SOPs

What Is an SOP, and Why Does Your Company Need Them —  Now?

The guide to creating simple, effective SOPs across your team or business.

Introduction

According to McKinsey, employees waste nearly 100 minutes (or 20 percent) of each workday looking for the basic data they need to do their job. Imagine getting a brand-new desk you have to assemble — and finding out it has no instruction manual. You could struggle and try to assemble it on your own, guessing at what should go where, maybe relying on outdated word-of-mouth instructions from others. But in the end, the amount of time wasted to get to a simple resolution won’t be worth it.

This is what performing a complex work task without a set of rules and procedures is like. You need SOPs (standard operating procedures) to illustrate to employees how the task is done, what rules need to be followed and how to handle any questions about procedures.

Not having instructions isn’t just frustrating — it wastes valuable time. That desk takes much longer to build, and may not get put together correctly (if at all). Here are ways SOPs will benefit your business and why it’s essential to start crafting an SOP strategy immediately.

What is an SOP?

An SOP is a list of procedures that give staff direction on how to conduct a specific task, process, or activity; or how to achieve a desired result. It can cover anything from using equipment to filing grievances. Most businesses have multiple SOPs — for example, a hotel chain should have separate SOPs for emergency evacuations procedures, laundry operations, and food and beverage operations. One set of rules and procedures would not apply to all of the hotel's departments.

The goal of an SOP is to improve the quality and consistency of operations and to provide staff with a framework for how to accomplish their jobs properly. If everyone is following the same procedure to perform a task, there is less room for error.

SOPs should outline the following elements:

  • Purpose: Define the task that’s related to your specific SOP.
  • Procedures: How do you perform the task in question?
  • Scope: How much should your SOPs cover?
  • Responsibilities: Who should perform the tasks the SOPs outline?
  • Accountability Measures: Who takes ownership of the SOP?

SOPs are more than just a simple instruction manual, however. They help your business to become more efficient, but they also have immediate benefits in the following areas:

SOPs encourage adherence to best practices

For maximum efficiency, you want all of your employees aligned and ready to perform their jobs as quickly as possible. Standardizing best practices in an SOP serves as a blueprint to improve the quality and consistency of operations. SOPs provide staff with a framework for how to accomplish their jobs properly and reduce inefficiencies in your processes — the GAO (General Accounting Office) found that 40% of drug shortages were the result of incorrect SOPs.

The longer an employee goes without an instruction manual, the more disastrous the outcome may be. A good example is this SOP from the CDC for transporting the COVID-19 virus in the field. Although your business may not be dealing with something as dangerous as this, it’s still important to stay ahead of your procedures with documentation rather than to wait until something goes wrong and then deal with it later.

SOPs enable thorough onboarding and training

An SOP can help your employee onboarding by presenting a standardized set of procedures that all new employees should follow (like an Employee Handbook). If there are any problems later on (i.e., conflict resolution between employees), another SOP can be constructed and used as the framework for how to deal with them.

Human resources is a department that often creates SOPs. One use case: When training new staff, employees can reference an SOP and increase productivity by not having to ask others for the steps in interviewing new candidates.

For example, an SOP for HR may look like this:

  1. Determine legal eligibility for employment
  2. Interview potential hire
  3. If proceeding with their candidacy, set up interviews with other relevant departments
  4. Call references
  5. Collect identification documents
  6. Reach out to the candidate with an offer, including salary and start dates

Why would using an SOP for onboarding be an immediate concern? Without an SOP in this example, your interview procedures could vary from one person to another, and an employee may later say they were not informed of a certain condition of their employment. This could lead to confusion, loss of productivity and even legal ramifications later on. SOPs can prevent that from happening.

SOPs ensures compliance with government regulations

Enforcing compliance aids in the prevention and detection of rule infractions, protecting your firm from penalties and lawsuits. The U.S. government’s CFR (Code of Federal Regulations) even calls out SOPs as standardized documents that it requires for many areas.

One for drug trials, for instance, states that, “There shall be written procedures for production and process control designed to assure that the drug products have the identity, strength, quality, and purity they purport or are represented to possess.” An SOP makes sure everyone is doing everything “by the book” and also helps to lessen problems with regulatory agencies.

You need an SOP immediately to help prevent the damage from compliance violations which could result in loss of productivity, hefty fines or legal action. The cost of non-compliance can be immense. Last year, JP Morgan Chase paid a $200 million fine for letting employees use company email addresses to conduct personal business, in direct violation of both the Securities and Exchange Commission and the Commodity Futures Trading Commission compliance rules.

In addition to that fine, JP Morgan Chase agreed to hire a compliance consultant, pay a $125 million penalty, and an additional $75 million fine for its brokers and bankers. That’s the largest record-keeping fine in SEC history.

Had JP Morgan outlined in an SOP that this practice was unacceptable, the fine may have been lessened. Almost 34 percent of businesses spend one-to-three hours per week just updating policies and procedures in regards to regulatory rules.

SOPs maintain organizational knowledge

An SOP needs to be established in case you lose key personnel. It allows for a smooth transition from one administration to another by setting out pre-established guidelines for how work should be done. If you lose high-ranking, experienced employees at work and you don't have an SOP, all of their organizational knowledge is lost. Whoever replaces that employee will immediately look for manuals or documents to tell them how the business is run.

Senior staff are leaving their jobs in record numbers these days. According to the business and executive coaching firm Challenger, Gray, & Christmas, Inc., 219 CEOs left their posts in January 2020, the highest total on record in a single month. Those CEOs may leave with big payouts, but more importantly to your company, they take a lot of organizational knowledge with them. And these departures are happening at all levels of an organization.

There’s no better way to mitigate turnover and ensure that “everything runs smoothly” after an employee leaves than having documents that outline how everything runs. Sometimes you can have an employee create missing documentation during their offboarding. But you have to develop SOPs now because losing key employees could happen in an instant, leaving you unprepared to train new leadership.

SOPs aren’t an afterthought — they’ll save you time and money

Without SOPs, businesses of all sizes can lose productivity. For small businesses with limited resources, these losses can prove massive.

Let's say every employee loses just 15 minutes a day in productivity. With 50 employees making an average of $30 per hour, those 15 minutes add up to a loss of $97,500 per year. If you increase employee counts or lost productivity per employee, these numbers only get larger.

If you don’t craft an SOP as a matter of urgency, there’s a high risk that your company will lose money through inefficiency — like employees repeating actions twice in a process — and it will be more difficult to put operations back on track again. An SOP is more than just an instruction manual — it’s a stable, necessary aid to immediately help you and your business save time and resources.