A well written IT services contract defines many client-specific requirements. But too often, the metrics needed to measure and meet those requirements are overlooked during contract negotiations.
Worse yet, SLAs are rarely enforced as work progresses. Instead, buyers often don’t look at the metrics they’ve negotiated until somebody complains. It’s like balancing your chequebook only after a cheque bounces.
Metrics need to be specific and actionable to ensure the supplier meets the buyer’s goals. Metrics that are specific but track the wrong things are useless. One example is a call centre that measured call length. Because the company wanted to provide a very high level of service, a better measure would have been the percentage of problems resolved on the first call. Many contracts contain immeasurable and grandiose language like “provide world-class support”.
At contract time, many suppliers lack ample information about the client’s requirements to propose useful metrics. (Suppliers even hope to get back price concessions by taking advantage of loosely worded metrics.) Challenge your supplier to share successful metrics from other clients.
Really, the buyer is responsible for the success of any acquired product or service. Even when you outsource a function completely, it’s still your job to monitor the provider effectively.
To get the most out of your supplier measurement program, practise the following:
- Prioritise your goals. Most buyers want financial performance, service quality, operational excellence and ability to meet future needs. Define and weight each goal before negotiating.
- Define metrics early. Metrics should be negotiated as part of the initial contract, preferably by the same people who’ll be responsible for them after the contract is signed. But it’s never too late — even where contracts are in place, negotiate metrics that will effectively measure success.
- Establish operational metrics that support your goals.
- Grade performance. Use a multilevel gauge of success, such as letter grades. If a vendor realises halfway through the month that a target will be missed, it may quit trying if evaluated only “pass/fail”. With a letter grade, the supplier can still get a B.
- Use value-based metrics. Poorly chosen metrics let suppliers meet their contractual service levels and still disappoint buyers.
- Define trade-offs. Prepare to pay more for better service.
- Review performance regularly with suppliers. What you measure is what you get.
Bart Perkins is MD at Leverage Partners.