The Difference Between a KPI and an SLA
2 July 2021
It is important to understand that key performance indicators (KPIs) and service level agreements (SLAs) are not the same, even though there is some overlap. In this post I would like to explain the difference between KPIs and SLAs and look at the practical business applications of each.

Quite simply, KPIs are the way you measure how well individuals, business units, projects and companies are performing against their strategic goals. It’s the tool that helps leaders of an organisation know how close or far the team is to achieving an objective and by monitoring progress toward KPIs, it allows the team to course correct if they are off pace to achieve the strategic goals.
As a navigational tool, a KPI can highlight areas of the business that might be veering off track to hit a defined objective. Similar to how a doctor needs to get information about vital stats of a patient prior to recommending treatment, a leadership team can use KPIs as critical pieces of information to make business decisions.
For more information on KPIs you can:
- read ‘What are Key Performance Indicators (KPI)?’,
- check out this KPI template and
- explore the 10 biggest mistakes companies make with KPIs.
What is a Service Level Agreement (SLA)?
A SLA is also a tool to gauge performance, but it is different than a KPI. It’s an agreement that’s between an internal or external service provider and the entity that is the end-user of that service. A SLA should clearly outline in simple language what the client will receive and what should be expected of the service provider.
We often distinguish between three different categories of service level agreements. They include:
- Service-based: The terms of service customers can expect are similar for all customers on a service-based service level agreement. In this case, everyone working with a service provider receives similar terms. The SLA between you and your mobile service provider would fall into this category.
- Customer-based: A more customised service level agreement is customer based. This SLA outlines a relationship between a vendor and a customer in detail and is likely not a one-size-fits-all agreement.
- Multi-level: This category of SLA agreement splits into different levels to address a different set of customers who are using the same service.
When a SLA is in place, the service provider and the customer would regularly assess, communicate and adjust actions to adhere to the agreement. While a SLA might become a part of a legal contract, a contract isn’t necessarily a SLA because contracts can be finalised without outlining any services levels.
While the exact components will vary based on organisation and industry, SLAs have relevant use in almost any business relationship.
In general, most SLAs include:
- a description of what the service provider will do
- the quality and timing of the service,
- how performance will be monitored
- how problems should be addressed
- penalties for non-compliance
- and under what situations the SLA might be waived.
It’s important that SLAs include meaningful measurements so both the service provider and the customer can clearly assess performance, this is where some overlap occurs between SLAs and KPIs.
The fact that SLAs must define the measurements of the service delivery means that many SLAs define KPIs as such measures of service performance. While SLAs define the overall agreement and service standards between service providers and their customers, the KPIs will be used to measure and monitor the performance levels.
For a service provider, it often also means that the metrics defined in their SLAs become important KPIs they will monitor and report as indicators of their overall strategic business performance.
So, in a nutshell:
SLAs are different to KPIs. SLAs are documents that outline the wider service agreements between a service provider and its customers, while KPIs are generally used to measure the performance of companies against their strategic goals. However, KPIs can form part of a SLA to measure the delivery of the defined service standards.
Related Articles
The Top 10 Reasons Why Businesses Will Fail Over The Next 10 Years
Fifty percent of the Fortune 500 companies that existed 20 years ago have disappeared, and the life expectancy of multinational companies is limited and shrinking[...]
13 Easy Steps To Improve Your Critical Thinking Skills
With the sheer volume of information that we’re bombarded with on a daily basis – and with the pervasiveness of fake news and social media bubbles[...]
The Most In-Demand Technical Skills – And How To Develop Them
Think of technical skills, and you probably imagine something related to IT or technology – data science, maybe, or computer programming.[...]
The democratization of business funding: Why every business should be aware of new forms of funding
No doubt about it, businesses need money to grow. While, traditionally, this money would come from a loan or selling equity stakes in the business, today's organizations can benefit from alternative funding platforms.[...]
The 20 Most Important Skills Everyone Needs To Succeed In A Digital World
Technology is changing our world to such an extent that the majority of children in school today will do jobs that don’t yet exist.[...]
9 Practical Ways To Enhance Your Emotional Intelligence
Emotional intelligence is also known as emotional quotient (EQ), recognizing the contrast between emotional intelligence and cognitive intelligence (IQ).[...]
Stay up-to-date
- Get updates straight to your inbox
- Join my 1 million newsletter subscribers
- Never miss any new content
Social Media