Corrective Action Plan

Updated on March 21, 2024
Article byNanditha Saravanakumar
Edited byNanditha Saravanakumar
Reviewed byDheeraj Vaidya, CFA, FRM

What Is A Corrective Action Plan? 

A Corrective Action Plan (CAP) is a document that highlights any specific issue the organization faces and a step-by-step guide to tackling the problem systematically. It is comprehensive and tells the management how the progress will be measured once the solutions are employed.

Corrective Action Plan

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CAPs are significant components of an organization that addresses its weaknesses and threats. They also carry immense benefits. Firstly, they help increase productivity and process efficiency by minimizing hurdles and reducing wastage. It can further reduce time and associated costs. 

Key Takeaways

  • A corrective action plan is a document that facilitates the management in systematically addressing organizational concerns.
  • Essential steps include defining the problem, setting up members involved and deadlines, identifying the root cause, rolling out solutions, implementing them, and constantly tracking them to monitor their performance and control them as needed. 
  • Some significant benefits of CAP include reduced wastage of resources and time, decreased costs, and improved efficiency, productivity, and performance.
  • CAP involves the collective effort of all units of an organization for guaranteed success.

Corrective Action Plan Explained 

A corrective action plan, as the name suggests, is a tool that helps companies realize and resolve issues they face. Organizations are constantly faced with many problems from their external and internal environment. A simple hack to manage all these issues is by being systematic. CAPs help a lot in this regard.

Organizations can identify their chief concerns through SWOT analysis, periodic reviews, etc. A CAP helps identify and target the root cause of each of these concerns. The company can take up solutions to make things right. 

Businesses undertake corrective action to remove inefficiencies and reduce wastage of resources, time, and, most importantly, cost. It facilitates improvement in profits and making progress. Another critical factor is the periodic review of these action plans that ensure control over the processes over the long term.

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How To Write?

Let us look at the content and format of a corrective action plan.

#1 – The problem

The first step to writing a CAP is identifying and defining the problem. For example, the production of a batch of bottles that took two days now takes three days (other factors remain constant). Thus, the problem can be associated with any organizational activity or component – operations, finance, human resources, customers, investors, marketing, etc. But ensure that all the essential information related to the problem is included in the CAP.

#2 – Corrective action team members

The team’s primary function is to understand the issue and arrive at its root cause by the pre-determined due date. The team members can be selected from the department facing problems or multiple departments, depending on the management. 

#3 – Due date

It is the last date the document should be submitted to the management. It should include the root cause of the problem and effective solutions proposed by the corrective action team members. The due date should be chosen to allow the team to study the case freely. 

#4 – Root cause

The team members identify the root cause behind the organization’s specific problem. They can do this by talking to employees, reading the numbers, inspecting the quality, etc. A good approach is to trace the issue to the root cause. The team can also include the potential effects of the root cause.

#5 – Proposed solutions

After identifying and analyzing the root cause, the corrective action team should arrive at the solutions. These solutions should directly target the root cause and provide clear-cut directions on what each department or unit should do to resolve the issue. Therefore, an action plan for implementation is also necessary.

#6 – Effects

The team should also include how the proposed solutions will affect each stakeholder in the organization – investors, employees, suppliers, customers, etc. Risk assessment is an essential factor here. The management should understand the pros and cons and the effectiveness of each proposed action.

#7 – Performance and progress

Once the action plan is implemented, the management should track its progress. For this, the team can specify specific metrics themselves. After implementing the action plan, the management or the group should follow the performance occasionally. If the progress is not satisfactory, further steps should be taken.

Examples 

Let us understand the concept through some hypothetical and real-world examples.

Example #1

Let us examine a case involving Company A and its sales representatives. Company A encountered a challenge with their sales team, which had a monthly target of acquiring ten clients per sales representative. However, most reps consistently fell short of this objective over the past year. The concern escalated in the last quarter when no representative met the target.

In response to this issue, the management formed a committee comprising the sales manager and two members from the human resources, accounts, and customer relationship departments. Utilizing the structured format provided by the corrective action plan template, the committee thoroughly assessed the situation over two weeks.

Their analysis led to the realization that the initial target needed to be attainable within their industry, where each client represented a substantial $300,000 in monthly sales. Given the shared challenge faced by all representatives, the management adopted the committee’s proposal, as outlined in the CAP template, which recommended reducing the monthly target to seven clients.

Example #2

The Civil Aviation Authority (CAA) provisionally suspended Swansea Airport’s operating license due to a systemic failure of safety management, citing ineffective safety measures, the absence of an accountable manager, and inadequate aerodrome safeguarding. Swansea Airport Ltd.’s Director, Roy Thomas, planned to submit a CAP by February 28, 2023, to address these safety concerns.

The CAA’s decision raised questions about the commencement of scheduled passenger flights between Swansea and Exeter, previously planned for the end of March. Exeter Airport has expressed interest from an airline operator for this route.

Activities like flight schools can continue at Swansea Airport despite the license suspension. As the facility’s owner, Swansea Council is actively addressing the situation and coordinating with the CAA and the tenant to resolve the safety issues.

Corrective Action Plan vs Performance Improvement Plan

This table highlights the key differences between CAP and Performance Improvement Plans (PIPs).

BasisCAPPIP
PurposeAddresses organizational concerns systematicallyFocuses on improving employee performance
ScopeAddresses issues ranging from operations, finance, customers, and employees, to investorsConcentrates solely on employee performance
HR Department’s InvolvementIt may involve various departments or units, depending on the issueSignificant involvement of the HR department
Effort RequiredRequires collaborative effort from multiple units, employees, and managersDemands commitment and effort from managers and department heads
Formation of Corrective Action TeamTypically involves creating a corrective action teamNo requirement for a dedicated team

Frequently Asked Questions (FAQs)

1. When should you use a corrective action plan?

A CAP is effective when a company realizes threats, weaknesses, or concerns producing negative results, such as falling profits, decreasing employee turnover, less productivity, etc. CAP can be used to identify the root cause of the issue and undertake measures to correct it and improve overall efficiency.

2. How often should a corrective action plan be monitored?

Once a CAP is implemented, the effectiveness of the proposed solutions must be measured regularly by following the relevant metrics. Nevertheless, how regularly one should do it depends on the industry, organization, and seriousness of the issue. However, it is better to review the performance monthly or quarterly so that appropriate control measures can be implemented if necessary.

3. Who is responsible for preparing the corrective action plan?

Writing a CAP is the responsibility of the committee or team, including employees and managers from concerned departments or units.

This has been a guide to what is a Corrective Action Plan. We explain it with its examples, how to write it, & comparison with performance improvement plan. You can learn more about it from the following articles –

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