Consequences Create Clarity for Service Level Agreements

A service level agreement (SLA) defines the specifications, quality, and cost of a good or service being provided by a supplier to a buyer. SLAs help to provide transparency about what the buyer expects from the supplier and protects all parties in the event of a dispute or a disagreement. Ideally, SLAs should include rewards and incentives for meeting expectations, but even more importantly, they should clearly specify the consequences that the supplier will face if the terms of the SLA are not met.

This article highlights APQC's finding that too many organizations are not including the consequences of missing SLA expectations in their contracts with suppliers. In fact, just seven percent of organizations include consequences for more than 90 percent of their contracts.