In part one, I described how to begin outlining a novel.
To summarize, create a grid describing characters, plot and setting and add in everything you can think of. Have a character that fascinates you but not sure what role she’ll play? Put her in. A subway fight, but don’t know who’s fighting or why? Add it. Want a massive, totally-out of place stucco mansion in the middle of Iowa farm country but not sure why? Yup, put it in there.
Do not discount your imagination. Just because you don’t immediately understand something does not mean it’s purpose will not reveal itself later. And if it doesn’t, you can always take it out later.

Revised Outlines

By the time you’ve filled in the grid, you’ll have a solid grasp on your novel from start to finish. You’ll understand the role each scene plays in advancing plot and character.
That’s the time to change the multi-column grid into something simpler with only three columns that combines several of the columns from the earlier version. The first column contains scene information with the POV character in bold and info about that character in italics. Plot and setting information, underlined, is in the central column with any notes in the right-hand column.

Scene Plot Notes
Ian briefs Chris
Pissed off

Short, clipped speech
Police Station – Mid-afternoon (Few minutes after last scene)
Ian and Chris meet to talk about the case. The station is busy—phones ringing, people rushing around.
Ian is still pissed from last scene and the busy station does not help. He interrupts Chris, not letting him finish.
Chris, having had enough of Ian, storms out, saying Ian is off the case, which makes Ian even angrier.
Ian shouts back his former partner had more balls than Chris.
Former partner is Laurie. “Balls” comment shows Ian’s sense of humor.
Jumping to next scene with Laurie hints at who former partner was.

The goal of this outline is to describe the scene in its entirety that you can write from. Since you shouldn’t have one sentence for setting, another for character and one more for plot, your outline shouldn’t either.
For example:

The police station was a beehive of activity. Phones rang, cops pressed by each other in the narrow gaps between desks. All the commotion made Ian’s anger grow. Not to mention these cops were doing their part to solve the case, but Ian still hadn’t briefed Chris, his sergeant.

So, we have Setting / Setting / Character / Plot. What if we combine these elements:

Ian wanted to throttle the next uniformed beat cop who bumped his desk in a rush to get by. The ringing phones, the chatter of cops, the moving bodies—Ian wanted to scream. The cacophony made it hard to think, but also reminded him that the investigation pressed forward but Chris—his sergeant—still hadn’t made one damn second to hear Ian’s briefing.

In the above, character, plot and setting are all tied together making for more interesting reading.

Character Outline

While this three-column outline works for plot, you must track your characters’ development as well. It can be very easy to put together a tense, fast-moving plot only to find your characters don’t change and remain one-dimensional. No matter how fabulous your plot, if it has characters your readers don’t care about or aren’t rooting for, no one will care.
To track character growth, I created a chart that works in parallel with the plot outline described above. (That is, they are two separate but related documents.) Below, I’ve presented the steps in character development along with how they relate to Luke Skywalker in Episode IV of Star Wars.

TEASER Present the ordinary world of the main character Luke in his boring life on Tatooine with his Uncle and Aunt.
CALL TO ACTION Something changes in or enters into the normal world that presents a challenge or call to action to the character. The droids arrive with a mysterious message; Luke wants to go to the academy. (Also, Biggs tells Luke he’s joined the rebellion and wants Luke to come with him, but this never made it into the final film.)
BEGIN ACT ONE Main character refuses the call to action for internal or external reasons. Uncle Owen refuses Luke’s request to go to the academy, then Luke turns down Obi-Wan’s request for help even though “that’s your uncle talking.”
DISASTER ONE Something terrible happens to the main character, changing his/her resistance to the call to action. This usually comes from an external source. Uncle Owen and Aunt Beru are killed by stormtroopers.
BEGIN ACT TWO Main character must strike out on his/her own. Meets tests and challenges. Finds allies but also enemies. Often, main character is unable to overcome challenges, but learns from the experience. Luke goes with Ben, meets Han and Chewie. Tries to stand up for himself in the cantina.
Learns about The Force, but can’t yet control it.
Obi-Wan and Han are the ones making the decisions, not Luke.
DISASTER TWO Another disaster strikes, this one as a result of disrupting the status quo and going off on the adventure.
Helps keep the readers interested and reminds them that there are risks.
Stormtroopers shoot at the Falcon as it tries to leave Mos Eisley.
Luke gets pulled onto the Death Star. Never would have happened if he’s stayed on Tatooine.
CON’T ACT TWO More challenges and needing to grow. Main character begins to learn and develop. Adventures aboard the Death Star. Luke is proactive in the absence of Obi-Wan: His idea to rescue the Princess. Holds his own in the detention level fight. Gets them out of the trash compactor.
Han begins to treat Luke like an equal.
DISASTER THREE Another disaster, again probably caused by character actions. Isolates the character. Forces the climax. Obi-Wan is killed.
Tracking beacon attached to Millennium Falcon.
BEGIN ACT THREE Moment of reflection. Character takes stock of himself/herself. Luke ponders going on without Obi-Wan, considers Leia and if Han’s has feeling for her; stands up to Han for leaving before attack.
CLIMAX Ultimate ordeal. Tests everything the character has been through. Must apply lessons in order to be successful. Death Star attack. Luke is victorious by embracing The Force and being a leader.
RESOLUTION Character is rewarded for actions. Luke is the hero of the rebellion.

Why Have Two Outlines?

As mentioned above, one tracks characters and one tracks plot. Usually, a novel will have more than one major character and you should track their growths. Not to mention that the three-column outline should not be locked in stone and changes might still happen… changes that might affect your characters.
In my case, I had outlined how the main character of my novel would develop—what events in the story affected them and forced them to change and grow. Then, I decided to revise the plot again to increase the tension. After moving elements around, I discovered Disaster One for a character—which should happen about a quarter of the way through the book—now happened at the halfway point. More than that, Disasters Two and Three happened at the same time, not allowing the character the chance to grow.
My solution was to make Disaster One into a new Disaster Two, combine the event of the original Disaster Two into Disaster Three, and bump up the impact of another event in the story to serve the role as Disaster One. Doing this allowed me to keep the plot fast and excited, but also let my character grow and remain interesting so readers will root for him.

All of This is to Say…

You results may vary. You might be able to sit down and write a great story with little planning that only requires a quick polish. If so, I envy you. Or, you might enjoy outlining but have a different method. Or take my method and tweak it. It’s all good.
But if you’ve found yourself going round and round on story you know to be great, but can’t make it work, maybe take a step back and create an outline.
It’s amazing what you can discover (and fix) when you can see the whole story over a few pages.