How SOPs Help Save Money
Over the past 12 months, there were two sets of 3-letter-acronyms that have been embedded in the lexicon of almost every Malaysian. The first of course is SOP and the second is MCO (not to mention the variants of RMCO, EMCO, CMCO, YMCA and the like). The SOPs were created by the government of Malaysia as a step by step guide to help citizens carry on with their daily lives. It was designed to keep transmissions of the virus low by ensuring that adequate safeguards are put in place like social distancing. However, as time went on, these SOPs were ignored not only by the very same people who created the SOPs but also the people whom it was designed to protect. Malaysia had entered into an era of SOP fatigue. Everyone was so tired of hearing those words and they just wanted to be “unchained”.
This is the same (albeit with less drastic consequences) in organizations. SOPs are created to protect the company and to ensure that work carries on smoothly, efficiently and in the manner that the company wants it to. Corporate SOPs are so important to the smooth running of a company that leaders treat SOPs as the one, single point of truth when it comes to training their teams. Probably due to this, it is common for organizations and their employees to suffer from SOP fatigue as well. As a result, SOPs can fall into a state of disrepair, cease being updated with any sort of frequency or consistency and/or team members find ways of taking shortcuts. As SOP fatigue grows, the style of working becomes entrenched in the mind of team members and the organization as a whole, making them resistant to change or improvements.
As a result of this, a number of potentially dangerous situations might occur such as; a merchant being onboarded without the true level of risk being determined or credit being extended to a company with cash flow issues or high-risk transactions being processed without any additional investigation. Regardless of the exact situation, the consequences are the same to the company - financial losses. This does not include the possibility of fines or having to write off some bad debt. This scenario was the same that we faced some time ago and we thought we would show how something as seemingly mundane as an SOP can, with the right amount of attention and processes, help an organization save money.
The project all started when a few bad merchants were onboarded, made a decent number of sales, had accounts settled and exited the platform whilst not fulfilling any orders. A series of chargebacks occurred and the company faced multiple losses ranging between $50K - $110K. The first step that was undertaken here was to review and understand the SOPs. Next came interviews of randomly selected team members to ascertain how well they know the SOPs and why certain steps had to be done. This was followed by multiple SOP adherence checks to determine if the team members were following the SOPs. At this stage, the team members were asked if they had suggestions on how the overall process could be improved or at least, speed up. This revealed the shortcuts that were often taken by team members.
At the end of the finding, multiple issues were highlighted to the department manager such as :
The SOP was outdated & required team members to complete certain actions despite there being no actual need for those steps.
Risk team members were being asked to complete work that belonged to the compliance team. This resulted in major delays, customer complaints and underutilization of the product once a merchant was approved.
The SOP included a risk assessment tool that did not take into account recent changes in the company’s overall risk assessment process.
After some data crunching, interviews and analysis, it was concluded that these issues resulted in :
Merchant onboarding applications were often backlogged by 72 hours and the onboarding process often took an additional 72 hours. Meaning on average, a merchant waited 9 days to begin processing. By that time, the merchants often processed under 10% of what they were expecting as the wait time was unacceptable to them.
Merchants made multiple calls to the customer service department clogging up lines and support tickets. This point bothered us a great deal as 90% of the calls were customers asking when their account would be set up. A customer service representative would raise a support ticket to the risk team who would revert within 2 days due to a backlog of support tickets. This meant the customer did not hear back from the customer service team for 3 days after they called, a terrible customer experience.
Merchants that were risky were being onboarded without any security measures when either the merchant should have some security measure placed on their account OR the merchant should not have been onboarded at all.
At the very centre of these issues was the fact that the company had not done any level of relevance checks, adherence checks or sanity checks on their existing SOPs. Once these issues were addressed, wait times fell to under 24 hours. Bad decisions fell almost immediately and the company experienced no losses due to bad onboarding decisions since then. Finally, there was a decrease of 94% in customer calls to the company as merchants were being onboarded significantly faster. As a result of this, the company was able to get merchants using their services almost immediately, generating much more revenue.
As we said at the beginning, SOPs are critical to the success of a company but creating the document and training your teams to follow the SOP is only part of the battle. These documents need constant attention and editing and if an organization is unable to dedicate the time, they will surely face the consequences down the road. Of course, the company could just contact us and we can help you ensure that SOP fatigue does not impact your organization.