„Start – Stop SLA “– “Business Need” or “Cheating Tool”

What if effective service delivery time differs from customer delivery time more than 400 times? This happens when service which requires 3 hours of effective work customer will get in average for 2 months! This might be OK if customer and provider agreed 2 months delivery time. But what if they have agreed 7 days and if you succeed in 40% of orders only?

There are many reasons for such a situation. Insufficient capacity, low stock, and others. One, and most common is “Start-Stop SLA” mechanism in service level agreement. The easiest way to recognize “START-STOP SLA” situation is when performance indicators are “green”, but your customer satisfaction index is bad. In my consulting practices I have been called from provider side when customer does not want to extend the contract due to performance dissatisfaction. Most of companies are aware of the problem but they are not sure how to solve it without significant risk.

If service level is 7 days and you deliver service after 2 months how it is possible to have performance indicator “green”!? Who is dissatisfied: Customer who pays for service or End Customer who consume the service? Whose indicators are “green”? Who is happy with 2 months delivery time anyway?

What is SLA – Service Level Agreement and what is “Start-Stop SLA” mechanism?

SLA is agreement between external provider and the customer, where provider commits to deliver ordered servic

e/product within agreed timeframe and quality. Customer and Provider agree the percentage of SLA fulfillment (i.e. 80% of orders). If realization is less than 80%, customer can charge penalties to the provider according to predefined algorithm. Time frame is measured by elapsed calendar or working days and/or working time without exceptions (interruptions in counting elapsed time). Exceptions are included for 20% of events which represents acceptable percentage of SLA violations in responsibility of provider.

“Start-Stop SLA” is a mechanism which stops count elapsed time when a predefined

exception occurs. Exceptions often start with words “Waiting for…”, such as “Waiting for specification”, “Waiting for customer”, “Waiting for supplier”, “Waiting for material”, “Waiting for approval” ... Exception stops counting elapsed time within SLA committed period of the day (i.e. working time). Start-Stop SLA is a mechanism where you deduct waiting time from total elapsed time to get reported SLA time.

The problem with “Start-Stop SLA” is when it is misused. I know lot of companies which spend significant money and time to prevent misuse without success. However, “Start-Stop SLA” mechanism IS NOT recommended by any standard worldwide performance improvement methodology. Standard performance methods recommend percentage of successfully delivered service such as 80% and remaining 20% covers all allowed exceptions. But 8 of 10 companies still using this mechanism!

Why?

Why companies use “Start-Stop SLA” mechanism?

Provider will say to prevent penalties. Ok, we might understand provider’s reason. Anyway, there are just few customers who strictly apply penalties. But why customer accept this mechanism? These are reasons formally declared by customers:

1. Because we get lower service prices,

2. Our own processes and business rules sometimes (or often) cause SLA violations (i.e. “Waiting for approval”, “Waiting for material”,..)

3. We do not have proper tool to track SLA and this approach give us flexibility

4. The mechanism prevents wrongly applied penalties to providers.

But there is one hidden reason which was never formally declared – capability to adjust KPI performance indicators to get personal bonus. SLA is always agreed between two external parties. Internal organizations (end customer) very rarely have had agreed SLA with internal provider. The same is with external residential customers. Their satisfaction is measured by “Customer Satisfaction Index” (CSI) not by SLA performance indicator. CSI is “soft” KPI and depends on many different attributes, until SLA is concrete metrics and riskier for KPI. Thus, business customer has more common interests with external provider than with its internal end users or residential customers!

“Strat-Stop SLA” mechanism if misused, make service level agreement metrics useless and as such complete SLA unnecessary. It becomes a Form without real benefit for the organization either provider, customer, or end customer.

How to recognize the problem?

The problem starts when End Customer (the one who consumes the service) cannot fulfill own KPI’s and escalate the problem. SLA metrics is “green”, but CSI is “red”. It means that your KPI’s are not aligned across value chain or, something is wrong with metrics or definitions. Also, the problem can be identified by measuring process Takt Time and Cycle Time. You may see huge difference between these values – even more than 1000 times! Finally, the problem can be identified by percentage of total number of work orders with “Waiting for…” process state in comparison with total number of work orders in one year.

On the market, these situations are not isolated cases, rather a common practice.

Is “Start-Stop SLA” business need or “cheating tool”?

To be able to answer this question we must understand consequences. Dissatisfied end customer (the one who consume the service and cannot fulfill own KPI’s) will look for other options – another provider. It means lost revenue for provider. If you lose customer, you lose revenue, but the cost stays the same if you do not reduce the resources. If you want to keep revenue you have to increase cost. Therefore, many companies are afraid to replace “Start-Stop SLA” mechanism and prefer to put control on its misuse. They conclude “Start-Stop SLA” is “Business Need”. They call consultant after they fail to improve performance several times and cost increases continuously.

In chapter “Why companies use Start-Stop SLA” I have mentioned customer and provider motivation to apply this mechanism. If you use “Start-Stop SLA” all your metrics will be set according to this algorithm and it would be difficult to recognize the problem before end customer complain or initiate contract cancelation. But your data “hides” true information if you use right analysis method. My experience shows that in 80% of cases there is no rational and objective reason to use this mechanism – misuse cases. It means that SLA requirements can be fulfilled if they use standard SLA definitions (without start-stop elapsed time). In many cases I have found that there is no need to increase resources to achieve same result. Many have a space to reduce it. Mainly, after analysis they conclude that “Star-Stop SLA” is used as “Cheating Tool”.

Conclusion - STANDARDIZATION

What is end customer expectation if you measure its satisfaction with MSI? To deliver service when he/she need it (agreed or scheduled time). In this situation you must agree a time with end customer for every request.

Manager job is to read reports, make decisions based on business case and manage escalations. In this article I explain the case where a nice “green” report escalates into customer dissatisfaction. Business case indicates risk of increased cost if you leave “Start-Stop SLA” mechanism. Managers at first place decide to improve process control on Start-Stop SLA misuse. They make same decision several times until becomes obvious it does not give expected result. Finally, they take external consulting to get “second” opinion. If consulting company takes right approach the result will indicate Start-Stop SLA misuse. Next management decision becomes difficult but obvious.

Start-Stop SLA mechanism is the most common customer dissatisfaction root cause. Managers does not like to change this mechanism. They rather invest in “process improvement” to improve performance. Often, useless. Inefficiencies are hidden behind inappropriate metrics and thus difficult to be identified and removed.

On the other hand, using standardization and standard SLA approach brings lots of benefits. It exposes SLA violation root causes and gives opportunity to remove it regardless is it on provider or customer side. Additionally, it indicates balance among resource capacity and customer expectations, prices, and cost. First step to change Start-Stop SLA into standard SLA is STANDARDIZATION of the service portfolio. This is the only way to bring proper and accurate metrics, capacity and load management, stock control and process orchestration across value chain. Process improvement, which is standard buzzword in such a situation will not give any significant benefit and will create higher cost than it was before.

Start-Stop SLA in the eyes of business is “Business Need” until end customer becomes dissatisfied with service performance and escalate the problem. Then it becomes “Cheating Tool”.