Page 116 - Performance Leadership

Chapter 7 Business Interfaces Drive Collaboration • 105

department that has business critical partnerships with external com-
panies, which, for instance, run the communications networks
between the various offices of the company and with the outside
world or which run business critical transactional systems that are
needed to perform transactions on a continuous basis. These SLAs
contain very detailed performance indicators on availability of the
systems, performance, scalability, and many other aspects that need
to be managed. A good SLA also specifies escalation processes when
the service levels are not met or may not be met without immediate
action.
However, SLAs are not the answer to business interfaces. The most
important objective of business interface metrics is to drive collabora-
tive behaviors between the owners of the various business domains in
order to optimize the complete value chain. Service level agreements
can easily lead to further suboptimization of performance because they
make managers behave more entrepreneurial. As desirable as that
sounds, it leads to a further focus on one’s business domain, not the
overall organization. Although the philosophy of entrepreneurial
behavior may help eliminate bureaucracy and bring about market con-
formity, it will also increase transaction costs. Managers will be less
likely to buy into stretch targets, as there are contractual repercussions
if those targets are not met. Margins will be built in to cover for risk,
as there is no shared responsibility for that. It will be necessary to cre-
ate internal offers that are compared to external offers, leading to loss
of time and increased cost. There will be no overall resource optimiza-
tion. Also, tightly managed SLAs may inhibit innovation. The perform-
ance indicators that are monitored and the service that is promised are
managed best when aiming for a status quo. Current processes can be
optimized and change is seen as a risk factor. However, we should not
only support the current business practices, but also enable the busi-
ness to respond to changes in an agile way.
The problem with SLAs is that they still have the same business
domain focus as the original business domain metrics. They provide a
dashboard measuring success for the supplier of services, and a mech-
anism of control for the customer. As a result, SLAs make relationships
more transactional, turning colleagues into customers and suppliers,
instead of co-owners of performance. Every business function should