Both Critical Service Levels (CSLs) and Key Performance Indicators (KPIs) are evaluation metrics that monitor Service Level Agreement (SLA) performance data. Though they appear similar, they have distinct functions that work in tandem to enable the improvement of managed services.
Both metrics’ general functions can be defined as follows:
CSLs double as evaluation and action tools tasked with remediation, service enforcement responsibilities, and penalty governance
KPIs collect and report performance data for analysis, providing information for operational adjustments and aspirational goal-setting
Other distinguishing elements are less obvious and it is easy to confuse the two in practice.
Here are 6 primary differences to help clarify their roles and guide your efforts when defining and classifying service levels.
Both CSLs and KPIs provide continuous evaluations to ensure vendors fulfill their SLA requirements. But their specific operational responsibilities differ.
CSLs focus on correction and remediation, triggering actions in the case of a failed service level that directly impact business outcomes. They are based on quantifiable, objective data to prove under-performance and hard business consequences in real time.
KPIs function as reporting and projection tools. Besides providing vision of service processes and operational efficiencies, they are used to project potential outcomes and plan contingencies for resultant scenarios.
CSLs are always benchmarked against current capabilities and established SLA scope. Effective CSLs illustrate the connections between SLA clauses, vendor solutions, and target service levels, and how their dynamics impact performance.
As tools focused on potential, KPIs can include non-SLA objectives and make future performance projections. Any qualitative factors and aspirational targets not presenting quantifiable business impacts are also classified as KPIs.
Although both metrics convey valuable information for client performance management teams, they have different common user bases.
The CSL focus on real-time data makes them invaluable for front-end business users as they test deployed solutions and contribute data to evaluation.
Business users can range from client employees to vendors, and CSLs are standardized across managed service portfolios to maximize their effectiveness as comparative evaluation tools.
KPIs do not need strictly quantified data to function effectively. Back-end operational teams leverage KPI data to evaluate service performance, identify underperforming processes, and formulate optimization adjustments.
Highly organization-specific, KPIs are closely aligned to internal business goals and often utilize exclusive metrics and formats absent from formal SLA clauses or those used by CSLs.
The disparity in the types of collected data means CSLs and KPIs have vastly different requirements to stay cost-effective:
CSL reliance on verified, quantitative data necessitates rigorous, consistent, and standardized capture methods. Maintenance costs incurred from formulating these specifications must remain lower than the cost of tracking the data.
Vendor compliance costs should also be set below the costs of a continued failure to achieve service levels to incentivize vendor correction and dissuade contract termination.
KPIs do not execute corrective or proactive action and incur minimal operating costs. Their focus on data capture, projection, and inclusion of intangible qualities means they can function with little expenditure.
Both metrics have divergent load-bearing responsibilities regarding risk – and trigger separate actions in the case of vendor failure to achieve target service levels.
CSLs measure business state and performance impacts to regulate risk between clients and suppliers, setting terms that balance risk fairly and effectively.
Failed CSLs trigger a Root Cause Analysis (RCA) to locate the source of the problem, avoiding limited responses to surface-level issues. Subsequent findings inform the formulation of a related action plan to address the issue at its source.
KPIs exist to collect and report data, not interpret it. Neither client nor supplier is required to share internal KPIs, and they are therefore incapable of carrying or regulating shared risk.
Although a service level failure might trigger a KPI-led response, an RCA is rarely executed, and the action plan does not need to align with common service levels.
Vendor failures to meet CSL targets can trigger the application of service level credits. Alternative penalties can be applied in the case of a failure to meet multiple targets, or repeated failure to meet a specific target. In severe cases, penalties can include contract termination without client penalties.
By contrast, KPIs cannot inflict punitive measures on vendors. The lack of regulation and transparency between client and supplier KPIs makes standardized performance measurement and consistent, fair penalties impossible.
The specific metrics of effective CSLs and KPIs with well-defined operational responsibilities vary based on enterprise state, business objectives, vendor capabilities, SLA terms, and other unique factors. Expert guidance is recommended to define and classify service levels efficiently and achieve target outcomes.
Wavestone experts have in-depth experience defining effective CSLs and KPIs to ensure optimal service levels.LET’S TALK!
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