedures and best practices
  4. To ensure clear communication
  5. Mutual protection and peace of mind 
  6. To clearly outline remedies
  7. To positively impact customer service quality

Alignment of Expectations and Requirements With Service Providers

The main reason companies use a Service Level Agreement is to align expectations with their service provider. Above all, SLAs help service providers move forward with an understanding of what’s expected.

Finally, they outline how that work will be measured.

Measuring Service Quality 

Secondly, when service quality expectations and SLOs are clear, there’s no room for providers to avoid taking responsibility for poor performance.

Providers are responsible for the quality of their work and to meet client expectations. This responsibility ensures a long-term business relationship.

Clear expectations make everything easier.

Customer service quality

Picture 2. Service quality ensures a long-term business relationship

Documentation of Procedures and Best Practices 

First, you have to outline procedures and best practices before you can measure quality. Therefore, having systems in place makes it easy for providers to keep focused on customers.

Work quality is predictable when best practices are followed.

Best practices help people adapt to tough situations. Best practices are most powerful when they’re put in writing, and easily accessible. If service providers can give employees a quick reference guide for these best practices, that’s a best-case scenario.

Read 9 Customer Service Metrics to Track Right Now

Ensuring Clear Communication

Clear communication makes life comfortable. With modern technology and different communication styles, it can be challenging to keep everyone on the same page.

It’s easy to get sidetracked and put too much emphasis – and spend too much time – on tasks that don’t really matter in the bigger picture.

Because of this challenge, there are few things to consider:

  • First, will we be communicating via email?
  • Or, will we be on online messaging platforms like Slack or Microsoft Teams?
  • Thirdly, will we use project management software like Trello or Asana?
  • Finally, how often will we meet? What is the meeting format?

Understanding how people communicate is vital because this understanding keeps people at ease and working together toward goals.

Mutual Protection and Peace of Mind 

Also, service level agreements end assumptions. Without assumptions, the working relationship between a company and its service provider is clear.

Companies have peace of mind with an SLA. And, it protects them in case of a worst-case scenario. Accordingly, service providers have peace of mind when they know the work they’re doing is valuable and leading toward a common goal.

Remedies for Those Negatively Affected 

Finally, sometimes, things don’t work out. Even with the best intentions, life can occasionally happen. Everyone may be doing their best to work toward common goals, but some may fall short of expectations.

Service level agreements include remedies based on established SLOs for this reason. If a service provider fails to deliver quality service, their client can ask for one of the following:

  • Discounted rates
  • Service credits, and
  • Fines

Remedies are a protection, even though they usually aren’t needed.

It does happen, though, where they are, and those situations are unfortunate but not the end of the world.

Impact on Customer Service Quality

The service quality impact of a Service Level Agreement is undeniable. 

Can you imagine the alternative? Forcing customer service providers to design workflows, set goals without standards, measure work performance, and report on their success could be messy. There’s no reason to go down this road when SLAs are available.

Also, asking companies to have faith service providers are doing high-quality work without measuring performance, isn’t reasonable. SLAs are not perfect.

However, they provide a framework for high-quality work that’s timeless.

Read How to Improve Customer Service and Ensure Customer Satisfaction


Service Level Agreements are the backbone of good working relationships between companies and providers. They don’t have to be complicated. Simple language can make a point.

In fact, the more complicated your service level agreement, the less effective. Use plain language everyone can understand.

The most important thing is goals are clear, and expectations are clear. Also, it’s understandable what happens if poor performance becomes common.

When goals, expectations, and remedies are clear, best practices set the table for success. These also set the foundation for a long-term business relationship to flourish.

How is your SLA working for your company? Need to go make a few edits?

We won’t judge you.

Go right ahead.

You’ll be glad you did.

Kris Hughes is the Senior Content Creator for Austin-based product innovation platform, Gembah, where he manages the company’s content, social media, domain authority growth, and SEO efforts. Gembah helps entrepreneurs and small businesses of all types confidently navigate the product creation lifecycle.

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7 Reasons You Need a Service Level Agreement was last modified: March 10th, 2021 by Martina Pranjic
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