Guiding principles to service level agreements
Business process outsourcing: Finance and Accounting
Many buyers soon realize that the service levels defined in their outsourcing contracts are not aligned with business needs, do not encourage desirable vendor behavior, and seek to manage the process, not the output – what is not measured, does not get done.
- Service Level Agreements
- Seven Guiding Principles
- Mitigate performance risk
- Meet the authors
- Related topics
Service Level Agreements
Fundamentally, providers of finance and accounting (F&A) business process outsourcing (BPO) services have different financial interests than their customers. Buyer’s may feel that they’ve hired someone simply to do work they previously performed themselves. The reality is that a buyer’s expense becomes a vendor’s revenue stream, and different P&Ls mean different interests in managing cost and risk.
Seven Guiding Principles
Mitigate performance risk
Following these seven principles can substantially help to mitigate performance risk in finance and accounting business process outsourcing contracts by establishing meaningful service levels and service level credit regimes. They include:
1. Determining that business requirements form the foundation of service levels
2. Service levels should reflect prioritization of the business
3. Service credit regimes should be designed to incentivize long-term performance
4. Designing service levels to be leading indicators of vendor performance
5. Service levels should determine that 100% of the work gets done
6. Service levels should indicate that failures are fully remediated and provide severe disincentives for recurrent performance issues
7. Recognize that service levels will require change and evolve with business requirements
These principles recognize that buyers and vendors can, and often do, have conflicting interests in managing costs and risks.