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Key Performance Indicator (KPI)

Definition

Key Performance Indicator definition

A key performance indicator (KPI) is a critical indicator of the progress of business processes in reaching their objectives. It is used by different organizations at different levels to evaluate each professional services that contribute to the progress of the company and its overall performance.

Key performance indicators are categorized into two categories: quantitative and qualitative.

Quantitative is based on numerical standards of a goal while qualitative refers to the quality of the performance based on physical feelings, tastes, or opinions.

They are also measured into five types: input, process, output, outcome, and project. Since this is an embodiment of a SMART goal, it measures its objectives and individual goals through the methodology and presents it in data form.

Key Performance Indicator examples

Key performance indicators may fall into different points of measurement: financial metrics, process metrics, customer metrics, and people metrics. For instance, the assessment of net profit, cost of goods sold, and the tally of revenue vs. target fall on the financial metrics.

For people metrics, there’s the average number of employee turnover, training and seminars held for employees, and the number of open positions every quarter.

Process metrics, meanwhile, measure the number of processes it has for each role over the efficiency of these processes.

Key Performance Indicator (KPI)
Key Performance Indicator examples

KPIs by industry

Regardless of whether you call them indicators or measures, KPIs are the most crucial benchmarks for the performance of an organization or industry. Using and measuring the right KPI is a key step in the success of your business processes.

Determining what indicator you want to utilize is the hardest part of workforce management. It can be financial, customer-focused, process-focused, and many more.

KPIs vary between different sectors. These industry-specific measures will enable you to analyze your data to know your performance and create concrete decisions for your company.

KPI’s meaning in the BPO sector is also different. Many call centers use metrics that are customized to their everyday processes to measure the productivity of every call agent.

KPIs in the BPO industry

In a BPO, contact center, or call center environment, supervisors usually monitor and measure the performance of their call agents through various call center metrics.

Monitoring these KPIs allows them to analyze their everyday call volume, their call setup success rate, agent productivity, customer satisfaction, and their services’ overall customer experience.

Some common contact center KPIs include the following:

First call resolution (FCR)

Also called first contact resolution, this call center KPI tracks the percentage of incoming calls or requests that were resolved during the first interaction between call agents and inbound callers.

Solving an issue quickly within the first call contributes to an excellent customer experience. This also eliminates the need for the call center agent or the tech support team to schedule a follow-up call to solve the customer’s issue.

This metric is also a great way to assess the call center efficiency and the agent performance in your company.

Generally, the industry requires an FCR rate close to 90% to consider the call center service to be excellent, while 40% is considered the “low” end.

Customer satisfaction (CSAT)

The customer satisfaction score indicates whether a product or service exceeds customer expectations. It measures the service level of every call center agent and whether they delivered a poor or excellent solution to all the calls that the center has received.

CSAT is often measured through surveys given out as a post-call work to callers. Inbound callers are then asked to rate the service level from zero to five.

To calculate your final CSAT score, use the two highest values on your feedback surveys (commonly 4 and 5). Then, follow this equation:

CSAT = (No. of satisfied customers / Number of survey responses) x 100

Net promoter score (NPS)

The net promoter score measures both customer loyalty and customer satisfaction. It answers the question of how likely a caller would recommend the call center’s services to other people.

The total NPS score helps businesses find out if they need to improve their services, customer support, and delivery, among others to increase customer loyalty.

As a contact center KPI, NPS helps companies determine how many of their callers are enthusiastic with their service, as well as how many are not satisfied with the service.

To measure your NPS, follow this formula:

NPS = Percentage of promoters – Percentage of detractors

Customer retention rate (CRR)

Customer retention rate measures the total percentage of customers that your team has retained in a certain amount of time. This can be weekly, monthly, quarterly, or yearly.

This metric is among the most important KPIs to monitor because it impacts the company’s revenue, customer satisfaction levels, and the overall growth of the business.

A high or increasing retention rate means that your clients have a positive sentiment about your brand and that they are happy with your services.

To know your CRR, simply follow this formula:

CRR = (Total active customers at the end of a given period – No. of new customers during the same period) ÷ Total customers at the beginning of the period X 100%

KPIs in the BPO industry

Average speed of answer (ASA)

The average speed of answer, or simply ASA, calculates the average time that agents take before answering a customer’s call. This includes time spent waiting for a call agent to answer the customer’s calls.

