Green SLAs, Unhappy Payroll Users
A payroll outsourced provider has met its SLA for 18 consecutive months: payslips delivered on time 99.8%, incidents resolved within targets 96%, and system availability 99.9%. Yet HR's quarterly satisfaction survey has fallen from 78% to 54%. Common complaints: payroll queries take three days to acknowledge, the provider's portal changes require repeated explanations, and month-end exceptions are resolved by named individuals who are often unavailable. The contract has no customer-experience metric, only operational SLAs. Monthly governance is a 60-minute call where the provider presents green dashboards and the client raises few issues. Two payroll errors in the last quarter were corrected but not root-caused. The provider's account manager is leaving next month. The CFO wants to invoke penalties, but no SLA breach exists.
1. Explain why invoking penalties is not the right response, and what performance gap the current measures are missing.
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Penalties are contractually weak here because the provider is meeting its SLAs; invoking them without a breach would damage the relationship and may not be enforceable. The deeper issue is that the SLA set measures operational outputs, not the outcomes HR experiences. Payslip timeliness and availability can be green while query acknowledgement takes three days, portal changes are poorly communicated, and month-end exceptions depend on unavailable named individuals. Those are service quality and relationship failures not captured by the contract. The two uncorrected payroll errors also signal that the provider is fixing symptoms rather than causes. A penalty would punish the wrong thing and would not create the missing measures. The CFO should instead ask for a revised performance framework that includes accuracy, responsiveness, user experience, root-cause closure, and relationship continuity, with consequences tied to those measures at the next contract change.
2. Design a performance and relationship governance approach that would close the gap. Include cadence, metrics, and actions for the account manager departure.
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Use a balanced scorecard rather than a single SLA dashboard. Operational metrics should cover payroll accuracy, on-time delivery, incident resolution, and root-cause closure. Experience metrics should include query acknowledgement and resolution times, HR satisfaction, portal change communications, and ease of doing business. Relationship metrics should cover named-contact availability, escalation effectiveness, and meeting actions completed. Governance should run at three levels: monthly operations review for incidents, errors, and actions; quarterly service review for trends, satisfaction, and improvement plans; and an annual strategic review for contract value and roadmap. The account manager departure requires a managed transition: named replacements, knowledge transfer, a relationship map, and a joint 90-day improvement plan covering query acknowledgement, root-cause analysis, and portal communications. The client should also appoint its own relationship owner so dependence on one person does not recur.