This case study provides an overview of how Vsolution Management Consultants assisted a financial services entity to design and build an effective service management strategy, backed by realistic SLA’s that were implementable, sustainable and inextricably linked to business objectives and performance.
Vsolution was given 6 months in which to design and build the business, so speed to market was a key driver. As a result of the requirement for speed to market, as well as the client not having any prior experience with financing of retail home loans, the decision was taken to outsource many of the support services to the core business. A service management strategy was required for 3rd party contracts, to ensure that services could be managed according to agreed service levels, guaranteeing a good customer experience. It was also important to ensure a strong service procurement and management capability was established within the client.
Within the project, a work stream was dedicated to 3rd party contracting with accountable leadership from both the client and Vsolution, with the objective of developing an effective contracting process to ensure sustainability and embed the service management capability within the client organisation.
During the project the following insights were embedded into the client service contracting capability.
GOOD CUSTOMER SERVICE DOES NOT HAPPEN BY ACCIDENT
– Sound contracts with service providers are required if you wish to deliver outstanding customer service.
IDENTIFY YOUR SERVICE PARTNERS AND FORMALISE THE RELATIONSHIP
– Most service providers are easy to identify, and are used to complaints about their service, but seldom have had client objectives distilled into a clear agreement;
– Sometimes Agents, Branches and Distributors look like customers. They are not. They are service partners that help you reach your customers. Set up service agreements with them if you want to manage your business;
– It is tempting to be directed by what is considered standard from the service providers’ perspective. This is a mistake. Design the service agreements based on your desired service levels and market positioning; and
– Negotiations can be slow due to reluctance of service providers to commit to service level agreements. In each case we were able to overcome their reluctance.
THREE GOLDEN RULES FOR A SERVICE CONTRACT
1. Success of the service must be measured
– If you can’t measure the success of a service, you can’t manage it;
– Measures of success need to be agreed up front;
– The best measures are outcomes, not inputs. Managing the inputs draws attention away from what really matters and if you try and manage the inputs it is very difficult to maintain accountability for service delivery;
– If you can not measure success directly, use indirect measures such as customer feedback, complaints or surveys;
– Do not make any allowance for “single points of failure”. Service providers need to have contingency plans at each point of possible failure. Review every “Force Majeure” clause in a contract to ensure you are not creating a pre-written excuse for underperformance; Measures, controls and business continuity need to be covered for multiple points of failure;
– The essence of a good service contract is simplicity of the measurement. You don’t want your service staff spending more time debating the quality of the service delivered than actually delivering it; and
– A few good measures are much better than many bad ones.
2. Performance must be incentivised
– You get the appropriate behaviour from the staff you incentivize. Service providers are the same;
– Positive incentives are best, but are not always possible in a cost driven world;
– Penalties (negative incentives) need to be applied with rigorous fairness;
– Penalties must be appropriately severe and must be scaled correctly or they drive the wrong behaviour;
– Penalties that are too low do not influence behaviour positively;
– Penalties that are too high can put your provider out of business and will lead to torturous arguments and unmanageable relationships;
– The right level is typically between 5% and 25% of the monthly billing take out the service providers’ profit, but don’t leave him unable to cover his costs;
– The potential loss of profit is generally sufficient to encourage performance at agreed service levels;
– Allow for escalation of penalties if they persist; and
– Determine your tolerance for repeat offences, and make it grounds for termination – three times in a row or four times in a year is an indication your provider has a problem he can’t solve.
3. The service must be managed
– Service agreements are typically negotiated at a high-level, but performed at lower levels in the organisation;
– Insist on a single identified individual being responsible for end-to-end delivery of the service;
– Select one of your management to be accountable for the service received;
– Legislate that they meet regularly to address service issues;
– All service failures need to have a root cause analysis and a recommendation of what needs to be done to prevent the recurrence; and
– Set up a dispute resolution procedure and agree service provider control principles and escalation of rationale for fixing the problem