Here is a simple formula to know your ASA,

ASA = Wait time for answered calls ÷ No. of answered calls

The industry standard ASA average speed is generally 28 seconds. A longer time than that could lead to a low customer satisfaction rate and generally a bad review from a caller.

Average abandonment rate

A call center service’s abandonment rate determines the percentage of abandoned calls made by customers who have already ended the call before even reaching a call center agent.

Abandoned calls are not uncommon in call centers as callers tend to be held up for several minutes to an hour before getting connected to a human representative.

Monitoring your team’s abandonment rate allows you to see how many callers became angry or impatient enough to leave before receiving assistance from the company.

A high abandonment rate signals that you mostly have frustrated customers which in turn, affects your customer satisfaction rate.

Here is how you calculate your abandonment rate:

Abandonment rate = (Number of calls – Number of handled calls) ÷ Number of calls x 100

Average response time

The average response time refers to the average time it takes to respond to an incoming call and the time the agent spends completing the whole conversation. It does not include time spent waiting for an agent to answer.

The most ideal response time in the call center industry is 30 seconds. The shorter your average response time is, the higher your customer satisfaction gets.

Calls blocked

Call centers can sometimes get overwhelmed when fielding calls from their customers. This is where a busy tone or signal goes through. This usually occurs when the call center cannot handle answering more calls.

Usually, the call center software is not capable of handling the current amount. When you measure KPIs for the percentage of calls blocked, you must determine if the problem is department-wide or only to an individual employee.

Additional training can be offered for call center agents who are struggling with an excessive number of active waiting calls in their lines.

Customer effort score (CES)

Customer effort score (CES) is a KPI that measures the amount of effort the customer had to apply to be able to use a product or service, have their concerns or questions answered, or get their issues resolved.

Sometimes, any call centers or contact center platforms are hard to reach. Callers had to make extra effort to get their calls answered by an agent that could help them with their concerns.

Measuring your CES can help make accurate predictions of your call center performance. Typically, callers are asked to rate the ease of their customer experience through a numerical scale or an anger-to-happiness scale.

The higher the CES a call center has, the better. A high customer effort score means that your call center provides an effortless experience for customers.

KPIs in the BPO industry

Aligning BPO employees with your KPIs and metrics

It is always advisable to track call center KPIs. It helps organizations know what to do when measuring customer satisfaction, the center’s and agent productivity, the effectiveness of their services, how many calls are being answered in a timely manner — or as soon as the agent’s phone rings, how agents are working to resolve customer issues, and how they avoid reaching even one blocked call.

BPOs have different ways of measuring their call center effectiveness, but all have standardized metrics for the industry. Typically this measurement combines specific focus areas and provides important insights about customer experience, putting equal emphasis on quality and quantity.

One of the most complicated parts of working in the call center industry is knowing and understanding call center KPI and metrics. Comprehending them makes it easier for call center agents to align themselves with the contact center and the goals that the company is working for.

This responsibility mostly falls on call center managers. They are obliged to study the different call center KPIs deeply to train their agents to work according to the specific metrics.

If you are still confused, you can ask for advice from outside consultants about measuring your call center KPIs.

Outsource Accelerator connects you with the best outsourcing companies in the Philippines, where you can save up to 70% on staffing costs. We have over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 2,500 BPOs… all designed to make it easier for clients to learn about, and engage with, outsourcing.

Outsourcing FAQ

What is What is business process outsourcing??

Business Process Outsourcing (BPO) is the delegation of business processes to an external service provider to a nearby or farther location. BPO uses various technology-enabled services to optimize the delivery of services.

Some of the usual outsourced business functions are the following.

Payroll Accounting Human resources Customer service Sales Marketing

In the case of content providers, these could mean hiring writers, remote editors, or virtual assistants.

BPO speeds up processes and enhances efficiency. Companies that outsource some of their business processes use their time on core services and competencies.

With this shift in focus, companies improve their current processes which may result in improved customer satisfaction. BPO helps companies divert their resources to more critical business strategies.

Often, companies find it impractical to hire a full-time position in-house because of the cost associated with doing so. Outsourcing services can also help them save costs and resources in hiring suitable employees.

The definition of BPO outsourcing

In business process outsourcing, a company delegates their services to a service provider. It can be a local firm, nearshore, or offshore company.

