This article is coauthored by Monique B. Clohesy, Cairn Consultants & Advisors LLC (917-435-7938), and M&A Consultants and Advisors.
Overview
Every company has its own processes for doing business. Often they are known only to the person or team in charge of specific business activities. For instance, the sales manager knows and understands the sales funnel, the lead engineer knows how to specify new products, the bookkeeping department knows how to run month-end reconciliations, etc. This approach is often the default approach to running businesses because key people tend to grow along with the business. This approach can often be efficient until it isn’t. The key triggers to exposing process weakness are (1) the loss or disability of a key employee, (2) growth of a business, (3) shrinking profit margins, (4) downsizing. Documenting processes not only causes roles to be transferable, but also enables a fresh look at efficiencies, risk management, scalability, etc. After processes are defined and documented, they can be systematized into software platforms such as ERP systems.
NOTE: Often when documenting a process, it is important to include a writeup on why things are the way they are. This can be included in new employee training and create a fact pattern that can be evaluated when determining if the process should be updated.
Why is documenting processes important?
If you have ever had to perform a colleague’s work while they are out of the office and their responsibilities differed from your own, you know how important it is to have their workflow documented. Many times, this is accomplished by sitting with the person ahead of their departure and taking notes; imagine how much easier it would be if these steps were already documented.
Process documentation is fundamental for business continuity.
Other reasons include:
Mitigation of risk – the ability to prove that business processes meet compliance regulations reduces the costly risk of noncompliance.
Strengthen employee engagement – as staff document each process and address problems, they begin to take ownership.
Stress-free outsourcing – when processes are defined well, it is easy to bring on remote workers without losing consistency.
Retention of knowledge – process knowledge is not lost due to unexpected absence or turnover.
Transferability of roles – process documentation enables employees to move into different roles when needed.
It is a requirement for industry certifications (i.e. ISO), registration of patents & trade secrets, and some outside third parties (i.e. auditors).
Documenting your business’s processes also provides management and staff an opportunity to review a process for improvements and perhaps automation. It is recommended that a review of processes occurs annually; this will ensure that repeated mistakes are corrected, and inefficiencies are addressed, as both can cost your business time and money.
Operations Manual, Defined
An operations manual (also called an procedures manual or SOP – standard operating procedure) is a document outlining how specific work processes should be handled by employees.
Operations Manual Style
An operations manual should ideally:
Be written in a simple, easy-to-understand style
List every step of each process
Contextualize the instructions – say why things are done this way
Operations Manual Components
Examples of sections to include in the document are the following:
Processes & Procedures
Business Policies – Note that these are business-specific, not social policies. Not accepting checks is a business policy, while vacation, benefits, etc. are social.
Hierarchy & Roles
Contact Details & Job Descriptions
Emergency Procedures[1]
What do I do next?
If you already have all of your business processes documented, great! Now is the time to review them and make improvements. If you do not, well now is the time to get started.
Engage your staff to assist in this task. Explain the purpose of this process documentation exercise and ask them to be open to improvements that will make the workflow not only more effective but easier. Each process should state the objective of the process and list each task in sequential order until the objective is achieved.
We encourage the use of screenshots and other pictures that will enhance the reader’s ability to perform the task. For example, a new employee may not know where to find the F: drive used in the example above, so including a screenshot of the file explorer with the drive highlighted would be useful.
Have staff review each other’s documentation to test its thoroughness. Missing steps or incomplete documentation can be corrected at this time, along with opportunities for improvements. Once the processes are written and reviewed, make them easily accessible—and searchable—in both electronic and written forms.
Implementing a New ERP
In April 2022's monthly topic we talked about Enterprise Resource Planning (ERP) systems and how they can be a game-changer to consolidate the operations of your business – as well as how time-consuming and costly they can be to implement. Before setting up a new ERP, it is important to document all processes that may be tracked in the system. This documentation will inform:
Whether a process can benefit from more automation, and what kind of automation would be helpful
How certain processes interact with others within the business, and in what order
What kind of ERP is needed (which features are must-haves when evaluating multiple options)
Don't hesitate to reach out for a historical monthly topic from our archive!
Summary
While documenting processes is a large investment of time and resources up front, updating the documentation is much easier after it has been initially developed. Sometimes documented processes are required for legal or industry standardization, ease of teaching new employees, or retention of knowledge. No matter what the reasons are, documenting processes is important for the success of your business.
Don't hesitate to reach out to us for copies of prior editions from our extensive Monthly Topic archive. Other July Systems Monthly Topics include: Process Focus, Systems Focus, and ERP Focus.
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