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February 04, 2019
Outcomes are the new Service Level Agreements
By: Michael Gaggiano

Service level agreements (SLAs) are a hallmark of procurement outsourcing. So how is it possible that clients can still be dissatisfied—see red—even when all SLAs are green?

In my experience, it’s because SLAs measure minimum service expectations. They don’t guarantee the achievement of outcomes that bring new value to procurement, stakeholders, or to the business. And outcomes matter more than ever in procurement.

Transformation, not transactions

Historically, procurement has been a process-oriented function. In fact, I would argue that procurement has actually used process as a way to engage with the business. But there has been backlash. Complex processes are certainly not endearing to anyone. They are frustrating and create serious compliance challenges.

Yet in our data-rich, digital world, procurement can (and should) evolve its relationship with the business. Doing procurement well today means being a strategic partner to the business. A partner that impacts all of the company’s key functions and objectives. This takes a focus on outcomes, not on processes.

This is why it is critical not to confuse outcomes and SLAs. An SLA is a boundary for a transaction. For example, it says that 80 percent of tasks were completed on time. An outcome is a transformation from something to something better for the business—like moving from 40 percent spend managed to 90 percent.

How can #procurement move from tactics to transformation? Think outcomes, not SLAs.

 
 

Pivoting to outcomes

It’s not that procurement should abandon SLAs. They have a role: monitoring service expectations, supporting governance and grounding supplier/client operating models. However, the time has come to lean harder into outcomes to evolve to next generation procurement and make the most of digital tools and enablers. Here’s how to start making the pivot:

Let strategy be your compass.The starting point should be a vision that includes the goals and objectives for the business, and how procurement can help deliver them. It is important to set and prioritize both short- and long-term outcomes that go above and beyond cost of service improvements. Confirm that roles and responsibilities are crystal clear and that innovation is championed and enabled with resources. Develop success metrics from the outset that link outcomes to quantifiable value.

Don’t tell the market the answer. If you give the market the “answer” to your challenge—such as requesting ten FTEs for requisition processing—this is what you receive, however it may not address the real challenge at hand. If you lead with the outcomes you want from outsourcing the requisition to P.O. process—such as improving user experience—the focus moves from tactics to transformation, from FTE and process to automation. It’s the difference between delivering what was asked for vs the art of the possible.

Game plan the day-to-day impact. Focusing on strategy and outcomes can become more theoretical than practical without the right considerations. It is not enough to understand “on paper” the outcomes that procurement is charged with delivering. You should understand how to operationalize the pivot—the “how’s” behind making it happen. How will the work get done? How will the resource mix change? How will the culture evolve?

Never forget the stakeholder experience. Poor stakeholder experiences can make it difficult, if not impossible, for procurement organizations to deliver outcomes. The hard truth is that when the stakeholder experience runs amok even a seemingly inconsequential way, there’s a domino effect that cuts into outcomes. So, if you don’t consider and truly understand the stakeholder experience, you have lost the battle.

A seat at the table.

Procurement has coveted a seat at the table with the business for years. Doubling down on outcomes while attending to SLAs can finally give procurement the “green light” it needs to get there. This is bigger than cost or transaction speed, but rather about being a true strategic partner to the business.

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