Upon reaching an agreement, the service provider will then set up a team for their client. They will shoulder the costs and resources needed, including the office space, workplaces, connection, cloud storage, and IT infrastructure.

The providers are responsible for tracking the staff’s performance and progress. The clients, meanwhile, are responsible for providing the tasks, processes, and KPIs needed for their operation.

In some instances, they are also allowed to incorporate their culture and values to their team and absorb them as a part of their company.

What is BPO? How does Business Process Outsourcing work?

Business process outsourcing happens when a business taps a third-party service provider to operate some of its internal processes. Such ‘processes’ include customer service, accounting and finance, or sales.

It is different from hiring an agency to do specific tasks, as the outsourcing provider (BPO) is more concerned with the ongoing production of labour-intensive tasks, instead of the higher-level strategy and guidance.

Now, BPO has broadened and is more akin to staff augmentation, or staff leasing.

What are the benefits of business process outsourcing?

There are many benefits to outsourcing, as well as some downsides and risks. Outsourcing powerhouses like the Philippines and India produce high-quality talents at a lower rate due to their low operational costs and full government support.

Since outsourcing companies hire and produce experts in the field, clients can assure better results in their operations – whether in customer service, accounting, or marketing. Their staffs are trained to ensure that their clients achieve the outcome they expect.

Companies are able to scale their staff depending on the demand and availability of their tasks. This also helps them improve their operations by letting their service providers contribute in streamlining their processes.

Outsourcing poses more growth opportunities for businesses of all shapes and sizes. While there is still drawbacks to this practice, it is safe to say that its advantages outweigh its risks. 

To explain it further, below we have outlined the top benefits of outsourcing business processes: 

Cost savings

Companies can enjoy savings of up to 70% by leveraging the salaries and costs in offshore countries.

In the Philippines, for instance, companies can hire offshore staff with a US$500/month salary for starting positions. A team of 10 employees would only cost them as much as a single worker in the US with an equal position.

Global market

Small and medium-sized businesses find it most difficult to hire local employees that suit their roles. 

The widened skill gap in developed countries paired with economic crises affects their capacity to expand their teams as needed.

Businesses get to access a bigger pool of talent that can fit their requirements. They can have better options in hiring employees since they are not limited to what is available in their home countries.

Global presence

At the same time, outsourcing opens clients to global trade opportunities. They can establish their global presence and expand more easily to other locations since they already have operations in the area.

Flexible workforce

Outsourcing is a great way to establish a remote workforce, especially for companies looking to implement this setup for the first time.

BPO reduces internal local compliance obligations including providing additional office spaces to employees. Instead, organizations can hold their business operations on a remote setup, most usually having their teams in an office provided by the BPO firm.

Leverage skill

Companies cannot always do everything on their own. Burnout within entrepreneurs and teams are more common than everyone thinks, especially with everyone filling up the tasks beyond their skill sets.

A BPO company enables them to leverage the skills of other specialist companies on more complex tasks such as accounting and IT.

Focus

Lastly, BPO enables organizations to focus on their core business functions. This is since most of their non-core business operations are done with the help of a reliable service provider.

Business process outsourcing examples

The BPO sector is a vast industry, generating over $200bn annually, and employing millions of people worldwide.

As stated in the Market Analysis Report, the global business process outsourcing market reached over USD 245.9 billion in 2021. Thus, it is foreseen to acquire a compound annual growth rate (CAGR) of 9.1% this year, 2022 to 2030. 

The proliferation of the global BPO sector is utterly driven by several key factors that organizations take full advantage of: 

Improved efficiency and agility Focus on core competencies Decreased operational costs Adapt to the ever changing business dynamics

In general, when we speak of outsourcing, it always entails contracting out parts of business processes to an external provider either domestically or offshore. 

BPO can be seen in different forms and contexts, from hiring single staff to getting an offshore team.

Here we have listed some of the examples of business process outsourcing:

Big enterprise

Corporate outsourcing has been around since the industry started. The new breed of large companies are still taking advantage of its benefits and use it to expand their offerings further.

Some of the known enterprises that outsource their services today include the following.

