Note: This is the second post in a series focusing on the continuous improvement of Shared Services. You can find Part 1 here.

2. Monitor Compliance with the Service Level Agreement (SLA)

In every shared services project there are those in the organization, particularly in the business units, that doubt the promised benefits will materialize and that the service center is truly capable of providing the level of service the business units enjoyed when they had their own support services. Don’t prove them right. Once the service center goes live it’s time to hit the ground running and live up to the promises made. This means living by the service level agreement and constantly monitoring the Center’s performance against the service level metrics.

Monitoring a Service Level Agreement is not without its challenges. One challenge is that the actual agreement can be interpreted differently by different parties. What may be clear as day to you may actually mean something different to the other party. That's why is extremely important to develop the SLA in as a partnership between the Finance organization, the Business Units it serves and any other relevant stakeholders in the organization. The SLA should very clearly spell out the performance metrics that will be measured, how often they'll be measured, by whom they'll be measured and how often they'll be reported. The SLA should also define how disputes around these issues and the overall performance of the Shared Service Organization are resolved.

Another challenge often encountered by SSOs is the actual collection of data. Don't define performance metrics in the SLA if it's virtually impossible to collect the data at the level of granularity defined. If you have to hire a group of people to do nothing buy collect and report on the performance metrics in the SLA then something is wrong. Remember, this is an operating agreement between units in a business; it isn't a legal agreement that enables you to sue someone if they don't live up to your expectations. Keep the metrics defined focused on service levels, cost and response times. And put in place procedures to collect that data at the intervals defined in the SLA and report on it as promised.

Define the intervals at which the entire SLA is re-evaluated. No agreement lasts forever. As the SSO and the Business Units learn more about working together it's inevitable that some aspects of the SLA will need to be changed. Use the governance process to revisit the SLA and make changes as necessary.

Finally, use the data collected as part of the SLA process to evaluate the performance of the SSO in light of continuous improvement efforts. Are you better today than you were a year ago? If not, why not? Even if the SSO is meeting the promised levels as defined in the SLA, the SSO should be looking ahead to even higher levels of performance. What processes can be optimized to improve service delivery and reduce cost? What new technology can be introduced to support the efforts of the SSO? How can the SSO improve response times and customer satisfaction?

Setting expectations early on is critical for a successful transition of Finance processes from the Business Units to a Shared Service Center. These expectations should be spelled out in a Service Level Agreement (SLA). The SLA is not necessarily a legal agreement between the Business Units and the SSC, but rather a written understanding of the rights and responsibilities of each party. The goals of the SLA are as follows:

Set expectations between the Business Units and the Shared Service Center
Enable performance monitoring
Provide a pricing mechanism for services
Provide an escalation path for issues
Allow parties to modify as needs change

Listed below are the major components of a Service Level Agreement:

Processes and services provided
Key performance commitments
Key process and performance measures
Transaction volumes and process activity
Service pricing and billing approach
Dispute resolution and escalation clause
Roles and responsibilities of each party during transition
Roles and responsibilities of each party ongoing
Provision for scope changes and renewal

By creating a Service Level Agreement that clearly spells out the rights and responsibilities of each party, the Business Units can remain engaged with the processes rather than turning them over and absolving themselves of any responsibility. The challenge is making the agreement specific and firm enough to provide clarity but flexible enough that it can be modified as the needs and capabilities of the parties changes over time.