A service level agreement (SLA) specifies a level of performance that a company will provide to its customers. This includes the features, benefits, and functions of a product or service, as well as the other important details, such as the time frame in which those services will be delivered.

Below are tips for creating good Service Level Agreements:

Understand SLA’s and why they are important:

The SLA, in short, is the written agreement that binds both parties to specific standards of behavior. Like employment contracts, they ensure that each side knows what is expected in terms of performance and payment.

SLA’s need to meet the needs of both parties:

Although it can be tempting to skew SLA terms in one’s own favor, this tactic usually ends up backfiring.

A business relationship, after all, should be built upon transparency, trust, and mutual advantages – and those that are not tend to fare poorly over time. SLAs should therefore be developed that are fair to both sides, with clear and accessible terms.

If necessary negotiate terms:

Providers will often have a standard SLA template that they use for most of their client work.

However, these terms should be open to negotiation, since each partnership and each client is unique. This is especially true for large organizations, such as enterprise clients, whose needs will often vary significantly from company to company. At the same time, clients don’t want to feel as though they are being pushed into an agreement that doesn’t work in their favor. As mentioned above, after all, a one-sided contract will only sour the relationship over time.

Include an indemnification clause:

An indemnification clause is a section of a contract that requires one party to cover any damages caused by the other party. 

In the case of SLAs, these often refer to damages caused when a provider breaches their end of the contract and fails to provide services. 

Use metrics that are fair and motivating for both parties:

Naturally, the KPIs used will depend on factors such as the business one is in and the service one is offering.

That being said, it is important to create metrics that are relevant and useful to both parties. Vanity metrics that only serve the needs of the provider will be unfair to the customer and can ultimately harm the relationship, for instance.On the other hand, metrics that motivate each side to fulfill their end of the bargain – such as metrics that inspire performance and transparency – will help to create a relationship founded on mutual trust and drive revenue growth for both companies.