Negotiating SLA’s for Good Vendor Management
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This past summer, I co-negotiated a complex supplier agreement. Like many of you who’ve rushed the deal over the finish line, my colleague literally got the signature the late afternoon of the last day of the month—approximately 2 hours before our final, final, final deadline.
On paper it looks like we got it done—with one major exception. We did not adequately define the Service Level Agreements (SLA’s) or the metrics associated with the SLA’s. Now that the nine year agreement is signed, my client (the customer) has lost all of its traditional negotiation leverage.
So, how does my client get the behaviors we fought for from the supplier? Solid SLA and metric definitions that the vendor manager can understand and enforce?
As contract negotiators we don’t often get involved in the daily, monthly or sometimes even the quarterly business reviews. The vendor or supplier manager does. But, if they are not at the table, and we as negotiators don’t do our job to define the SLA’s and metrics in a way that our colleagues can manage, we’ve done a disservice to our organization.
Now that the deal is signed and the proverbial ink is dry, my colleague and I are creating a SLA/Metric definition sheet. The SLA/Metric definition sheet:
* Accompanies the scorecard spreadsheet, and
* Describes each metric in detail:
- Intent of the metrics (why was it chosen),
- How the metric is measured,
- Who is collecting the data and how the data will be collected, and
- How the metric shall be interpreted.
The problem is, she and I know what we intended. We were a part of every negotiation conversation before and during talks with the supplier. We know what the line of business wants and why. We have the dozens of emails outlining the line of business’ thinking. The vendor manager has none of this.
Our intentions and understandings are stored in our head. Our memories of what the supplier said are fading fast as we gear up to negotiate other deals. For the good of the organization, we have to document our understandings associated with the scorecard, and we need the supplier to sign off on it so the vendor manager can appropriately manage the relationship.
Our goal in this process is to ensure that all parties capture, analyze and act upon the metric in the same way. Only in this way can the vendor manager get the performance the supplier agreed to in the bargaining sessions.
So, here is my request to those of you in management: Seek out a junior colleague and ask them to create a SLA/Metric definition document. Ask them to go through the process to describe for each metric, the intent of the metric (why was it chosen), how the metric is measured, who is collecting the data and how the data will be collected, and how the metric shall be interpreted.
This process alone will make that colleague a better, smarter contract negotiator the next time around. And you might be surprised by what you learn, too.
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