SOP stands for Standard Operating Procedure. It is a standard process followed by companies to ensure consistency in different business functions like sales, marketing, accounting, customer service, etc. It may vary from company to company on the basis of nature of business. For example; the banks, hotels, and hospitals are likely to have slightly different SOPs.
In small companies, CEO makes all the important decisions related to day to day business activities. But as the company expands, documented SOPs are needed to bring consistency in business functions. It works as a reference guide for the employees, which helps employees understand the order of business practices and other routine tasks.
In some companies, SOPs are quite vital and needs to be followed strictly. For example, Clinical Research, Emergency Response, Power Plants, and Pharmaceuticals are some the critical fields where there is no scope for errors.