SLA vs KPI: Breaking down the differences, and similarities, of these important metrics

TL;DR

• Incident management can lean on SLAs (Service Level Agreements) and KPIs (Key Performance Indicators) to guide efficient response processes.
• SLAs set expectations between provider and client, while KPIs measure internal performance against those expectations.
• SLAs cover broader aspects of service, including timelines, finances, and benchmarks, while KPIs focus on specific metrics.
• KPIs are measured internally and help teams meet strategic objectives, while SLAs center on the provider-client relationship.
• KPIs encompass a wide range, including CSAT scores, help desk metrics, retention rates, and marketing engagement.
• Creating effective SLAs and KPIs requires understanding client needs, clear metrics, regular monitoring, and adapting to changes.

In the world of incident management, where responding quickly to incidents takes precedence, two very important acronyms often rear their heads: SLAs and KPIs.

These two act like a compass and map for incident management companies, guiding them through the intricate maze of efficient response processes. But, while they might appear to be cut from the same cloth, these two tools are distinct, each serving a unique purpose in the journey to operational excellence. And at the same time, there is a bit of overlap between the two.

In this article, I’m going to dive into the nuanced world of SLAs and KPIs, discuss their differences and highlight how they work together to, ultimately, take your incident management to new heights.

In the end, you’ll better understand what each of these important terms mean, and how you can leverage them to make your customers happier.

What are key performance indicators (KPIs)?

KPIs are "key performance indicators." In short, these metrics help you track your progress toward your business goals. You can use KPIs to measure all kinds of functions within your organization. For example, these metrics will tell you information such as:

• Your progress toward a specific goal
• The usefulness of a new technology
• The return on investment of a new process or platform
• Customer satisfaction status
• Employee satisfaction status
• Employee productivity
• Company performance in general

These are just a few examples of how KPIs can empower you and your teams. With the insights you get from them, you can make meaningful improvements to decision-making and operations. In the end, KPIs give you valuable information about your current business and what you should be focusing on to meet your goals.

What are service level agreements?

An SLA is a service level agreement. This contract outlines everything a service provider promises to provide to the client, including quality of service, service standards, service expectations, and response times.

For example, the SLA will include:

• Specific service expectations for whatever technology is being provided
• How issues will be addressed and how fast
• How or when services will be monitored
• What SLA metrics will be used to track progress and SLA performance
• Any penalties that will apply if expectations are not met
• Payment details and timeline
• If and how the SLA can be terminated
• How and what confidential information will be shared in the relationship
• How long the SLA is in effect

Since SLAs are contracts, they typically contain liability, warranties, insurance, and force majeure clauses. While, at first glance, SLAs can seem like yet another document full of legalese, this couldn’t be further from the truth.

These documents can set your organization up for success when it comes to managing expectations around incident response and keep your customers happy as a result.

So when creating them, it’s important to follow some SLA best practices to ensure you’re toeing the line well between sensibility and lofty expectations.

Key differences between an SLA and KPI

SLAs and KPIs deliver valuable insights about the services being provided, but both are important for different reasons. Let’s take a deeper look at the most important ways they differ:

The area of focus

SLAs are contracts signed by all the parties involved. They are client-facing documents that both parties must abide by. They outline what the service provider is promising to deliver, including baseline performance expectations, as well as what happens if there is an incident or breach of contract.

KPIs may be a part of an SLA. These key metrics will be outlined and tracked to guarantee that the SLA terms are being met. KPIs will vary based on the type of relationship and technology provided. In general, they help the internal organization understand whether it’s meeting the expectations set up in the SLA.

The parties involved

All parties sign the SLA. However, the service provider is generally responsible for tracking KPIs. Depending on the SLA, they may or may not share this information with their client. Often they don't. These are typically internal metrics to keep the service provider on track. KPIs also allow the provider to address any issues or incidents as soon as they detect a problem.

The nature of measurement

KPIs help the service provider measure the success of specific functions, but SLAs cover a lot more.

Service level agreements help teams measure timelines, financials, and all expectations for the services provided. The service provider will use performance metrics to ensure it is hitting or exceeding benchmarks. These KPIs are compared against the SLA to ensure that promises are being met.

KPIs are measured internally, often using a platform that tracks these numbers automatically. For example, software can show teams how long they are spending on customer phone calls, both collectively and individually. KPIs help teams measure important strategic objectives.

Their uses and applications

A KPI is a general term that expands much beyond the use of technology provider teams. KPIs tell businesses what’s going on behind the scenes. These may include:

• CSAT scores, which measure customer satisfaction with a survey
• Help desk metrics, such as ticket response time, resolution time, or turnaround time
• Customer retention rate
• Vanity metrics, such as follower count on social media
• Profitability and cash flow metrics
• Marketing engagement metrics, such as click-through rate

SLAs, on the other hand, may reflect the policies and expectations of the service provider, but they are focused solely on the relationship between provider and client and what will be delivered.

Key considerations for service providers

SLAs require the right balance between customer satisfaction concerns and what is actually possible for you to provide. Drafting them and incorporating KPIs isn’t always easy. Here are a few key considerations:

Understand specific needs and objectives

Each client is different. Some may have a whole list of requests, while some may be happy to sign whatever you send them the first time. It’s important to get to know each client so you fully understand their unique needs. What are their goals? What are their concerns? After gathering this information, you can create an SLA that everyone is happy with.

For example, the SLAs and KPIs you set for enterprise businesses may vary quite a bit from small 10-person startups since their needs are so different.

Establish clear and measurable metrics

KPIs are your friend. They provide factual information that can tell you how your business is doing. It's important to establish clear service level agreement metrics that you can measure without ambiguity. Clearly state how they will be measured and why they’re necessary. Establishing everything upfront allows both parties to be on the same page as far as expectations.

Monitor and review for continuous improvement

Even though you have a contract in place, regular monitoring is crucial. If the relationship is extended, you will need to review the SLA terms again. Monitor your processes to see if you need to alter KPI expectations or increase benchmarks. A regular review of your KPIs will help you continue to improve service delivery and quality.

Adapt SLAs and KPIs to evolving business dynamics

Every business goes through changes. That’s especially true for the tech world. Keep an open mind and be willing to embrace change to improve your business practices. Always be transparent with clients about evolving business dynamics, especially when you need to update an SLA in areas like downtime expectations or pricing.

Enhance your performance metrics and boost customer satisfaction with incident.io

With SLAs and KPIs, every minute counts, especially when it comes to downtime metrics. Remember, more downtime means more unhappy customers.

incident.io was designed specifically to help businesses reduce their downtime through better incident management, which is great news for anyone responsible for meeting SLA uptime requirements or KPIs that revolve around availability.

With streamlined incident response via Slack, gone are the days of direct messages and siloed communications. You can say goodbye to context chasing, too, as everything responders need to know is in one dedicated incident channel, enabling them to get up to speed faster.

Our Status Pages also play a significant role here. With Status Pages, you can communicate clearly to customers when an incident occurs, building trust and offering a glance at historical uptime: both of which help you meet your SLAs and offer insights into whether or not you’re hitting your KPIs.

incident.io also offers Workflows that automate several steps in the incident response process and Insights that highlight the efficiency of your response processes. Together, these functionality ensures that you can make your incident response faster and better while building more resilient products.

Want to learn more about how incident.io can help you meet your SLAs and land your KPIs? Book a demo today.