Google. Google has been ramping up its outsourcing efforts since 2016 by delegating development and customer support. Facebook. Meta, particularly Facebook, outsources content moderation to the Philippines as a way to filter toxic content and keep the platform safe for its users. Wells Fargo. Wells Fargo has been outsourcing their operations to the Philippines since 2011. It has recently pulled out its functions in the country, though the company retained its BPO center in Manila. Medium-size businesses

A medium business with 50-500 staff might outsource the labour-intensive accounting and finance functions to a team in the Philippines.

Small business and entrepreneur

The recent Clutch survey stated that around 90% of small businesses plan to outsource their services in 2022 due to the efficiency and flexibility that companies get.

It is common for small business owners to have a Virtual Assistant (VA) working for them full time and remotely from the Philippines.

Aside from this, organizations can delegate other services such as development, IT, and digital marketing.

What are the different types of BPO?

Outsourcing can be executed in different forms, depending on the outsourcer’s needs. Truth is, not everyone are fully aware, and has an in-depth grasp of the BPO sector. 

For most people, BPO can simply mean farming out business processes to third parties located in another country, but this is just one type of BPO. 

As for businesses, it is always vital to be familiar with the various classifications and functions of BPOs. This way, they are able to opt for a business process outsourcing provider that is best suited for their type of requirements and industry. 

More importantly, outsourcing is not a one size fits all strategic approach, this is why it is not enough just know what outsourcing is and how it works. 

There are several types of BPOs that businesses can choose from. The type of business process outsourcing can be characterised by their specialisation, location, and size.

Generalist or specialist BPOs

Business process outsourcing is in the human resources and professional services sector. 

However, their services extend across all industries. The majority of BPOs are generalists, in that they offer a full range of professional services.

Meanwhile, some specialise in certain verticals such as the following.

Legal process outsourcing

Legal process outsourcing deals more with delegating legal processes and compliances to legal firms in another area.

Knowledge process outsourcing

Meanwhile, knowledge process outsourcing enables companies to outsource knowledge-related work including research and development, innovation, and creatives.

Location

Business process outsourcing typically operates from developing nations such as the Philippines, India, and Colombia. They typically have cheaper cost-of-living and bigger populations. Different locations offer different advantages.

Size of BPO

The bigger BPOs employ more than 250,000 people. They are huge, global operations. Medium-sized BPOs range from 500-5,000 staff and offer a full range of services. The smaller BPOs might have 1-500 people.

Offshore

Offshore outsourcing refers to the process of delegating a part of operations or a department to an offshore country.

To maximize profitability and efficiency, companies choose to outsource to a different region or timezone. India, the Philippines, and South Africa are some of the popular countries known for offshore outsourcing services.

Onshore

Onshore outsourcing or onshoring, meanwhile, is preferred by firms looking to delegate their services within their country.

Onshoring does not offer much savings as that of offshoring or nearshoring. However, clients prefer this as a way to maintain their branding and satisfy their local markets.

Nearshore

Lastly, nearshore outsourcing is preferred by companies that do not want the hassles of time zone and cultural differences in offshoring but still want to get the best out of their delegated services.

Through nearshoring, businesses can collaborate with their teams located in a nearby country. This gives them the opportunity to maintain their local compliance and save on costs since most nearshore locations are cheaper than their onshore counterparts. 

Functions of business process outsourcing

Collectively, business process outsourcing provides any kind of staffing solution. Common functions of BPO include:

Finance and accounting

Outsourced finance and accounting services help businesses manage their books, monitor cash flow, and keep up with corporate income tax compliances without fuss.

Healthcare

Healthcare outsourcing, meanwhile, organizes various back- and front-end functions done for the healthcare and insurance industries.

Creative and content

Creative services outsourcing covers everything from post-production of Hollywood movies to newspaper and website content.

Tech, IT and development

IT outsourcing involves delegating network management, web and app development, and cybersecurity protection to IT firms in different countries.

Sales & customer support

Some BPO providers specialize in sales and customer support for pre- and post-sales transactions. This helps companies meet the expectations and demands of their customers, keeping them satisfied even after their purchase.

Marketing

BPOs and marketing firms can help in ongoing marketing, communication and branding activities for their clients. This helps them attract more suitable leads in a cost-efficient way.

Talent and HR

Businesses can delegate HR, recruitment and compliance to professional employer organizations to maximize recruitment and workforce management.

Administration

Generalist BPOs help organizations accomplish general business administration and operational activities. This includes data entry, appointment setting, and other related functions.

