Standard operating procedures
SOP
What is an SOP?
A standard operating procedure is a company wide formalised structure to
handle specific operational activities. They are, in the opinion of Ibis, an
essential supporting element in the creation of good planning and control within
the growing company.
What are the potential advantages of using SOP's?
They standardise the approach of individuals within the company to specific
procedures, improving the quality and speed of decision making in key areas –
especially in contingency planning
and survival and recovery;
They provide a valuable structure for inter company discussion and
development, with a key role in creating a knowledge management base within the
organisation, particularly important in cost
cutting and exit planning;
They act to disseminate best practice within the organisation and can be updated as the conditions and legislation require;
They serve to speed the integration of an individual into the organisation during the induction training phase by making available a library of company wide best practice and company operating procedures;
They improve transparency within the organisation by enabling all employees to see how specific problems are handled in a standard and clear fashion which helps in the creation of shared values;
They provide a clear audit trail in cases of dispute or external investigation where it can be shown that correct procedures were followed and records maintained;
They provide a check list which is action
and implementation orientated;
T
They can provide a rapid way to improve the span of control within organisations – removing much of the mundane procedures from management and empowering employees to carry out a whole range of standard activities;
They can provide highly cost effective maintenance training when incorporated into an effective Intranet and checking system. It can also be linked to additional material held within the company and on-line training courses;
They provide the first stage in the creation of knowledge centres within an enterprise, by serving as a means of collecting information which can then be used to develop expert systems, involving software and eventually artificial intelligence;
They can provide valuable assistance to change
management policies, by embedding new best practice.
What are the potential disadvantages of using SOP's?
Standard operating procedures can become more and more restrictive and more and more detailed, reducing individual liberty and individual approaches to work;
Standard operating procedures can become very time consuming involving the completion of excessive paperwork;
Standard operating procedures can be extended to cover even the most minor aspects of work, creating a completely controlled environment – ideal for a bureaucratic management style;
Unless updated with new regulatory requirements and best practice they will rapidly fall into disrepute;
Unless they are used by all they will also be seen as part of a system put in place to mollify employees rather than as a key universal management tool.
What are the characteristics of a good SOP?
The SOP can be shown to have benefits to the employee in improving and simplifying job performance;
That it provides a inclusive framework for decision making rather than an exclusive structure;
The SOP is easily and rapidly accessible to all employees;
The role and importance of the SOP can be easily and clearly demonstrated in the accompanying explanation;
The SOP leads to specific and ideally simple action which can be rapidly documented;
The SOP is part of a company wide training and development programme, and knowledge of the SOP is regularly tested within the organisation through the use of Intranet systems;
SOP's are always used by senior management in the relevant decision making areas, and are communicated in that form to other staff.
What SOP's are essential?
Ibis now has around 65 standard operating procedures developed for different companies. Within this range of material there are core items that all organisations should consider:
SOP's concerned with corporate governance, record keeping, and monitoring;
SOP's concerned with buying and selling including outsourcing;
SOP's concerned with safety and security;
SOP's concerned with personnel policy and employee development;
SOP's concerned with the standardisation of key operational activities such as contingency planning, risk management, new product development, and investment appraisal;
Other SOP's will depend on organisational circumstances.
When should the company consider the introduction of SOP's?
Some SOP's are in the view of Ibis, central to effective decision making at whatever stage of company development.
Both academic research and personal experience suggest that they become more and more important as the organisation grows in size and more and more operational decisions need to be delegated. In practical terms this suggests that an organisation with more than 30 employees should be considering the formalisation of operating procedures through the introduction and adherence to a complete set of standard operating procedures that are relevant to the demands of the environment in which it operates.
Creating a standard format for a SOP
Ibis has a standard format for the structure of a SOP, which we have found meets the requirements of all that have been currently developed.
Two separate components have been created – an element of general background, combined with specific stage by stage SOP elements.
General
Title of SOP;
Why is it important – how does it improve corporate performance?
What are useful background concepts?
What does it link with within the enterprise?
What is best practice? – current research findings.
What are the legal implications of using this SOP and creating documentation?
What security problems should we address when using this SOP and distributing it?
Specific
What is the specific action item designed to achieve?
What resources do we need (if any) to carry it out – and are they in place?
What tools do we need (if any) to complete and measure its achievement?
Who needs to be involved (if any)?
What paperwork needs to be completed (if any) for the stage and where it should be stored?
