Get what you pay for: service-level agreements work
by Staff -- Manufacturing Business Technology, 8/1/2005 6:00:00 AM
While reliance on metrics is the traditional way to drive continuous improvement, the value of aligning Selling, General, and Administration (SG&A) activities with the strategic priorities of the business is gaining favor as a way to reduce staffing costs and other HR-related expenses, as well as streamline procurement.
According to The Hackett Group, an Atlanta-based business process advisory firm, the service-level agreement (SLA)—which dictates the terms of service that an outsourcer provides—is the common tool for reaching strategic alignment and improving IT quality management. Research from Hackett's 2005 Book of Numbersindicates world-class IT organizations are 61 percent more likely than typical companies to have formal SLAs in place.
According to Six Sigma Black Belt for Honeywell's Global Business Services, Mary Stubbs, "[With procure-to-pay], we use SLAs with both penalties and rewards, as incentive for the right behaviors. We also take a very customer-centric approach by understanding how we can add value by managing expectations and focusing on communication, education, and relationship-building."
While outsourcing isn't always the best solution, Hackett Group Chief Research Officer Richard Roth points out, "Highly transactional areas—like HR administration, payroll, or technology infrastructure—can be strong candidates for outsourcing if you begin by optimizing processes and reducing complexity."
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