Service Level Agreements (SLAs) are about driving good outcomes and good behaviors, not making money. But when improperly processed, SLAs will lead to bad outcomes! So this begs the question: is it ethical to insist on the letter of the contract, even if the spirit of the contract may conflict with it? Put another way, should we insist on penalizing non-performance when the mutual outcome should be improved performance? Be sure to check-out our new Business Ethics Program at Business Ethics (worldcc.com).
Using this as a baseline, we can build upon the idea of, not whether we can see and stick up for what is right, but whether what we see is really real. In the world of Commerce and Contracting we often assume three things. Do you agree? Hopefully not…
- the contract is cut and dried, cast in stone, clear as … then we are surprised when disputed terms show up or language interpretations disagree;
- our relationship with the counterparty is collaborative and for mutual benefit, then we are surprised when our colleagues argue about who is responsible or at fault;
- we are clear and transparent in our communications, then we are surprised when the other party just does not get it.
I could be mounting the case for simplifying contracts or building better collaboration, but these situations also have an ethical implication.
If we can’t always believe what we see or hear, then how do we decide who is right or wrong? Maybe we are both right from our unique perspectives?
For example, lets juxtapose the mechanism of contractual Service Level Agreements (SLAs) i.e. measures of service delivery performance and the mechanism of effective communications i.e. what we see and hear.
SLAs are great for providing clarity to performance expectations, such as system availability and responsiveness. They also typically offer service level credits associated with them i.e. penalties for non-performance, up to the level of expected profit. They might have earnback i.e. ability to waive credits through improved performance. Pretty clear so far? No room for ambiguity or to ask, “is this right”?
So why do most people still spend so much time reviewing SLAs and some even seek to make money out of SLAs? What happens if the supplier consistently fails to meet their SLAs? You can expect 10 to 15 percent of service fee not being paid by the buyer.
Sometimes, the buyer writes it into their budget and the supplier writes it off as non-deliverable and allocates resources elsewhere. If I were making the case for successful negotiations, this would be an example of win/lose or, even worse, lose/lose, because in the end both parties lose service delivery and reputation. That’s why I’m making the case for SLAs being about acting with integrity and driving good outcomes, not about making a profit.
Perhaps the mechanism of effective communications can give us a lens to look at this situation. Surveys suggest that words carry 5-7% of the communication, tone of voice another 45%, and body language conveys the rest i.e. what we hear is 50% and what we see is the other 50%. Right? So, for the SLA example, we might say that what the contract says is 5-7%, the inflection or tone on top of the words (especially in China) or perhaps the effort or attitude of the supplier is another 45%, but the interpretation of body language is so important.
- What are the parties saying that they are not saying?
- What are the often subliminal messages we are sending which support or counter the spoken word?
- What is being left unsaid in our words and tone?
Perhaps, what we hear and see is not really real? Again, I could be making the case for effective communications and relationship management which helps us to better understand the other party (often by just spending time together outside of work), but I am making the case for ethics and acting with integrity.
Integrity is about saying what you mean and doing what you say. Ethics is about acting morally, in our case in the World of Commerce & Contracting, in line with the spirit of the contract as well as the letter of the contract.
In my example, we have SLAs for good reason but if they are driving poor or unethical behaviors, then we should just step back and ask, ‘is this right?’
Ethics is also about the study of morality and how we can understand it better. We understand ethics better by understanding how we communicate, verbally and non-verbally, as well as how we see the world. If we see the world as ‘dog eat dog’, supplier screw buyer (or vica versa), or win/lose, then this colors our ability to listen to the other party and to act with integrity. As Buddha has said, “Through our senses the world appears. Through our reactions we create delusions. Without reactions the world becomes clear.”
This year, World Commerce & Contracting is focusing on business ethics in the face of Covid-19 and the uncertainty and disruptions which it brings. Let’s react with true listening and empathy, avoid delusions about the intentions of the other party, and work together with integrity. Let’s not make business ethics a contradiction in terms, but an example to others.
Discover more at www.worldcc.com as we unpack and promote ethics and social value in 2021!
Note that the views expressed in this article are my own and do not necessarily reflect those of World Commerce & Contracting.
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This article content is based largely upon two previous articles written by Bruce Everett who published both on LinkedIn.
Content reflects views and opinions of the author and do not necessarily reflect the views and opinions of World Commerce & Contracting.