Service level agreements, scopes of work, contracts… three terms we hear a lot about in business. I was going to start out this article defining them – they’re frequently used interchangeably despite the fact they have different definitions. But on reflection, the definitions of these terms aren’t really what’s important here. (I will drop some definitions at the bottom or this article for anyone who is interested though).
Almost all leaders are missing out on profit in their businesses – and the principal reason is that they either don’t have an SLA, SOW or contract, or they have them and aren’t applying them.
Having clearly defined SLAs, SOWs and contracts is the most simple and fundamental way to be clear about what’s expected from both parties, right from the off.
Side note, it’s incredibly difficult (although not impossible) to bring in any one of these three things respectively. So, my advice is to carve out all three at the very start of your client relationships.
It may sound a little dry and obvious – but the impact of lacking decent SLAs, SOWs and contracts is generally the root of all the typical problems we see in people-based businesses; over-servicing, over delivering etc.
Defining your SLAs, SOWs and contracts is the best way to make sure that you are managing expectations and outputs. By creating these documents together, both you and your client are signed up to a certain way of working together.
If you and your clients understand from the outset the scope of what you’ll be delivering, the specific outputs and the implications failure to deliver will have (from there side and from yours), then the gap between what you’re delivering, and what they’re expecting will reduce to almost nothing (and that’s the secret to a prosperous and profitable relationship). I like the idea that managing scope is a fairly straightforward proposition when you’re working against a well-defined set of deliverables. A “deliverable” can take many forms, from a physical thing, to a report, plan, analysis, or recommendation. If your client is paying for a predetermined set of outputs, the only risk of “over-servicing” is when you provide deliverables that fall outside the original agreement.
- Define your SLAs, SOWs and contracts as early as possible – bringing these three things in retrospectively is difficulty
- Make sure your client is part of the conversation – help them understand their part in the agreements and the implications if their side is not upheld
- Great SLAs, SOWs and contracts help to minimise the gap between client expectation and delivery – this ‘gap’ one of the biggest reasons client relationships break down
Sidebar over-servicing vs over-delivery
There’s a temptation for businesses to label something ‘over-servicing’ when there appears to be more work than is chargeable. Be aware that hours do not equal scope. Scope is comprised of work delivered, problems solved, and deadlines met — not hours worked. The fact that your business has spent more time than anticipated doesn’t necessarily mean they are over-servicing It’s only over-servicing if the client sees the benefit.
I hope this has given you some food for thought about your own agreements.
Some definintions (I promised…)
Service level agreement (SLA)
A service-level agreement (SLA) sets the expectations between the service provider and the customer and describes the products or services to be delivered, the single point of contact for end-user problems, and the metrics by which the effectiveness of the process is monitored and approved.
Scope of work / statement of work (SOW)
The statement of work (SOW) is a legally binding document that captures and defines all the work management aspects of your project. You’ll note the activities, deliverables and timetable for the project. It’s an extremely detailed work contract that defines the terms and conditions agreed upon between parties and lays the groundwork for the project plan.
A contract is an agreement between private parties creating mutual obligations enforceable by law. The basic elements required for the agreement to be a legally enforceable contract are: mutual assent, expressed by a valid offer and acceptance; adequate consideration; capacity; and legality.