Supply chain management

Lastly, e-commerce stores benefit from outsourcing supply chain management to manage warehouse and delivery processes.

The future of BPO outsourcing

We have gathered five expert opinions from renowned global business leaders. They shared how they perceive the future of outsourcing will be, including the trends that will prevail in the coming years.  

Meg Marrs, Safer Senior Care

Meg Marrs of Safer Senior Care strongly believes that entrepreneurs and business leaders should outsource their essential tasks. “Outsourcing certain roles has freed up my time to focus more on big picture strategy, rather than being completely meshed in the day-to-day tasks.” 

One thing is certain, outsourcing to support businesses growth is something that will never go out of trend. 

Sean Nguyen, Internet Advisor

As for Sean Nguyen, Director of the Internet Advisor, outsourcing to streamline processes is another essential trend that businesses will continue to apply. 

He quotes, “Outsourcing can be really helpful, even at the most incipient levels, because it allows you to streamline operations. If it’s not essential to have it taken care of in-house, there is no reason to do so.”

Elandas Miller, Kicking It Sports

Elandas Miller of Kicking It Sports, has been outsourcing back office and creatives since 2017. “I like to think of outsourcing as a tool to help me get to my goals faster and more efficient without burning myself out.” 

Outsourcing to support both organizations' short and long term goals is another trend that companies will practice in the foreseeable future. 

Tom Baker, Tom’s Projects

The founder of Tom’s Projects, Tom Baker, offshores his entire product and development. “Outsourcing means that we can scale the team up and down when need be.” Scaling workforce through outsourcing is yet again, among the trends that will remain prevalent. 

Bobby Reid, Capitol Tech Solutions

For Bobby Reid, founder of Capitol Tech Solutions “Outsourcing has helped our business by being able to provide expertise for a service quickly. While these contracts are outsourced, they are incorporated into our company culture when possible, since they are working full time with our firm.” 

Lastly, outsourcing to fill-in talent gaps and expertise is one of the key trends that more and more organizations will utilize in the coming years. 

The future of work is digital, says Outsource Accelerator Founder and CEO Derek Gallimore.

The world has moved on from manufacturing and creating products to providing services. And as we enter the post-pandemic world, he says we are “moving towards a single global economy.”

The concept of work dramatically changed with COVID, and things have changed for good. These changes made us realize that technology is available for remote and digital work interfaces.

Once showed an unsteady growth, the global outsourcing market spiked to US$245.9 billion in 2021. The sudden surge of demand brought by the pandemic along with the worsened talent shortage has led companies to increase their outsourcing efforts.

In a podcast episode, Derek explained, “There are eight billion people on the planet, and they are now all increasingly connected digitally.

There are [also] four billion people who are highly-qualified professionals sitting around the world, and they’re not just virtual assistants and basic roles. You can find [people with] PhDs, architects, accountants, or whatever you need for your business.”

To conclude, Derek believes that the global economy and a globally-sourced workforce is the future, and it is not going away.

Leaders all over the world also know that outsourcing is here to stay. Former US President Barack Obama says that jobs that have been outsourced cannot be brought back to the country. 

As a result, it is better to retrain and re-skill the workers who have lost their jobs on account of outsourcing.

Obama further suggests that community colleges could provide the necessary skills for a person to be gainfully re-employed in the workforce. He adds that this is a necessity that Americans look forward to in the future.

Looking back doesn’t always make people feel good, so it is essential that they retrain for the ‘jobs of the future.’

How to choose a Business Process Outsourcing vendor

Over the years, outsourcing has been the go-to strategic practice for businesses looking to scale their operations effectively.

But just like any other venture, companies should be wary of the possible drawbacks of outsourcing before selecting a BPO company. 

Risks of BPO outsourcing 

Despite its advantages, business process outsourcing done incorrectly leads to outsourcing risks that affect a company one way or another. 

Hidden charges

Some BPO vendors do not totally disclose the total fees they charge and their terms. Clients could experience “bill shock” upon seeing the hidden charges they get.

Compliance issues

Compliance is crucial, especially in handling financial information and dealing with intellectual property. BPOs that violate compliances could risk their clients’ reputation and branding.

Problems with security

Lastly, BPO vendors with loose security compliance could risk getting their client’s data exposed and used for malicious purposes.

