There are 3 Kinds of SOPs

Each Requires a Different Type of Documentation

WELCOME! There's been an influx of new subscribers recently so I'll start with a short intro of who I am and what this is about.

• I've been a business owner for over 40 years. Never had a job.

• I helped found the International Coach Federation & was its 4th president in 1998 and have been coaching business owners since then. I work with companies with 0.5-20M in revenue and under 250 employees.

• Got rid of my last company in 2016 - I'm semi-retired but I don't have a boat so I keep working with business owners to grow their companies and/or get their lives back. Readers of this newsletter can get a free 45 minute coaching call to help with this process. https://john-3.youcanbook.me/

• Some people think as they talk. I think as I write, so I write here about things I've learned / am learning about how run a company better.

What is an SOP?

Image from https://pixabay.com/photos/boat-fishing-sea-baltic-ocean-2614531/.

No it's not the boat I don't have. An SOP is a Standard Operating Procedure. Also called a process, a system, or a task. It's how you do the work to produce an output.  Like a recipe to produce something to eat or an algorithm a computer uses to produce a result.

What makes it "standard" is it's documented so it can be replicated. Your grandma probably makes a great meal, but if how to do it is all in her head, it's not standard or repeatable without her being there in the kitchen. Companies can't scale well with grandmas. They need SOPs.

Remember the point of any process is to produce an output. So the SOP describes how to do that. It requires 4 parts.

A good SOP documents those four parts plus some metadata about who wrote it and when and why you're producing the output in the first place. When you're documenting the transformation part, you should use a different format depending on the type of SOP it is.

There are three basic types of transformations:

• A Recipe. This is a very detailed step by step explanation of what to do. Both the output and the steps of how to produce it are listed in depth.

• A Dance. This is a process involving another person and reacting to that person’s reactions to what you do. You generally can’t predefine the steps used to achieve the output, but you can define the output in detail. 

• A Creation. When a creation is required, you can’t describe the exact output or the steps used to create it, but you can describe the constraints within which the creation must take place. 

There are some processes that look like a combination. For example, a CPA might devise a tax strategy - this is a creation process (constrained by laws). Then they'd fill out the right forms. Filing out the tax forms is a recipe. Usually it’s more efficient to make these into two different SOPs performed by different people, each playing at the top of their game. 

Let’s look at the three types of transformations in more detail.

RECIPE SOP

A recipe should have step by step instructions. It should include checklists and links to video screenshots or other media as appropriate. A recipe is similar to a computer algorithm.

The body of the document should have lots of headings that are easy to scan.

• Use bullet points

1. Use a numbered sequence

• Use checklists

You probably need more detail than you think. When an intuitive person is producing an output, they often make decisions based on experience and judgment that seem like they can’t be explained. But surprisingly often they can be.

We’ve been talking about food and cookbooks, for example, are very detailed. They tell you what size pan to use, and how to adjust the time and temperature for things like cooking at high altitude, or using a metal pan as opposed to a glass one. Many jobs need an SOP with this level of detail.

Suppose you had a list of 10,000 companies from the same industry you wanted to send a letter to in order to start a business relationship. But you want to customize the letter so you don’t sound like a total jerk. And you know that most of those 10,000 aren’t right for you anyway – maybe only 500 or 1,000 are. You could look at the websites of each company and very quickly decide which ones you should eliminate. But doing that for 10,000 companies wouldn't be the best use of your time.

You can imagine two things.

1. There is a lot of judgment involved. This would be expensive to replicate.

2. The more steps in this process that can be handled by someone without the experience and judgment you have the faster (and cheaper) it will be.

You need a way to translate your judgment into an algorithm or recipe. So you do a few yourself and notice what makes you eliminate or include certain companies from the list. Here’s what you realize:

• Certain geographies are off the list, and certain ones make the cut.

• Certain phrases on the company's website (like distributor, or subsidiary of…) indicate companies you don’t want to bother with.

• If the name of the owner or CEO is listed, that’s a bonus – you’ll use that to look them up on LinkedIn for possible connections you can mention in the letter.

Now you’ve got a way to translate your judgment into an algorithm. Here are the steps you use to tell someone else how to narrow down the list.