Who needs to be informed of stage completion (if any)?
Who needs to be informed of SOP completion (if any)?
Comments on how the SOP worked.
The current (January 2005) list of standard operating procedures available
from Ibis are:
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Purpose of SOP: To enable the firm to create and manage in a structured
and systematic way its international development |
|
Linked SOP's: Strategic analysis, marketing, new product development,
business monitoring and MIS, investment appraisal, recruitment, appraisal,
E-commerce, market research, competitive analysis |
|
Useful concepts: Trading blocs, Golden circle, Balanced scorecard,
Investment analysis, KPI, Marketing mix, Diffusion analysis, Segmentation,
Team building, Structure, Skills |
|
Background book: Meade JJ Making International Development Pay (title
does not exist – for demonstration purposes only) |
|
Background articles: Scanned into International Development Background
file |
|
Best web site for material: www.buildingbusiness.org
(title does not exist – for demonstration purposes only) |
|
Best on-line training: www.getitrightoverseas.com
(title does not exist – for demonstration purposes only) |
|
Documentation: Strategic plan, balanced scorecard, legal framework
(several documents), investment appraisal, project plan, marketing and
business development plan, manpower development plan, cash flow forecast,
contingency plan, |
|
Personnel involvement: CEO, FD, Management team for specific market,
Relevant director heading team, production and logistics |
|
Security: Material to be password protected |
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Legal concerns: Not to be issued to stakeholders; for internal use only |
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Best practice:
* Integrate strategy through balanced scorecard
* Emphasise golden circle
* Use common investment appraisal system for strategic development
* Choose board member as head of team
* Create team for both analysis and implementation
* Focus on key markets
* Leverage sales through international customers in core markets with
links in target international markets
* Group markets for optimal logistics solution
* Maximise control and flexibility in each new market
* Maximise costs and revenues in same currency to reduce risk wherever
possible
* Optimise relationship between market attractiveness and risk by
choosing appropriate market entry investment
* Focus on key products
* Focus on key customers within international markets
* Build joint plans wherever possible with key customers (TDA's)
* Regularly review structures as operation develops
* Separate information systems and create new framework for each major
market
* Make customer satisfaction survey central part of monitoring system
* Attempt to standardise IT platforms across regions and markets
* Build new core competences where necessary
* Complete detailed review of marketing mix changes prior to market
development (13 topic analysis)
* Build up plan from realistic assessment of customer base and sales
per customer
* Reality check plan through key performance indicators
|
|
Tools:
Team building
Systems development (recruitment, appraisal, training, motivation)
Strategic analysis
Forecasting methodology
Project management
Operations research
Market research
Diffusion analysis
Marketing planning
Manpower planning
Investment appraisal
Pricing
Key performance indicators
Contingency planning including risk appraisal
|
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Step 1 Create team for strategic analysis and implementation |
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Step 2 Establish current business position |
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Step 3 Establish future business position over planning horizon |
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Step 4 Identify strategic gap related to balanced scorecard |
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Step 5 Define mix of strategies to fill strategic gap, concentrating on
golden circle solutions |
|
Step 6 Identify markets most appropriate for long term investment (high
attractiveness, low risk) |
|
Step 7 Check legals |
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Step 8 Define best tax structure |
|
Step 9 Identify key local advisors and suppliers (legal, finance,
premises, logistics, components,
IT) |
|
Step 10 Establish fixed cost investment related to market entry choice
(sales from home, sales office, assembly based operation, full assembly) |
|
Step 11 Define 7 S choices in new operation |
|
Step 12 Establish variable cost structure and investment in marketing
mix (13 variables) |
|
Step 13 Review pricing structures against new market leader, risk,
quality and planned investment in A&P |
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Step 14 Choose ownership structure |
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Step 15 Recruit internally and externally for operation |
|
Step 16 Review information system and change frequency, content,
sourcing and key performance indicators |
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Step 17 Reality check through review of key performance indicators |
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Step 18 Contingency plan including review of key assumptions, risk and
budget |
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Step 19 Final budget and cash flow |
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Step 20 Check back against balanced scorecard and investment appraisal
requirements |
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Step 21 Implement using project management methodology |
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Step 22 Reference sale from key customers |
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Step 23 Co-ordinate through key products, new product development,
training and manpower planning |
|
Step 24 Drive out operation through mixture of market penetration and
product development strategies |