Choosing the right business process outsourcing vendor

The key to successful outsourcing lies in choosing a suitable business process outsourcing vendor and working with them along the way. Here are some of the considerations to look for in a BPO vendor.

Expertise

A BPO vendor’s expertise can be shown primarily through their approach to their clients. Even without getting too technical, they can comfortably discuss the initial solutions to provide according to their client’s requirements.

Compliances

Especially when delegating functions involving sensitive information, a BPO vendor should be up-to-date and compliant with regulations relevant to their services. Check for ISO, HIPAA, and PCI certifications as much as possible.

Employee satisfaction

A good BPO vendor also places employee satisfaction to their priority. Check on employee reviews online to see how the staff feels about their company.

Technology

The tools and equipment a BPO vendor uses largely affect their performance in general. Check to see if they use updated technology at work and how they train their employees on using them.

Top BPO companies in the world’s top outsourcing hubs

A wide range of business process outsourcing companies in different parts of the world provide the utmost services to their Western and local clients. Many of them even earned recognition by award-giving bodies due to their performance in both their roles and their level of care for the employees.

Check out the top BPO companies in several outsourcing destinations below.

Top BPO companies in the Philippines Top Indian BPO companies Top South African BPO companies Business Process Outsourcing (BPO) services

With the rise of new offshore outsourcing locations, companies can have better options in terms of location and services they can delegate. However, finding a suitable BPO company can be a daunting task to be done on their own.

Good thing advisory services such as Outsource Accelerator is there to help them.

Outsource Accelerator is the most trusted source for independent information & advisory for Business Process Outsourcing (BPO). We have over 5,000 articles, 400+ podcast episodes, and a comprehensive directory with 3,000+ BPOs from different locations.

Outsource Accelerator’s offerings make it easier for clients to learn about, and engage with, business process outsourcing companies worldwide.

Want to learn more about outsourcing? Check out the Inside Outsourcing book as well as the Inside Outsourcing book review today!

What is Fully Managed Outsourcing?

What is fully managed outsourcing?

Fully Managed Outsourcing is one of the many services offered online by various outsourcing companies. It is a kind of laser-focused management that takes over the business process and tracking of the organization’s KPI metrics, training and development of employees, and quality assurance for the client. When routine tasks and jobs are outsourced, the company will have more time to focus on the more essential aspects of the business.

Fully managed service

Working with a fully managed outsourcing can be beneficial to any specific organization. Despite working offshore, Business Process Outsourcing (BPO) companies can still provide a fully managed service to their clients. They ensure the best operational structure, competitive pricing structure, proven processes, and guaranteed results with their operational overseers. They can build a team and hierarchy; they do well-prepared implementation and alignment; and are also aligned to their high-quality mission, objectives, and culture. This kind of partnership promises a deliverable-based solution that can hit KPIs, targets, and metrics. Lastly, they can ensure continuous improvement as you go along with your business.

Outsource Accelerator provides you access to the best outsourcing companies in the Philippines, where you can save up to 70% on staffing cost. We have over 3,000 articles, 200+ podcast episodes, and a comprehensive directory with 700+ BPOs… all designed to make it easier for clients to learn about, and engage with fully managed outsourcing.

What is a Knowledge Base?

What is a knowledge base?

A knowledge base is a system of related information. Promoting the gathering, organization, and retrieval of data about a service or a product FAQS, tips, guidelines, and rules or standards in an organization. It can also support computer system information retrieval on various matters. These data are readily available - anytime & anywhere to provide employees and customers with easy access to the information.

With modern technology, there's almost a limitless availability of knowledge base information on the internet. Consumers demand not only effectiveness but efficiency, with just a point and a click, people can already know what's the benefit of a product, know the list of cool places to visit, even the steps on how to cook a perfect dinner. Additionally, a knowledge base can be used by companies to easily keep track of all work-related information about the employee.

Knowledge-based outsourcing

There is a need for users - both internal (ie. agents), and external (customers) to effortlessly access information. Both have the primary goal of data-sharing so that information is made readily available for satisfying user query. Businesses have improved over the years through better management and usage of a knowledge base system.

Outsource Accelerator specializes in helping small & medium sized enterprises (SMEs), with 2-500 employees, typically based in the high-cost English-speaking world. We are the experts in transforming these businesses with outsourcing.

What is Standard Operating Procedure (SOP)?

