Need for Standard Operating Procedures (SoP’s) -SME perspective

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Need for Standard Operating Procedures (SoP’s) -SME perspective

Date: 4 Sep 2020

Businesses are created by putting hard work, taking enormous risks and investing scarce resources by the founders .What follows thereafter is a journey of ups and down witnessing both opportunities and challenges. These challenges increase with growing size of operations, increased manpower, higher resource allocation and vision to reach a larger goal.

The complexities in operations increase with size and there comes an inflection point where in it becomes imperative to reimagine the businesses. The ‘Black Swan’ event in the form of the covid-19 pandemic has left many SME’s around the world at an inflection point searching for the way forward.

The process of revisiting the business approach requires answers to the fundamentals questions of Why? What? And How?

  • WHY helps to re-frame the mission and vision of the organisation.
  • WHAT serves as an enabler to understand the boundaries within which the organisation shall work.
  • HOW suggests the systems, processes, people & resources required to achieve the Why and What.

The Why and What are organisation specific and in case of SME’s are largely controlled by the promoter. It is the promoter who is the best judge to decide on these fundamentals and take corrective actions if required.

However the How is something which requires a reasonable shift from existing means of doing business. The following paragraphs attempt to delve into the ‘How’ part and explain the significance of putting systems and procedures to scale up and grow business.

It’s rare to find SME companies with highly sophisticated process and systems for two main reasons. One, Owners think their size does not demand such sophistication and two, they often lack time and professional resources to take up the exercise of creating one. Their business is centred around the promoter or founder and its run under his directions. Such an approach works in the short run, but becomes a limiting factor to scale & grow beyond a reasonable size.

When should a business consider adopting formal operating systems?

Ideally well-defined systems and processes should be an integral part of each enterprise irrespective of its size and stage of growth .However, starting with scarce resources does not leave enough with start-ups or new businesses to be invested in systems & processes. Also the initial phase of business is all about survival and systems becomes a priority in the later phase of growth. However there exists a few exceptions to this argument which have to invest in systems right from the beginning.

Below are some of the common signs which indicates a SME business owner to go for creating or documenting or standardising its business processes?

  • When the promoter realise that he/she is spending more than 3 hr per day on routine operations.
  • The business becomes too dependent on existing employees or business functions are hampered when an employee leaves the organisation.
  • New joinees start leaving the organisation within 3 months of on boarding due to lack of clarity on their role & responsibilities.
  • The management feels that information required by various stakeholders like Banks, statutory auditors, Government authorities is not made available in a reasonable time.
  • Information, data or records for past years are not traceable.
  • MIS related to business operations and performance is erroneous or not timely available.
  • Communication within and outside the organisation is not smooth.
  • Increase in Overhead costs is not in sync with the revenue growth of the business.

What are the benefits of SoP implementation?

  • SOPs improve communication within the company.
  • SOPs provide quality control and consistency.
  • Employees will be more productive and inspired to work.
  • Creates staff accountability.
  • Ensure business continuity.
  • Adds to the organization value

How to implement:

  • Start with documenting the existing procedures followed in the company as that is what is working for you for so long.
  • Identify gaps and make necessary improvements.
  • Keep the first version broad and simple to implement.
  • Do a process audit each 3 months and record the gaps and rectify noncompliance.
  • Review the document annually basis the audits and roll out the amended version.
  • Make the document granular with each revision.

Things to remember:

  • Seek professional support if you do not have internal team capable to deliver.
  • Ensure participation of the employees in creating and amending the document.
  • Keep the processes simple and clear as far as possible.

SOP’s can be tedious & time-consuming exercise to create and need to be frequently reviewed. However it’s worth the investment in the long run and augurs well for a growing organisation looking to scale up in terms of geography, products or size. Business owners have limited time in a day to work and manage the employees. Putting SOPs in place ensures that processes are followed consistently and business owners have sufficient time to imagine and make the next big move.

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