Crafting Pragmatic KPIs or Service Levels

Service level management is a critical tool in many business contexts. Creating pragmatic service levels, that support sound decision-making is crucial. Here are elements to examine when drafting a key performance indicator or service level measurement.?

?The first element is cost. The stricter the service levels or KPIs, the more cost you will incur to meet them. There should be a balance between the need for performance, and the cost of providing that level of performance. For example, it’s a waste of resources to demand 24 by 7 support with 99.999% availability if those services are required only during the business day. On the other hand, if you’re in a hospital and depend upon patient information systems for critically ill patients, it’s very appropriate to have extremely high availability standards for 24 by 7 service.

?The second item to consider is how service levels affect the approaches used to deliver services. Let’s look at the hospital for a moment. Your service delivery team is going to be motivated – quite appropriately – to be very conservative when they make changes to the patient information systems. The contractual and health outcomes are too important to be lax about how changes are made. So, hospital administrators should not expect a quick turnaround on changes they want to be made unless substantial backup systems or processes are in place. As you can see, the service levels put in place will have a profound effect on how staff will deliver services.

?The third effect of service level or KPI design is how flexible your service delivery team is likely to be. Let’s say a very unusual situation or something like a pandemic were to briefly affect the delivery team’s ability to deliver services. A client could strictly administer the service level penalties and demand a punitive response for service level failures. Or, the client could look at the circumstances, evaluate the actual impact to their business, and consider extending penalty relief to their service provider. This flexibility in administering service levels could be reflected in flexibility from the service provider, should the business have a special request.

Finally, when problems arise, the response from the service provider will be dictated by the service levels. Should some form of service failure occur, a slower response will result from less stringent SLAs. The opposite will occur when service levels are strict. This isn’t bad or good, it reflects business judgment based on the SLAs. The critical success factor here, along with the other points I have discussed, is that SLAs need to be appropriate for the business impact the client will experience.

?Additional tips can be found in my project management and outsourcing classes on LinkedIn Learning, including:

·??????Project Management: Technical Projects which can be found at: https://www.dhirubhai.net/learning/project-management-technical-projects-2021/what-is-a-technical-project?autoAdvance=true&autoSkip=false&autoplay=true&resume=false&u=2125562

·??????Outsourcing Fundamentals, the first of six courses on outsourcing, can be found at: https://www.dhirubhai.net/learning/outsourcing-fundamentals/key-components-of-outsourcing?autoAdvance=true&autoSkip=false&autoplay=true&resume=false&u=0

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This article is part of Bob’s Reflections newsletter series, which discusses project management, outsourcing, and “intelligent disobedience”, a leadership approach. If you want more of this content, you can?subscribe to receive notifications when a new article posts.

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