What is a standard operating procedure?

A standard operating procedure (SOP) is a set of instructions that explains how to do a critical process or workflow. Its purpose is to follow processes according to the standards of a company, organization, or industry.

This helps to protect the employees, processes, and customers from errors throughout a normal workflow and creates a safe work environment for the company.

SOPs are sometimes required to comply with the industry regulations while some institutions suggest them as a company’s best practice. This is mostly used to maintain safety and efficiency in different departments such as production, sales and marketing, customer support, finance, and legal.

Standard operating procedure template

For small teams and solopreneurs, SOPs are made by writing a checklist of routines that should be done. For bigger enterprises, thorough planning and taking note of processes are needed to ensure proper carrying of procedures.

The integral parts of an SOP are the roles that will do the task, the frequency or how often will they do it, and the expected outcome or the deliverables in finishing the task.

SOPs in BPO companies have different standards. Their SOPs need to include compliance with administrative policies, metrics on performance management, and training and coaching sessions.

Outsource Accelerator provides you with the best outsourcing companies in the Philippines, where you can save up to 70% on staffing costs. We have over 3,000 articles, 200+ podcast episodes, and a comprehensive directory with 700+ BPOs… all designed to make it easier for clients to learn about, and engage with, outsourcing.

Different forms of standard operating procedures

SOPs can be written in different formats, depending on compliance standards or specific functions that need them. Companies should choose the SOP formats that can work best with their team or the entire organization.

The most common SOP formats are the following.

Step-by-step instructions

As its name suggests, step-by-step SOPs are used to simply list down how to do a process according to its order. This format is used when the process is straightforward and can be completed easily.

A step-by-step SOP works best with processes such as:

Digital logins Routine tasks Safety guidelines

Hierarchical SOPs

A hierarchical SOP, meanwhile, contains more detailed instructions compared to step-by-step SOPs. It elaborates each step and includes all the necessary tasks in a process. For instance, instead of listing a process in 1, 2, 3..., hierarchical steps will include substeps listed as 1a, 1b, 1c...

Flowchart SOP

Flowchart SOP documents are best used when writing complex processes that have more than one desired outcome possible.

Flowchart SOPs give insights on what outcome a team can get should they take a certain step. This format helps in the decision-making process of a team or an organization in general, making them more careful in approaching a process.

Importance of standard operating procedures

Aside from proper documentation of processes, SOPs are crucial in the business processes of a company in different ways.

Knowledge preservation

By creating SOPs, the prior knowledge in a process can be easily stored and updated. Team leaders can also pass them to their members, use this to train new employees, and store them for reference.

Improved efficiency

At the same time, employees perform more efficiently with an SOP document. This can help streamline workflows better and save time in passing organizational knowledge long-term.

Consistent outcomes

Employees perform better and will produce consistent outcomes with the help of an SOP document. This is since they will have an idea of how to do a certain task according to company standards.

Ensuring compliance

SOP documentation is also crucial in following compliances for certifications such as ISO. It makes sure that employees comply with related laws, regulations, and standards imposed by an organization to avoid litigation risks.

Steps to create standard operating procedures

There's no single way to create SOPs for all business processes and organizations. However, firms can take note of the following steps on how they can create an effective SOP for their business.

Define objectives in SOP creation. Define the objectives in creating an SOP, whether it's for documenting a new process or improving an existing one. List down each business process. List every process and function that needs an SOP document and find which process will be prioritized. Choose a format for each SOP document. Choose which SOP formats will be most suitable for each process. Outline the entire process. Starting with the title page, outline the entire process according to how they are made.

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About OA

Outsource Accelerator is the trusted source of independent information, advisory and expert implementation of Business Process Outsourcing (BPO).

The #1 outsourcing authority

Outsource Accelerator offers the world’s leading aggregator marketplace for outsourcing. It specifically provides the conduit between world-leading outsourcing suppliers and the businesses – clients – across the globe.

The Outsource Accelerator website has over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 3,000+ BPO companies… all designed to make it easier for clients to learn about – and engage with – outsourcing.

About Derek Gallimore

Derek Gallimore has been in business for 20 years, outsourcing for over eight years, and has been living in Manila (the heart of global outsourcing) since 2014. Derek is the founder and CEO of Outsource Accelerator, and is regarded as a leading expert on all things outsourcing.