1. Start with the first company on the list

2. Look up the company's website

3. Eliminate it if you see these words ….

4. Eliminate it if the company is outside of this geography …

5. If the CEO or owner’s name is listed include it and put the company name and address in list A

6. If the CEO or owner's name is not listed include the company name and address in list B

7. Repeat steps 2-7 with the next company till the list is done.

8. Send me both lists in a spreadsheet with the following columns …

That's the level of detail that's required in a recipe SOP. Just like a cookbook. You could even divide up the list and give those instructions to multiple people if you needed to get through it quickly.

Here's a tip. If your work seems intuitive and immediate, then separate it into steps. Some of those steps can be made into an algorithm and handed off. If you can't explain it in that level of detail, talk it through with someone else. Often they can see things in your process that you can't.

A recipe SOP is great when you're dealing with machines, computers, and data. But when you're dealing with people, you need to dance.

DANCE SOP

Peter Lohmann (@pslohmann) runs a Property Management company in Columbus Ohio. He thinks like an engineer so his processes are well documented. He told me he uses different departments to deal with operations (machines, computers and maintenance) than he does with customer service because some people are better at using finesse and he doesn’t want his clients or tenants to feel like a number in a checklist. Sometimes people just need to be heard.

Then he told me what one of his customer service processes looks like. For certain situations he instructs his people to say something like, “The purpose of this call is to gather all the facts, then I’ll take what I’ve learned and work on solving your problem. Please tell me in your words what happened.” Even if the solution is obvious, he instructs his people to hear the whole story. Then use their judgment about what to do next within certain guidelines.

When dealing with people you can't reduce your SOP to an algorithm or a script. You have to dance with people. Here’s another example. Let's say you're developing an SOP for your sales team and in the initial conversation, you want to gauge the level of interest from a prospect. You can't just tell your people to ask, "On a scale of 1-10 how interested are you?" Even if you could, one person's 6 might be another's 9. So the answer wouldn't be of much use.

What you can do is say in your SOP something like:

Before a prospect is moved to the next stage in the sales pipeline, we want to know their budget, their timeline for purchase and the key players in the buying decision. It may take more than one conversation before they are ready to share this information - and their eagerness (or lack) to share can be an indication of their interest.  Record the results of your conversation in the CRM and always try to set an appointment for the next conversation in the calendar. If they are not willing to commit to a date for that conversation, schedule a time when you will follow up and ask for permission to follow up in that timeframe. For example, "I'll check back in about 3 weeks. Would that be OK?" Then you put an actual date/time for the follow up, 3 weeks in the future.

This allows the person to "dance" and use their judgment but still specifies what the output should look like. In this case, the output would be:

• Details of the conversation in the CRM (which should include some facts and some judgment)

• Moving the prospect to the next stage only if all the information was given

• A follow up date in the calendar

A dance SOP means you can't describe the actual steps involved, but you should be able to specify what the output looks like. This works well if you have a dance partner. But what if you have no partner?

CREATION SOP

With this type of transformation, you can’t predict what the output will look like. But all creative acts have some constraints and these should be defined in the SOP. Constraints can be something as narrow as the rules around making a Haiku or as broad as the laws of physics.

Emma Coats used to work at Pixar - a very creative place. She wrote what she called the 22 story rules. (She later said she should have called them guidelines). Here’s number 4, a great way to constrain a certain type of story.

Once upon a time there was ___. Every day, ___. One day ___. Because of that, ___.

Because of that, ___. Until finally ___.

A creation SOP is similar to a design brief that might be given to a graphic artist. Those constraints might limit the work to using certain colors and fonts and to evoking a certain mood. Then it would specify the size and format of the final result.

Understanding these three types of SOPs will help you document how the outputs in your company are produced. This is the first step towards making the work in your business repeatable and scalable, which is vital if you want to grow and if you want to shift your work away from the day to day on to more strategic operations. 

This is an excerpt from my upcoming book about how to scale your company faster using Output Thinking.  
UPDATE: The book is available for pre-order before Dec. 7, 2023 Check out the pre-order special HERE.